Tramore Development - Tranche 1

 Development loan
Project listed: 13.05.2020
Tramore,
Ireland
8%
Annual yield
50%
LTV
Term: 18 months
Mortgage rank:
First
Interest payment schedule:
Quarterly
Interest payments
15.09.2020
Paid
30.12.2020
Pending

Project updates

Login to subscribe on project updates

Ask a question

@
Allowed characters: a-z, 0-9. Min 3 characters
${question.length}/${maxQuestionLength}

Descripton

Video of the project.

Offering Description

Borrower

 SE Construction (Kent) Ltd.

Property

 Development site for 69 houses, at Cluain Lárach,   

 Tramore, Co. Waterford.

Security

 First legal charge over the property.

Facility Amount

 €2,000,000

Net Development Value (NDV)

 €9,780,000

LTNDV

 20%

Max LTNDV

 50%

LTC on First Drawdown

 26%

Max LTC

 70%

Interest

 8% (To be paid quarterly)

Purpose

 Bridging Facility

Term

 18 months (6 months minimum).

Repayment

 Open market sales and / or refinancing

Loan Overview

The Borrower is a well-known and regarded construction/development firm operating in the Waterford area. They have requested that we provide them with a €2,000,000 facility for a period of 18 months (6 months term minimum). This will be drawn down in three tranches.

  • Tranche 1 - €750,000
  • Tranche 2 - €750,000
  • Tranche 3 - €500,000

The funds will be used to for the following items;

  • To complete the first 15 houses and start developing 24 units of phase 2.
  • The Irish Water connection fee for the entire development.

This is a revolving facility which means SE construction will be allowed to use part of the sales proceeds from phase 1 to start the construction of phase 2. Measures are in place to ensure that the loan to cost never exceeds 70%, well below our maximum limit of 90% and also that the loan to net development value never exceeds 50%, much lower than our maximum ratio of 70%.

This will be the Borrower’s second loan facility with us. They previously had a loan facility of €700,000, which was secured by their Sherlock Walk development in Waterford. This loan was fully repaid 2 months ago. The interest rate for lenders on this loan will be 8% per annum.

Property

The Borrower started in the Cluain Lárach development since November 2015, since then they have completed and sold 97 houses. For 2019 they had to stop work on the site as the Irish Water infrastructure had to be upgraded to allow for additional housing. This work has now been completed. They started back on site at the beginning of this year, with a plan to complete and sell the remaining 69 houses by mid-2021, with 42 scheduled for completion this year. Timelines have now been extended to take account of Covid19.

  • Phase 1: The first phase of 15 houses is well underway, with many units close to completion.
  • Phase 2: According to the QS report approximately €100,000 has been spent on groundworks and foundations for these 27 units. 
  • Phase 3: No works have begun on these last 27 units. 

The houses will be A rated houses, with an Air 2 Water heating system. They are mainly a mixture of 3- and 4-bedroom semi-detached houses and are currently being marketed at prices between €245,000 and €345,000 and will be aimed at the young family market.

Sales Outlook

Given the current market environment we have undertaken a deep analysis on sales potential.

The total sales value of the 15-unit phase 1 is €4,295,000 and the total sales value of the 27 units in phase 2 is €6,805,000.

Excluding VAT on new homes sales, the total sales proceeds amount to €9,779,735.

Loan to Net Development Value = €2,000,000 / €9,780,000 = 20%

Details of the progress of the sales are as follows;

  • 30 out of 42 houses are sale agreed with a sales value of €7,395,000
  • The total sales proceeds excluding Vat amounts to €6,500,000

Loan to Sale Agreed = €2,000,000 / €6,500,000 = 30%

Of the 30 sales, there are varying degrees of commitment. For example, we do not expect fully contracted sales to fall away or council sales, however, we would expect some of the issued contract sales to fall away. We have listed the sales in order of their chance to complete.

  • 8 sales are fully contracted, and 10% of deposits have been paid. The value of these is €2,260,000. This includes 4 sales to state employees and 2 that are part funded by the help to buy scheme.
  • 4 are going to Waterford Council will be buying 4 houses on the estate for their Part 5 social housing requirement at a value of €690,000.

The total committed sales figure is €2,950,000. Excluding Vat, the figure is €2,600,000.

Loan to Committed Sales = €2,000,000 / €2,600,000 = 77%

  • 12 other contracts have been issued at a value of €3,230,000. We would expect some of these to fall away. Given the current market conditions, we would be left with sales proceeds of €1,615,000 should half of these sales fall away. This gives us estimated sales proceeds of €4,750,000 comprising of €2,950,000 (representing the total committed sales) plus €1,615,000 (representing 50% the value of contracts for sale currently issued). Excluding Vat, the figure is €4,185,022.

Loan to Estimated Sales Figure of €2,000,000 / €4,185,000 = 47%

Loan to Cost

An independent QS visited the site on the 12th of March 2020. The value of works complete as of that date was €1,802,950 excluding Vat. This also excludes the site costs. It is conservative to estimate the total cost of the sites to be €1,035,000 comprising 69 sites at a cost of €15,000 each.

Therefore, the total cost as of the 12th of March is €2,837,950.

Our loan to cost after the first drawdown will be 26% (€750,000 / €2,840,000).

Revolving Facility

This is a revolving facility which means SE construction will be allowed to use part of the sales proceeds from phase 1 to start the construction of phase 2. Measures are in place to ensure that the loan to cost never exceeds 70%, well below our maximum limit of 90% and also that the loan to net development value never exceeds 50%, much lower than our maximum ratio of 70%.

Location

The Cluain Lárach estate is on the outskirts of Tramore. 97 houses are occupied. There will be 166 houses in the estate when the final phase of houses is completed in 2021. Tramore, while it is regarded as the leading holiday resort in the southeast, it is also the main commuter belt town for Waterford, which is located a 10-minute drive away. The town has a population in excess of 10,000, and has all the facilities that young families require, including schools, retail, local services, along with easy access to a great beachfront and promenade.

Exit

It is proposed to have a term of 18 months (6 months term minimum) on this facility. The facility will be repaid from sales proceeds from houses close to expiry of the facility or from a refinancing proposal that Property Bridges will provide to finance the build costs of all the remaining 54 houses, at a quicker pace, should the pandemic situation improve in the second half of this year. The sales proceeds from the first 15 sales will be used to fund the next phase of houses.

The Borrower

SE Construction (Kent) Ltd is a reputable family owned building firm, who has been operating in the Waterford area since 1970. In the last few years, they have completed several significant developments such as the existing Cluain Larach houses, Tramore, Fan Glas, Kilmeaden, Ard na Groi, Tramore and Sherlock Walk, Waterford. Property Bridges provided a loan against the Sherlock Walk property, which was fully repaid 2 months ago. Currently they have sales of €2,100,000 in Sherlock Walk and Primrose Hill (Tramore), which are contracted to the Council and private individuals. All of these houses are fully complete.

Security

The loan will be secured by a first legal charge over the Property. There is currently a charge against a separate site that the Borrower owns in Kilmeaden. Part of this charge includes a floating element over the assets of the Borrower. However, to allow us to take a charge over the Property, we have received correspondence, from the lending institution confirming that our Charge on the Property site ranks ahead of any security they have. Our Solicitor has confirmed this is in order.

Planning

The site has full valid planning permission.

Risk Warning

Property Bridges has compiled this report on behalf of our lenders and have taken reasonable care to ensure the information provided is authentic and accurate. Please be aware that returns are not guaranteed, and your capital is at risk. Please also note that the term is not certain and may be extended under certain circumstances. Investors should seek their own advice before investing.

Conclusion

We had originally intended to recommend a €4,000,000 facility to lenders, to allow SE Construction to build out all 69 houses in Cluain Lárach, however, due to the Pandemic situation, we have changed this to a €2,000,000  facility to complete 2 phases, totaling 42 units.

We recommend this facility for the following reasons,

  1. Extremely conservative loan to value ratio and a max loan to cost ratio of 70%.
  2. Very strong level of security against contracted sales and Council sales.
  3. The strong history the Borrower has in building similar houses in the same estate over the last few years.
  4. The repayment history the Borrower has with us.
  5. 8% p.a. return.

The Borrower has a proven track record in the Waterford area of providing good quality houses in areas that have a proven demand, as can be seen from the nearly 100 houses they have already completed and sold in the Cluain Lárach Estate. This is their second loan facility with us, having repaid the first facility for two months. This is a large facility, however, the quality and the quantity of the security provided and the levels of return for investors allows us to recommend this facility.

Project originated by:

Documentation

8%
Annual yield
50%
LTV
Term: 18 months
Mortgage rank:
First
Interest payment schedule:
Quarterly
Interest payments
15.09.2020
Paid
30.12.2020
Pending
Get emails about all
Property Bridges
projects