Pre-construction bridging and planning plays: how to make deals a success

Written by Luke Stevenson

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by Tom Madden, Director of Structured Property Finance

To explore our full bridging range and get instant quotes, visit here.

Planning plays are among the most frequent deals our Structured Property Finance team works on.

This is because of the bespoke nature and complexity of the deals, which can range from £1 million to £20 million in size depending on the location and ambition of the project.

The security could be greenfield or brownfield land with or without planning in place, any type of commercial or even residential at present. There may be no planning history on the site, lapsed planning, a current approved or extant scheme that requires enhancement or amendment.

With these types of deals, the experience of the lender, BDM and professionals is key, bringing them all together is how a daunting process can be made simple, here is how we approach the assessment of the deals.

Step 1: Experienced client, delivering added value.

Needless to say, for a lender to back your planning play project there needs to be experience.

This doesn’t necessarily mean a like-for-like deal in the past, but experiences of the acquisition and planning process, whether the borrower went on to develop the site or how they exited it, is essential to help make this work.

That’s also where a team of experts from the lender side can assist, quickly understanding the role played in previous sites, the history of the site and the skills transferable from different projects.

Whatever the proposal and the experience of the client we’re looking for them to also have a strong professional team involved and to have at least started their due diligence process on the scheme.

Step 2: Viability of the site, whether speculative, in the process or enhancement.

It feels obvious – but relationships and trust are the key to these larger, complex deals working.

The lender needs to trust the client that they can achieve their vision and the client has to have confidence that the lender will deliver on the funding.

To agree the fundamentals, the borrower will need to present to the lender a history of the site and any planning applications, their proposal, whether just a simple idea at this point or significant planning progress with formal viability and design and access work.

A view of future costs to develop out the site is also essential at this stage to assess the feasibility.

From here the lender can get a good understanding of what work there is to be done, and the valuers can see the potential, which makes it easier for us to lend on and assist you with the next step of the deal.

We work closely with a panel of specialist valuers and solicitors who know what we require to make the deal work.

Step 3: Exit, access to Development Finance for the site and, if retaining it, the client.

What may feel like a simple part of the process after you’ve acquired, got planning and potentially realised the value in the land you wanted or got it ready for development can be anything but if the lender doesn’t have the right tools to assist you.

For example, if a lender doesn’t fund its own developments and doesn’t have the right team to assist on the next step (or how attainable that step will be in the market), or its product transitions aren’t slick enough to make it easier.

At every step of this process, a close relationship with your lender and BDM makes each step easier because they know what you need, and how to achieve it.

Planning play in action: A recent deal we funded

Gross Facility: £1,700,000.00
LTV: 60%
Security: Former garden Nursery in West Sussex with resolution to grant for the development of 39 houses.
Borrowers: New client introduced to LendInvest with a proven track record of delivering large residential & commercial schemes across the Country.
Loan purpose: The deal involves a site that was previously purchased unconditionally as a redundant Nursery. The funds released by LendInvest are being used to cover head office running costs, planning costs in relation to an adjoining site for a further 66 houses and for the purchase and planning costs of another 2 sites in Bath & Surbiton. Joint Venture negotiations are currently in hand in respect of the security and the bridging loan will be repaid from funds released from a development loan that we will support.

To explore our full bridging range and get instant quotes, visit here.

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