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Refurbishment Finance – An update

We are seeing a boom in the refurbishment of redundant buildings. This is fuelled by the increase in residential property values, the demise of the high street retail sector and the ease or even lack of necessary planning consents via “permitted development rights” which have been available over the last few years.

So how easy is it to get Refurbishment and conversion finance for such schemes?

We estimate that there are at least 50 lenders available for such schemes. Funding can be obtained where the developer makes only a very modest contribution or has only minimal experience with such schemes. The more the applicant has relevant experience and the greater the applicants contribution towards costs then the better the deal that we can obtain. It is often the case that simply creating the concept and obtaining support from the planning authority is sufficient to create value within the building to be developed (“planning gain”) and make the scheme more attractive for potential lenders.

It is fair to say that the specialist finance market has at least kept pace with the increase in the number of such schemes. In fact there is increasing competition between lenders which has seen a steady reduction in rates and fees for refurbishment and development finance.

There are two types of finance available.

  1. The lender will simply fund up to 75% of the value of the building to be converted. The developer funds the conversion costs. Rates start from around 6% per annum. There is no detailed monitoring by the lender through the scheme.
  2. Other lenders will fund 60% of the building value and up to 100% of the development costs. Rates are similar but the lender will require more monitoring of the scheme as it progresses with a cost and “hassle” implication. Funding for costs are released in stages as the scheme progresses. The total borrowing, including finance costs, should be no more than about 65/70% of the schemes completed value (gross development value).

It is noticeable that the high street Banks are reluctant to fund these schemes unless the applicants experience and contribution are very significant. The reality is that probably 80% of all such schemes are funded by a lesser known independent/specialist funder and not the high street Banks.

Here at Key we have extensive knowledge of the lending market for such schemes. We are an independent and unbiased firm of advisors, and will source funding from the lender that best matches your needs and requirements.

So if you are considering a refurbishment or renovation project, please speak to us here at Key Commercial Finance Solutions for the best finance in the market for your needs.

 

 

Phone: 0345 193 0666
Fax:

Key Commercial Finance Solutions Ltd, The Mews, Little Brunswick Street, Huddersfield, HD1 5JL
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