UPDATE May 2010

Planning gain funding (or pre-planning funding) is not currently available  from corporate lenders (banks) due to the effects of the credit crunch, downturn in resdidential and commercial property values and falling residual land values. However at OPTIMA we have access to private investors who will consider funding viable and well located pre-planning projects. There is no set funding or pricing structure and each project will be considered on its merits with funding being sourced from a mixture of senior debt (bank or bridging lender), client and private investors.

The rest of this text is historic but it may be of interest!!!

MARKET LEADER:   100% of PURCHASE PRICE of potential DEVELOPMENT sites. Read more......

• Finance to enable developers or traders to acquire a site (commercial, brownfield, residential, student etc.) pending obtaining a new/improved planning consent for residential or commercial use, is hard to come by, certainly at high levels of gearing, particularly if the property/site is vacant and not producing rental income.
• A high street bank may lend up to c. 30% of the ‘as is’ value and a bridging company may go to 70% but at this level , the hefty interest charge will have to be covered monthly from cash flow.
• We have access to specialist property lenders who will lend at high levels of gearing (potentially up to 100% of purchase price), based not on what the property/site is worth ‘as is’ but upon what it is expected to be worth with the intended planning consent in place.
• There are a limited number of lenders in this high risk market place, some have a prescriptive product, and others will look at each deal on its merit.
• To assess whether a project is suitable for planning gain finance we will need to know:

Example 1.

• Funding of up to 50% (may be higher if zoned) of the projected value of the site with the intended planning consent.
• Interest at Libor plus 3.5%, rolled up for up to 18 months.
• Lending fee 1% in.
• Exit fee of up to 5% of value of site with planning consent.
• Some deposit/hurt money will be required from the client.
• PG’s will be required for an element of the loan, and to cover any difference between the’ as is’ value and the loan, where the client is paying more for the property than the ‘as is’ value.

   Example 2.

• Funding of up to 100% purchase price
• Lender is looking for an annual return of between 20 and 30% depending upon risk.
• Lenders income will be a mix of lending fee in (typically 1%), interest at base plus 2 to 3% and an exit fee to make up the annual return (expressed as a monthly compounded fee, but taken at the end when the site is sold or developed)
• Interest will normally have to be covered by client, unless the property is being acquired at a very good/low price, or the client has a strong covenant/PG.
• PG’s will be required for an element of the loan, and to cover any difference between the’ as is’ value and the loan, where the client is paying more for the property than the ‘as is’ value.

Refer to CASE STUDIES for examples