Detail Descripton

Offering Description

Video presentation of the project.

Loan Overview

The Borrower has been a client of Property Bridges for the past 3 years. They have fully repaid two previous facilities that they had with us, for in excess of €2m which related to two development sites in Waterford City and Tramore. The Waterford City Loan funded the building and sale of 15 houses and 6 apartments. The Tramore loan resulted in the construction and sale of 69 houses.

Earlier this year the Borrower purchased a 17 acre site in Kilmeaden, Co. Waterford for €3m from their own funds. Since then the Borrower has received planning for 80 houses and 16 apartments which will be located on 12 acres of the site. Our security for the proposed facility will be over these 12 acres and 96 of the units.

They have requested a bridging facility €2m to allow them fund the ongoing development works on the site. We propose to facilitate this request by initially allowing them to drawdown €1.5m, secured against the value of the site, which is €2.75m (QRE valuation) which would give an initial LTV of 55%. The remainder of the facility would only be allowed to drawdown when €3m in contracted sales are in place. This equates to contracted sales over 12 – 15 houses depending on the house types.

The Borrower has commenced marketing the new Estate prior to Christmas. In Phase 1 which sees 12 houses being released to the market, 10 of these are “sale agreed”. In phase 2 which will see 27 houses being released in March, 8 of the houses have been reserved by potential purchasers, without the prices being advertised.

When fully drawn down at €2m the Borrower will have to maintain the €3m in contracted sales at all times, which will give an LTV of 66% against contracted sales. In reality our LTV will be sub 50% as we will have a Charge over the 12 acres site and all works completed thereon.

The loan will be repaid from the sale of the final c.15 units on the site. We will ensure that our max LTV will be maintained at 66% against contracted sales.

Security

A first fixed charge over the 12 acres site and all works completed.

Valuation

QRE valued the Property for us on the 11th January. They have placed a value of €2.75m on the site. This valuation excludes any works that the Borrower has carried out on site since they started construction.

QRE have also attributed a value of €28.065m to the completed development.

The Valuers have commented that the site is located on a prominent road near the centre of Kilemeaden and that there are no competing sites nearby.

In reaching their value of €28.065m for the full completed scheme, they have attributed values to the specific house types which are as follows.

House Type                                  Floor area                       GDV                   

4 Bedroom                                    1,482 sqft                        €390k                

4 Bedroom                                    1,460 sqft                        €345k                

3 Bedroom                                    1,133 sqft                        €280k                

2 Bedroom                                    799 sqft                           €230k                

2 Bedroom Apt                            958 sqft                           €250k  

They have used the following comparable sales evidence to support their Valuation.

Location                                         Description                                   Sale Date                             Price

28 Fan Glas, Kilmeaden            2nd Hand 4 bed detached       Q4 2021                             €365K

38 Fan Glas, Kilmeaden            2nd Hand 4 bed semi                Q4 2021                             €300K

5 Glebe Heights, Tramore        New 4 bed detached                 Q3 2021                             €363K

81 Cluain Larach, Tramore       New 4 bed semi                          Q3 2021                             €275k

Currently 10 of the 12 houses in phase 1 of the sales in the property are “sale agreed” at the sales prices that the Valuer has used in his valuation. At the time of writing 8 of the 27 houses in phase 2 have been reserved by potential purchasers, even though prices will not be advertised until they are released to the market in March. This evidence further supports the Valuation that QRE has attributed to the completed development.

To support their current valuation of site at €2.75m QRE, which equates to c.€29k per unit QRE have used the following comparable sales evidence.

Location                                         Description                                                 Price

Kilmeaden Site                            12 acres with fpp (96 units)                  €2.75m (€29k per site)

Crobally Upper, Tramore         12 acres with no planning                        €1.325m Q2 2019

Williamstown Rd, Waterford  28.32 acres with no planning                     €4.025m Q1 2021

Coleville Rd, Clonmel                9.68 acres with no planning                   €1.2m Q4 2019

Dunlavin, Wicklow                     3.29 acre with PP for 25 houses            €.89m (€35.6k per site)

Location

Kilmeaden is a village, which is c.8k from Waterford city and close to the well-known Waterford Greenway. The site is beside the Fán Glas estate, which is a development of 70 houses which the Borrower completed a number of years ago. This development has given the Borrower a detailed knowledge of the ground conditions in the area and the availability of services. This knowledge will greatly benefit the Borrower in their construction of the new estate.

The Property

The site which we will have security over covers 12 acres and has planning for 80 houses and 16 apartments. The Borrower has commenced work on site, with the foundations for the first 12 houses completed. They expect to have the first houses completed and sold by June 2022. Currently the Borrower is targeting c.30 completed sales in 2022 and c.40 completed sales in 2023, with the entire development expected to be completed by mid-2024, on the basis of no lockdowns. The following is a list of the property types and their guide prices. These guide prices are likely to increase due to the strength in demand as evidenced by the strong demand for Phase 1.

House Type                    Number                           Guide Price

3 Bed Semi                     26                                      €280k

4 Bed Semi                     31                                      €345k

Detached                        10                                      €390k

Social                                10                                    €220k

Apartments                    16                                      €220k

Borrower

SE Construction (Kent) Ltd are a reputable family-owned building firm, who have been operating in the Waterford area since 1970 This proposed facility will be their third facility with us. The first was fully repaid over 12 months ago (€800k) and the second one was for €1.3m which has recently been repaid.

In the last few years, they have completed several significant developments such as Fán Glas in Kilmeaden (70 units) Cluain Larach Estate in Tramore (166 units), Ard na Groi in Tramore (123 units) and Leaca Ard in Ferrybank (166 units). All of these developments are in the Waterford area.

For the financial year ending 31^st December 2020, the company had a turnover of €9.54 million, with a gross profit of €1.79 million.

Exit and Repayment

The term of this facility is for 2 years, with a 12 month minimum interest period.

It is likely that this facility will be utilised for the full 24 month period, which will see the loan being repaid in January 2024. At this point the Borrower is estimating that they will be completed on site by mid-2024. They are estimating total sales of in excess of €28 million.

When the loan is fully drawn down at €2 million we will require €3 million in contracted sales to be in place. The loan will be repaid from contracted sales. We expect this will occur in the first quarter of 2024 as the Developer completes the Estate. We will at all times maintain the cover 66% LTV cover against contracted sales.

Potential Risks

Construction risk:
Mitigation:  The Borrower has a long history of completing similar projects across Waterford. Their building process allows them to construct houses across large sites at various stages efficiently. They developed the estate (Fán Glas) beside the site, which we are financing, a number of years ago, this has given them a full understanding of the ground conditions they are likely to meet. They have already commenced work on site, with foundations in for the first 12 units, and a lot of the initial site roadways completed. The first timber frame is due to be erected in the next 2 weeks.

Sales risk:

Mitigation: The Borrower has recently completed the development and sale of over 160 units in the Cluain Larach estate in Tramore. They have been using the houses in Tramore as show houses for the Kilmeaden site, because of this they have a significant list of potential new owner who have expressed an interest in the proposed Kilmeaden houses. 

The house types in Kilmeaden will be the same as the Tramore houses, which were mainly 3 and 4 bedroom semi-detached homes. The houses in Tramore were typically released onto the market in phases of c.20. All houses were fully contracted typically 4 months ahead of completion. Given the strength of demand, evidenced by 10 houses already being “sale agreed” The Borrower has advised that the time period for contracted sales in Kilmeaden will match the experience of Tramore.
 

Summary

We have been asked to provide a facility of €2 million to part fund the Borrowers development of a 12 acre site in Kilmeaden. This will be the third facility we have with this Borrower. Both previous facilities were repaid fully.

The Borrower has commenced the construction of 80 houses and 16 apartments on the property, with completion expected by mid-2024. Houses will be completed and sold in phases during the lifetime of the facility. The Borrower expects to have built and sold c.30 houses in 2022, a further 40 in 2023, with the remainder in the first half of 2024. This is supported by the fact they have “sale agreeds” on 10 houses already, despite only commencing marketing prior to Christmas and having no house constructed above ground level.

The term of the loan is 24 months (12 months minimum). Lenders will receive an interest rate of 7% p.a.

This loan provides Lenders with an opportunity to participate in long term development facility with a Borrower who has a proven track record of delivering similar projects and with strong demand for the finished product, as can be evidenced from the success of the recently completed Cluain Larach estate in Tramore.

Based on the above reasons we recommend this facility to Lenders.

Prepared by James Twomey