Residential Peak Debt Facility
The facility is utilised to fund construction costs at the start of the development. At the mid-stage, sales proceeds from the first unit completions are used to funds costs, with the facility available to fund shortfalls up to the agreed limit. The drawn balance is then repaid in stages from sales completions. This allows developers to recycle equity through the development and reduce financing costs.
- Location: England, Wales & Scotland
- Sites: Freehold development land
- Security: 1st Legal Charge over the underlying asset, share charge, debenture, Personal Guarantees (as applicable) and collateral warranties from professionals with design and structural liabilities
- Peak LTGDV: 60%
- LTC: Up to 90% of the build cost, net of recycled equity
- Minimum GDV: £30 million
- Interest and Fee: rolled up into the facility
- Gross Loan: £20 million to £200 million
- Term: 18 – 36 months
- Regional and National Housebuilders
- Professional Developers
- UHNW & HNW Individuals
- Public Listed Companies
- Private Limited Companies
- Overseas SPVs
- This product is only suitable for land with planning permission for residential developments (houses)
Peak Debt Facility FAQs
How do peak debt facilities work?
A peak debt facility is a form of revolving credit facility (referred to as an RCF) which allows for monthly drawdowns and repayments, up to an agreed limit, over a set duration.
These facilities are typically used to finance the development of residential housing, across one or more construction sites, in which the developer expects plans to split the site into multiple phases, giving a rolling construction and sales programme across the development.
Once the developer’s equity is fully utilised, the facility can be drawn to finance construction costs on the initial units of the development. As the first units are completed and sold, the sales proceeds can be recycled and used to fund the construction costs of the subsequent phases. Then, when the development reaches its final phases, sales proceeds are used to repay the outstanding balance on the facility.
This is a different approach to traditional development finance, and it allows property developers to recycle their equity during the course of the project, which can decrease the amount of finance required and the cost of borrowing.
London Wall offers bridging loans and development loans to new and existing clients. We have expertise in lending against residential properties and commercial properties. Our loans are classified as unregulated and therefore the property being offered as security must not be your place of residence.
Are peak debt facilities suitable for all property developments?
Peak debt facilities are specifically designed to work with residential housing projects, rather than residential apartment projects.
This is because they assume that, for example, on a wider development site you will have some units which are completed, sold and occupied by purchasers, whilst on the other side of the development site you will have units under construction (or still to be constructed).
In the example, the sales proceeds received from completed units will be used to fund construction costs on the units that remain under construction. With apartment schemes, purchasers are generally not able to complete and occupy units until the entire building is complete.
London Wall offers bridging loans and development loans to new and existing clients. We have expertise in lending against residential properties and commercial properties. Our loans are classified as unregulated and therefore the property being offered as security must not be your place of residence.
What information is required to apply for a peak debt facility?
Lenders will require comprehensive details of the proposed development, financial projections, and developers experience, to consider a peak debt facility request.
Information on the proposed development should include background information on the site, copies of the approved planning consent, details of what you are planning to build, and the construction methodology being used.
Timing of the proposed phasing, including phased start dates, phased completion dates, and expected unit sales per month, is very important to lenders assessing the viability of these schemes.
Financial projections, referred to as development appraisals, will include both the costs incurred to date (for example, to acquire the site), the total costs required to construct the proposed development, including professional fees, and forecasts for the gross development value once completed.
Lenders will also want to know details of your experience as a developer and how this relates to the proposed scheme, along with that of any main contractors or professional firms with design responsibility (such as architects, structural engineers and so on).
Whilst this is not a comprehensive list, it will provide a lender with the initial information required to consider whether they can issue terms for a development. Once terms are agreed, site and/or specific transaction requirements will be advised, along with the requirement for an independent valuation and initial quantity surveyor report to be obtained.
London Wall offers bridging loans and development loans to new and existing clients. We have expertise in lending against residential properties and commercial properties. Our loans are classified as unregulated and therefore the property being offered as security must not be your place of residence.
What are typical peak debt facility terms?
Terms vary by transaction. That is because not all developments are the same and loan terms are designed to reflect the risks of an individual transaction.
A lender will consider risk metrics such as how strong the developer is, the type of asset being constructed, and the level of financial support required to complete the development.
London Wall offers bridging loans and development loans to new and existing clients. We have expertise in lending against residential properties and commercial properties. Our loans are classified as unregulated and therefore the property being offered as security must not be your place of residence.
