200 000.00 €
Type: Development loan
Mortgage rank: First
Interest payment schedule: At Project Completion
Min. amount of investment - € 100
Update from the originator:
As lenders may know, the originator has granted a 3-month extension on this facility after discussions with the borrower in early January. The borrower sought this extension and provided an updated schedule showing the completion and handover of 10 houses to the council by this date.
The originator has been monitoring the progress of this site on a weekly basis throughout the extension period and it's become clear that the end of March deadline will not be met.
Instead of granting a further extension, all parties have agreed that refinancing with another lender is now the preferred way forward. All parties are now working towards a refinance of the facility and it has been confirmed by the borrower's solicitor that an offer to refinance has been received and a fee has been paid to the new funder to conduct due diligence.
The originator would expect this to complete by the end of April. If the refinancing does not complete, the Property Bridges team will assess alternative options at that point.
Works are continuing on-site in Pallaskenry. There was a pause on construction because of the COVID lockdown. This delay has resulted in a prolonged build period, which will see the houses completed in January.
As previously advised negotiations are nearing completion with the Council for the purchase of all 16. Prices and fit-out requirements have been agreed upon. We have received confirmation of the final sign off from the Dept of Environment.
Our QS continues to visit the site regularly and is in agreement with the value of works completed so far. The Borrower requires further funding as per our loan agreement with him to continue the construction process, accordingly, we are now raising the next tranche of this facility for a further €200,000 at an interest rate of 7%. The term of this tranche is 6 months with a minimum interest period of 3 months.
Please refer to the original credit paper for more details on this proposal. Please note that the original credit paper stated an interest rate of 8.5% where the exit strategy was an open market sale. As stated above, the exit has changed to selling the units in advance to a local authority for social housing. The rate is now 8% to reflect the de-risked nature of the change in exit strategy.
Exit: Expression of Interest for all 16 Units
The Borrower is a construction/development firm in the Limerick area. It has requested that we provide them with a €2,415,000 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 8.5% p.a. for this facility. We will take the first charge over the entire site and all assets debenture over the company. 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 2 houses have been completed, with work on the exterior walls ongoing, along with general clearance across the entire site.
We have carried out full due diligence on the proposal.
▪ LK Shields has confirmed that all legal and security requirements have been met.
▪ OCFPM, who are our QS advisors have issued a report, which confirms all regulatory and planning requirements are in order for the development. They have also reviewed the Borrowers' cost and construction plans for the development and have confirmed they are in order.
Their full report is available to view on our website. OCFPM will also carry out ongoing site visits to ensure all timeline and cost schedules are running according to plan. They will sign off on drawdown requests to ensure work done agrees with the funding requested.
The development has been valued for us by an independent valuer based in Limerick, which confirms the price being paid for the site and that the sales price for the houses is achievable in the current market in Limerick. A copy of this report is available for viewing in our offices on request.
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 a 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 legal and tax due diligence which raised no issues.
The loan will be secured by a first legal charge over the Pallaskenry site, an all assets debenture over Top Drawer Developments Ltd, as well as 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 two houses and work progressing on the exterior walls.
The houses will be a mix of 3-bed dormer villas, 3-bed semi-detached and 4-bed semidetached 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 owners of the Sup-R-Wall system are the principles behind Top Drawer Developments, so we are happy that this method of construction will prove to be very efficient on-site.
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 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 Limerick 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 the cost price that the Borrower is purchasing the site.
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 estimated sales value of the development net of VAT is €3,5000,000, 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% (€2,415,000/€3,500,000),
The site has received full valid planning permission from Limerick City & County Council, under the planning reference 17/645.
It is proposed to have a term of 16 months on this facility. The Borrower will have the ability to repay the facility after month 6 either partially or in full.
The Borrower has requested a facility to enable them to purchase a site and develop 16 houses in Pallaskenry, Co.Limerick.
The Borrower and the principles behind it have a good knowledge of Limerick residential development. They are employing a very efficient building method, which will see the houses brought to the market in a timely manner.
The development is very well located in the center of Pallaskenry, a village that provides all the services and amenities that young families require. The young family segment is the primary target for development.
We have been advised by the sales agent that there will be strong demand for development due to the quality of the build and the price point it is placed at. This view is supported by the evidence provided by our independent valuation.
The loan facility provides a good return from Investors, this coupled with the level of security and the demand for the completed houses, allow us to recommend this facility to lenders.