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Friday, March 23, 2018

Case Studies

£11m UTB facility saves developer from considerable funding costs

Tom Belger | 5:00 Wednesday 22nd November 2017

United Trust Bank’s (UTB) structured finance team has provided an £11m facility to save a property development company from paying considerable funding costs.

The specialist bank was approached by a broker representing an existing UTB customer, an experienced property development company owned by a high-net-worth family.

The company had a proven track record of delivering successful development projects and UTB had provided funding for several acquisitions since 2015.

The most recent was a loan of around £1.7m to purchase a future development, a facility which was still live at the time of this application.

The family had invested profits from their businesses and had built a property portfolio comprising residential and commercial assets with a combined value of over £40m.

However, the ownership structure was complex with properties divided between subsidiary companies and trusts based both on- and off-shore.

As it was an existing UTB customer, the bank’s team understood the company’s structure, which proved vital when arranging the facility in a short timescale.

The company was close to completing a 13-unit apartment development in an affluent area of London and works totalling £500,000 were needed to complete the scheme.

The development was running around five months behind schedule and the delays to the completion of the build meant the company was paying a considerable premium on its existing facility.

These payments would continue until enough units had been sold to repay the loan.

The proposal was for UTB to provide the £500,000 required to complete the development and a sales period loan of around £11m to pay off the existing lender.

A facility of that size secured against the development alone would be in excess of the loan-to-value limits for the majority of lenders and an added complication was that the development was still being built.

However, as UTB already had a good understanding of the portfolio and existing gearing, it quickly structured a bespoke funding solution that could mitigate the risks associated with the loan.

UTB secured the funding against two additional properties, which were to be held only until the development achieved practical completion.

The bank managed to progress the complex loan from initial contact to drawdown in just over a month.

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