The Situation

Short-term land loan to act on an option to purchase a parcel of land without planning permission.

With a population of over 20,000 students across two universities, York is a significant hub for higher education in the UK. Within its array of academic residential offerings, our client spotted an opportunity for a city with a huge student market that was severely lacking in suitable accommodation for students.

To help satisfy this need, our client had negotiated a contract with an option to buy a parcel of land, comprising of two dilapidated industrial units, located just a short walk away from the two universities. Where most would assume these units were far past their glory days, this developer saw past the cobblestone streets, wooden window frames and rusting gates to identify a great development opportunity for the site.

When the time came to exercise the option and purchase the land the developer needed a land loan for the initial purchase, which was just over £1m. However, difficulties arose when many funders were not willing to lend money and provide a loan secured by land for a patch of land, home to two rusting industrial units, that had no planning permission for redevelopment.

Where We Came In

With the exercise date for the option closing in, the developer needed funding ASAP. We met with the developer in person after being introduced by an independent broker, who hoped we could provide a fast and flexible solution for their client’s funding needs. We listened to their plan of developing 100 self-contained student units, recognising it as an opportunity too good to miss.

As with most developers, they had multiple developments in progress, so the funding required needed to be flexible. To make the funding offer bespoke for this client, we agreed to accrue the loan’s interest for the first 6 months of the term and add the interest on to the loan, saving the client cash flow on interest costs whilst they were seeking planning permission. We also lent directly to the SPV that the client wanted to hold the asset in, instead of the main trading company, as this was more suitable for the client. Finally, we also agreed to provide a top up to the £1.4m loan the client needed at the last minute to bridge the VAT payment that became due on the land purchase.

Term: 9 Months

Timing: 1 Month

Security: 1st Legal charge over land without planning | A debenture from the SPV | A corporate guarantee | A personal guarantee.

The Result

The client successfully purchased the site and shortly after reclaimed the VAT. Architects drew up beautiful plans creating a marvellous living space for the students, resulting in the client being well on their way to achieving planning permission and building accommodation that any student would love to live in.