Fiduciam has supported a first-time developer in Southampton with a £1.26m development loan at 70% Loan to Gross Development Value.
The loan funds the conversion and extension of two neighbouring office buildings into 11 affordable flats within walking distance of Southampton town centre.
The project is led by an established property investor and an interior designer. Their limited experience was mitigated by the choice of an experienced contractor and independent monitoring from one of Fiduciam’s trusted project monitors. A longer 24-month term was provided to offer additional flexibility, with interest to be serviced in the final months through sales proceeds.
The facility fully funds the project works, which are expected finish within 10 months. Fiduciam facilitated the use of a mezzanine loan to supplement the borrower’s equity injection. The exit will be achieved through the sale of the completed units.
Marc Morris, underwriter at Fiduciam, said: “At Fiduciam managing credit risk is not about saying no but rather seeking the structures, relationships and professional support that enable the risk to be mitigated. In this case, the principals brought considerable experience designing and managing property but no experience leading development projects with structural works.
“We gained comfort through the use of an experienced contractor operating under a JCT contract and independent project monitoring.”
Ryan Parrett, business development manager at Fiduciam, added: “Throughout the Covid-19 pandemic we supported existing developers overcome delays across the build cycle with reliable flexible finance. After the decline in the number of SME developers over the last 30 years, it is encouraging to now see new talent entering this market.
“With our reduced 2022 interest rates, starting from just 0.57% per month, we hope to fund many similar projects over the coming months.”