United Trust Bank has launched two development finance products for SME builders and developers.
The first is a ‘build to let’ product. UTB will fund the development and provide an investment facility at the end of the build which allows the developer to reduce their funding cost, recover equity and move onto their next project without identifying a new long-term lender.
The development part is available on UTB’s standard terms up to 60% gross development value up to 24 months, while the investment part offers a loan of up to 65% of the value on completion up to five years.
UTB’s second product is for developers close to achieving build completion who want to refinance remaining stock while they sell out the project.
In most cases the bank will be prepared to refinance existing debt and self-funded development costs and it said an element of equity release may also be available. If funding is required to release capital for a further site purchase UTB said it may be able to assist with the new scheme as well.
The product offers loans up to £10m to 70% LTV usually on terms of six to nine months but occasionally up to 12 months.
Noel Meredith, executive director of United Trust Bank, said: “The private rented sector is undeniably playing a vital role in the provision of the UK’s housing needs and the opportunities presented by the growth in the sector are particularly attractive to those who can acquire housing stock cost effectively and have the right corporate structures in place in which to hold and manage them.
“Developers on multi-unit projects sometimes decide to retain a small number of the units to create or add to their own buy-to=let portfolios and retaining one or two of the last units as deferred profit can be a cost effective option.
“However, more recently we’ve seen some developers taking this approach to the next level and creating entire ‘build to let’ projects where they are literally building their own rental property portfolio at a much lower cost than acquiring existing housing stock.
“They not only get a property portfolio at wholesale prices, but they avoid all of the other associated costs one encounters when buying properties through traditional channels, including valuation and legal fees, and they have just one financial solution for the whole of that group of properties rather than a number of different loans or mortgages arranged if properties are acquired piecemeal.”