As a project nears completion, developers may need to release capital for their next acquisition, repay a development facility that is approaching its maturity date, or move to a lender whose terms better suit their changing circumstances.
This is where development exit finance can provide a valuable source of short-term funding.
An exit facility can give developers additional breathing room towards the end of a project, helping to refinance existing development debt while potentially releasing equity from the scheme. Funding may be available for projects that are still being completed, although lenders will generally offer their most competitive terms where a development is close to practical completion or already finished.
How Does Development Exit Finance Work?
Consider a development of ten apartments that was originally funded through a development loan.
Six apartments have now been sold, with the proceeds used to reduce the outstanding debt. However, four units remain on the market and the original development facility is approaching its repayment date.
The developer may face a difficult choice. The lender could potentially agree to extend the existing facility, but an extension isn’t always available and may involve additional fees or a higher interest rate.
An exit loan could provide an alternative by refinancing the outstanding development debt and giving the developer more time to sell the remaining units.
This can help avoid the pressure of having to sell properties quickly simply to meet an approaching loan maturity.
What Can Development Exit Finance Be Used For?
Depending on the lender and the individual project, development exit funding can potentially help developers:
- Refinance an existing development loan
- Support projects that are part-complete or nearing completion
- Release equity from units that have already been sold
- Provide additional time to market and sell remaining properties
- Access funding of up to 75% LTGDV (Loan to Gross Development Value)
The right structure will depend on factors such as the development’s current value, remaining units, sales position, existing debt and the proposed exit strategy.
Speed Can Make a Difference
Timing is often critical when a development loan is approaching maturity. Having access to a refinancing solution quickly can help developers avoid unnecessary pressure and make informed decisions about the next stage of their project.
In some circumstances, indicative terms can be available within 24 hours, with completion potentially achievable in as little as two weeks, subject to the lender, property and transaction meeting the relevant requirements.
This can make exit finance particularly useful where a developer needs to act quickly but doesn’t want to sell remaining assets below their intended market value.
Speak to Developer Money Market today to discuss your requirements and find out whether development exit finance could be suitable for your project.
About Developer Money Market
Developer Money Market is an award-winning specialist brokerage focused on property investment and development finance.
We arrange finance for property professionals across the UK, including the Channel Islands, as well as international finance opportunities.
To discuss your funding requirements, call
or visit DeveloperMoneyMarket.com.