A £2.18 million ground-up development loan has been secured by a novice developer from Avamore Capital, paving the way for a nine-flat residential scheme in a deal that defied conventional lending wisdom. The significant funding was provided despite the borrower's lack of experience in construction or property development.
The transaction, facilitated by Arose Finance, navigated several notable complexities. The development site is situated immediately adjacent to a railway line, necessitating compliance with a Basic Asset Protection Agreement (BAPA) - a regulatory requirement that added an extra layer of logistical challenge. Furthermore, the proposed scheme includes an unconventional mix of residential units, featuring several larger five-bedroom apartments, which diverges from more standard development models.
This deal highlights a growing trend within the specialist lending sector, where lenders are demonstrating a greater willingness to fund projects from less experienced developers. While mainstream banks generally require a robust track record of completed projects for ground-up construction finance, specialist firms are adopting a more pragmatic and case-by-case assessment approach. Kelsey Phillips, Head of Specialist Finance at Arose Finance Limited, noted the considerable diligence and collaboration required, praising Avamore's commercial approach in looking beyond the borrower's limited experience.
Adam Butler, Sales and Marketing Director at Avamore Capital, stressed that despite the borrower's novelty in development and the scheme's inherent complexities, their focus remained on the overall strength of the opportunity. This collaborative approach allowed them to structure a viable financial solution. Saif Ali Khichi, an underwriter at Avamore Capital, added that the assessment extended beyond just financial figures, incorporating a comprehensive understanding of the project's wider context, including the BAPA requirements and the unique unit mix.
The availability of such development finance persists even amidst broader pressures within the UK's mortgage and wider lending markets. Specialist lenders continue to evaluate residential development projects that might not meet conventional lending criteria. However, it is generally understood that such bespoke arrangements often come with higher interest rates and fees, reflecting the increased risk associated with less experienced borrowers and complex projects.