Why it’s important to have an Exit Strategy for your development
13 June 2024
Peritus has been involved in billions of pounds worth of development transactions over the years. One of the key pieces of advice we always stress to our clients is to ensure that there a robust exit from the loan should sales slow or the market retract. Whilst a developer may have a strong desire to sell or to retain, having a back-up plan is essential to ensure that all eventualities are covered.
Whilst sales provides a ‘quick’ profit, sales can often be long winded and drawn out, buyers could be lost and before you know it, the remaining term on your development loan is looming and it looks like you won’t be able to repay in a timely manner.
Keeping the lender up to date with the progress of sales and advising them should any sales fall through is essential. The lender can’t help if they don’t know what’s going on, and they will be keen to ensure you have the time needed to complete your scheme and repay their facility. As a broker, we ensure we keep in touch throughout the build and check on the progress of sales/refinance, keeping the lender fully up to date on your behalf.
A development exit refinance can be put in place as soon as the property(ies) are at practical completion (PC) therefore we start to look at refinance options around 3 months before the expected PC. Should a refinance be required, this allows us time for the valuation and legal work to be carried out and for you, to be able to complete at the earliest possible opportunity. This refinance may also allow you to take advantage of a lower refinance rate than paid on your development facility. Also, by starting the refinance process early, you will know if there are any issues early, for example, the property could be down valued which may make you reconsider the exit to sale rather than refinance.
As your broker, we are keen to ensure we are with you for the whole of the development journey, from the initial ‘can you see if this works’, to securing funding and to the repayment of the loan. We look at all finance so can assist with bridging, development and mezzanine finance and commercial loans.
Bridging
A short term loan to allow a quick purchase or the purchase of a site that requires planning approval or revised planning
Development finance
Finance that allows you to buy/refinance the site and provide the build costs to construct.
Mezzanine finance
Finance that tops up development finance to get to a higher loan to value loan
Commercial loan
Refinance of the development loan onto either a buy to let or commercial loan to retain the property
Why not get in touch if you would like to discuss a development opportunity?
