Commercial Developments
CLP have many years experience in arranging commercial development finance.
Whereas in a good market, lenders may consider funding purely speculative developments, it would be true to state that even then, lenders tend to avoid providing commercial loans unless the development is substantially prelet / presold before drawdown.
Important criteria - especially in a difficult market:
- Experienced and financially strong developers
- Construction risk supported by a financially strong contractor
- A strong exit provided by either an agreement to transfer the development loan into an investment loan (which can only be committed if development is pre-let to anchor tenants) or a presale.
Lenders primary objective is to derisk their exposure, which can take a number of forms:
- prelets and / or presales
- greater equity from the developer
- strong cost overrun guarantees
- contractors liability insurance
- strict monitoring procedures
- step in rights, and more.
In difficult market conditions it is important to evaluate and prepare a full presentation on the project and the parties behind it, thereby leaving as little as possible to chance.
£37.5 million – 100% development finance for pre-let retail park
