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Update from the originator:
It was extremely disappointing to learn that the level 5 lockdown will now be extended to the 5th of April as the government announced yesterday. Construction, like many business sectors, will feel the impact of this recent decision. The positive news for the sector is that essential construction remains open, albeit with restrictions.
The originator's lending managers are working closely with the borrowers and site monitors throughout the lockdown and the originator is pleased to report that the vast majority of the loans will remain on schedule. However, the site closures as well as restrictions on sites that remain open will inevitably lead to some delays. In the event of a delay, interest will continue to accrue for lenders and the originator would ask lenders to bear with the originator as the originator will allow borrowers some extra time to repay their loans.
The site is closed until the 5th of April.
As lenders are aware, the majority of the houses in this development are being sold on the open market, accordingly, this site remains closed during the lockdown. The build and sales program were well ahead of schedule prior to lockdown, with only 3 houses of the original 69 houses remaining for sale. The originator is confident in the ability of the Borrower to finish out the development, however as this site will remain closed until the construction lockdown ends, this may affect their ability to repay the loan by the repayment date of 18th November next. The originator will continue to monitor this project and will advise lenders of any potential delays as the year progresses.
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.
The funds will be used to for the following items;
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.
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;
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.
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%
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,
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.
Date | Status | Late | Assignment date |
---|---|---|---|
![]() | Paid | No | 15 September 2020, 22:35 |
![]() | Paid | No | 16 December 2020, 12:52 |
![]() | Paid | No | 16 March 2021, 19:07 |
![]() | Paid | No | 14 June 2021, 17:42 |
![]() | Paid | No | 21 September 2021, 07:55 |
![]() | Paid | No | 20 December 2021, 20:49 |
Amount €
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