Tranche 3 Pallaskenry, LimerickDevelopment loan
We are presenting you our first originator and project from Ireland. After platform and project due diligence we make our first investment into Limerick development loan. Full project is divided into 8 phases and this is the loan #3 - the last one of phase 1. The finish of phase 1 means the end of the development for 8 houses, the sales of the houses begin this Friday.
There will be subsequent financings for future phases, but only when there will be 3 sales/pre-sales from the phase 1 completed.
We are investing into this project to broaden our diversification outside the continental Europe. Property bridges shall earn from this project 3%, which makes a total intrest for the developer at 11%.
Property Bridges description:
Tranche 3 of Palaskenry Loan, 12 months, 8.0% Per Annum
Progress on the 16 unit development in Pallaskenry is progressing as expected. In line with the agreed construction plan, this third tranche of €230,000 will complete the first phase of funding. This will allow the developers to complete the bulk of the works on the first phase of 8 houses. The development will be launched for sale to the open market on Friday the 8th of November. There appears to be a strong demand for the homes and we would expect a number of sales before the end of the year.
The loan is repaying 8.0% per annum with an LTV of 69%. The loan is secured by first charge against the development site and works done to date.
Tranche 3 Overview
- Interest rate: 8.0% per annum
- Security: First Charge
- LTGDV: 69%
- Term: 12 months
- Minimum Term: 4 Months
- Final Repayment Date: November 2020
- Amount: €230,000
- Exit: Sale of properties
Top Drawer Developments have made great progress with the Pallaskenry site. Over the last 2 months, they have concentrated on getting all 16 houses to foundation stages before the weather changes as we move into winter. This means that future progress will be less weather dependent.
They will be officially bringing the development to the market on Friday 8th November, with a launch event, which is being advertised locally. Limericks Live 95 local radio station will be in attendance, as we will be. From the reaction they have had so far, they expect demand to be brisk. By the time of the launch, the 2 show houses will be nearly 50% complete. These houses are roofed, and the windows and internal partitions will be in prior to the launch event. This will give potential purchasers a good feel for the dimensions and quality of the houses. All the other houses in the development are at various stages of construction, and vary between 40% and 10% of completion, with construction due to complete by April 2020.
For a full construction report please read the drawdown report on our updates section HERE.
The latest repayment date for the loan facility is 8th November 2020.
The Borrower is a construction / development firm in the Limerick area. It has requested that we provide them with a €2.415m site purchase and development facility for a period of 16 months (6 months term certain), secured against the Property, to allow them to purchase the site and construct 16 houses on the property. The houses will be constructed in two phases of eight houses. We will only provide funding for the second phase if three presales have been agreed from the first phase of houses. Funding will be provided on a staged basis to the Borrower as they reach construction milestones on site.
It is proposed that lenders will receive a return of 8.0% p.a. for this facility. We will take a charge over the entire site. Our LTGDV (Loan To Gross Development Value) will be 69%, and our LTV (Loan To Value) for the site will be 61%.
The site is located on the main street in Pallaskenry. The village is located just off the N69, which is a direct route into Limerick City Centre, 19km away. The development is within easy walking distance of a number of local amenities, including primary & secondary schools, shops, pubs, post office and local sports clubs. The Borrower, with the forbearance of the current owner of the site has already commenced construction on the site. Foundations for 4 houses have been completed, with the first two houses being at roof level.
Top Drawer Developments is a building company that was set up in 2016, with the aim of building houses in the Limerick area. The principle behind Top Drawer has many years of experience in residential building in the Limerick area. The Borrower has built up a team of reliable subcontractors and advisors which it can call on to allow it to develop sites like the Pallaskenry property. We have completed a legal and tax due diligence which raised no issues.
The loan will be secured by a first legal charge over the Pallaskenry site, supported by a cost overrun guarantee from a Director of Top Drawer Developments. This will ensure, should there be any additional unforeseen costs outside of the original budget, they will be the responsibility of the Borrower, without having any negative impact on the facility.
The Orchard Estate will have 16 houses built over two phases of eight. The Borrower has already commenced work onsite with foundations completed on four houses and walls up to roof level on the first two. The houses will be a mix of 3-bed dormer villas, 3-bed semi-detached and 4-bed semi-detached homes. They will be A-rated with an Air to Water heating system. The houses will be concrete built using a new form of construction called Sup-R-Wall, which meets full regulatory requirements. This form of construction is regarded as superior to the wooden frame method which is now common on most development sites and will be a very attractive feature for potential owners.
The Estate is located in the middle of the main street in Pallaskenry, many local amenities such as shops, post office, creche, primary and secondary schools are on the doorstep of the estate. Pallaskenry itself is a 15-minute drive from the ring road around Limerick and the Raheen Industrial Estate, which is home to a number of multi-nationals such as Regeneron, Stryker and Analog.
Rooney Estate Agents, who are well-regarded property agents in Limerick, have been appointed to market the houses. They have a detailed marketing strategy in place, which will see the development being advertised in the local media, online platforms such as MyHome, and on Linkedin, Twitter and Instagram. The houses will be put on the market at between €240,000 and €270,000, depending on house type. Rooneys have a list of clients who have expressed an interest in this type of housing, who will be contacted informing them of the launch of the development.
The 16-house development will be completed over two phases of eight houses. Funding for the second phase is dependent on 3 contracted sales for houses in phase one.
An independent valuer based in has provided us with a “Red Book” valuation for the site and a view on the achievable sales price for the completed units. They have determined that the open market value for the site is €435,000, which matches the cost price.
With regards the sales prices that are being guided for the completed units, the valuers have commented as follows “Having reviewed the build specification for the subject development we would be of the opinion that the pricing for the development is ranged at an achievable price should it be brought to the open market”
In reaching this opinion the valuer used evidence of new house sales in Mungret, which is the nearest suburb in Limerick to Pallaskenry, where prices for 3-bed semi-detached houses are starting at €285,000. With the Pallaskenry development having a better build quality. Similar houses in Castletroy / Annacoty area have starting prices at €285,000 for 3-bed semi-detached and €360,000 for four-bed semi-detached houses.
The total sales value of the development net of VAT is €3.5m, based on the sale guide prices for the individual units. This value has been supported by our independent valuers report. Based on this figure the LTGDV is 69% (€2.415m/€3.5m).