Ground-up development
finance
Senior debt to build a new scheme from the ground up, drawn as the works progress and sized on the value of what is being built.
New-build residential
Houses and apartment schemes built from a cleared or undeveloped site with full planning consent, from a single prime house to a multi-unit block. The facility funds the build in stages and is repaid from unit sales or a refinance at completion.
Mixed-use schemes
Residential above commercial or retail space, where the gross development value combines sale values and, for the commercial element, an investment value. The appraisal has to evidence both, since the lender sizes against the total.
Demolition and rebuild
An existing building replaced by a new one on the same site. Underwritten as ground-up rather than refurbishment, because the lender is funding a new asset whose value only exists once it is built.
Indicative structural characteristics. Terms on any facility are set by the chosen lender and confirmed on completion of underwriting.
Why a ground-up scheme is underwritten differently
A bridge lends against a building that exists. A ground-up facility lends against one that does not yet: on day one the security is a site and a planning consent, and the value the loan is sized against only comes into being as the scheme is built. That is why the money is released in stages rather than in one advance, each tranche following certified progress on site, and why the lender looks as hard at the programme, the contractor and the cost plan as at the end values.
Two measures size the facility at once. Loan-to-gross-development-value caps the loan against the appraised value of the finished scheme; loan-to-cost caps it against what the scheme costs to deliver. On a senior basis that is up to around 60% of GDV and up to around 85-90% of construction costs, and the land is commonly the developer's equity. Where a scheme needs leverage beyond what senior debt will fund, the structures involved are set out in our note on the development finance capital stack. Our own mandates stay senior.
We arrange ground-up development finance in the United Kingdom, from central London to regional cities, and on selected schemes in France, Switzerland and Luxembourg. The work starts before any lender sees the file: testing the appraisal for internal consistency, checking the programme against the drawdown structure and preparing the pack in the form a credit committee expects. Each mandate then goes to a shortlist of three to five lenders chosen for fit with the scheme. For a step-by-step account of what follows, see how ground-up development finance works in the UK.
- Full planning permission for the scheme, with its pre-commencement conditions mapped against the programme
- A development appraisal setting out end values, the cost plan and the programme
- The build contract, the contractor and the professional team
- The developer's track record on comparable schemes
- The equity contribution, commonly including the land
- A credible exit: unit sales, or a refinance onto term debt against the completed asset
See also the monitoring surveyor, development exit finance and bridge or development finance.
Ground-up development,
answered.
Ground-up development finance is a loan that funds the construction of a new building from a cleared or undeveloped site, typically new-build residential or a mixed-use scheme. Unlike a bridge loan, it is not advanced in one sum: it is drawn in tranches as the works progress, each release certified by an independent monitoring surveyor appointed by the lender. It is sized on the value of the completed scheme and on the cost of building it, runs for the length of the construction programme plus a sales period, typically 18 to 36 months, and is repaid from unit sales or a refinance onto longer-term debt.
Planning a ground-up scheme?
Send the appraisal and the consent. We will give you a candid view on how the scheme finances before you approach lenders.