This article is very kindly contributed by Penshurst Finance, which raises equity and debt finance for property developers, mainly through alternative funding sources such as high net worth individuals, family offices, mezzanine and property debt specialists. Their contact details are set out at the end of this article.
All too often we meet developers looking for funding with tight deadlines, but who don’t have the right information ready to take to potential funders. This causes delays and can create a negative perception of that developer in lenders’ minds.
To enable a developer to put their best foot forward when they start to look for funding, at a minimum they need to have the following information to hand:
- A fully supported appraisal document, indicating:
- Site purchase costs (supported by an independent valuation) – ideally with an accepted offer or option, depending on the transaction circumstances
- Build costs (supported by a surveyors report if at all possible)
- Professional fees and costs
- Section 106 costs (if applicable)
- Sales and marketing costs
- Finance costs
- GDV (with independent support for the selling price per square foot).
- A build timeline, showing the clear timing of expected milestones.
- A projected cash flow statement showing clearly what funds are needed and when. If you don’t know what you need, it’s very difficult to obtain it.
- Properly developed marketing material, that shows the proposed development in the best light possible.
- Details of equity that the developer has available to put into the transaction (this could be costs already incurred such as site purchase costs, as long as they are factored into the gross development costs in the appraisal document).
- A developer CV clearly showing the experience you have and details of the developments you have successfully completed.
- A clear statement of the funds required and the terms offered. Even though you may be open to receiving finance in different forms, the clearer you can be as to what you can offer, the better.
As with most negotiations, the more prepared you are, and the more you can support your assumptions, the more likely you are to successfully secure funding.
Leigh Goodman, Director
(Tel: +44 7970 416767, Email: firstname.lastname@example.org)
Nathan Romburgh, Director
(Tel: +44 7967 464 626, Email: email@example.com)