First-ever development finance product with built-in sales guarantee
The first-ever development finance product with a guaranteed exit for housebuilders and lenders. has been launched.
BLEND Network, the specialist development finance lender, has announced a new product: “Development Plus, powered by LDS Sales Guarantees.”
Pictured: Roxana Mohammadian-Molina of Blend Network and Mark Roberts of LDS
LDS offer a unique service guaranteeing to acquire any unsold units on a site. This removes all speculative risk, allowing lenders to increase their leverage whilst reducing risk. LDS can also release their 10% cash deposit to developers, unsecured and at zero coupon. The combination of these factors is transformative for developers and brokers.
Development Plus enables developers to finance more schemes by increasing their Loan-To-GDV (LTGDV) by over 75%, and typically reducing their cash contribution by up to 77%.
This product is aimed at SME developers looking for increased leverage and reduced equity injection. It is designed with the needs of property developers who need easy access to stretched senior debt.
The first lending product of its kind in the development finance market, Development Plus powered by LDS Sales Guarantees offer a loan-to-cost figure of 95%. The additional leverage, coupled with the LDS deposit release, enables developers to increase development capacity by three to four times. Developers can often benefit from a 170% increase in returns on cash invested.
Yann Murciano, chief executive at BLEND Network, commented: “We are very excited to launch Development Plus powered by LDS – the first-ever development finance product to incorporate a built-in sales guarantee. This new breed of financial product is a very compelling proposition for developers, brokers and lenders alike that allows each party to maximise opportunity and profit. By guaranteeing the developer’s exit, it allows us as lenders to push our gearing and borrowers to reduce their upfront cash contribution and increase returns on cash invested.”
Mark Hawthorn, CEO at LDS commented: “Whilst we work with lenders on a daily basis, Development Plus is our first formal collaboration.
“The Sales Guarantee completely transforms the risk profile for lenders so it’s natural that we start to create joint products. This makes the whole finance process quicker and easier for lenders, brokers and developers allowing for increased numbers of new homes to be brought forward.
“We have issued almost £1.3bn of guarantees so far this year, which is encouraging yet only the tip of the iceberg.”
Roxana Mohammadian-Molina, chief strategy officer at BLEND Network, commented: “We believe the Development Plus facility is the perfect solution for the current market conditions. With advisers currently cautioning a potential softening in purchase activity due to slowing government support for first-time buyers, this product removes concerns around the exit for borrowers and lenders alike.
“The Development Plus facility provides developers with a guaranteed exit on development finance schemes, reduce their upfront cash contribution and increase their returns on cash invested.”
Mark Roberts, relationship director at LDS, commented: “I’m into my third decade in development finance, as soon as I saw what LDS were doing I could see the transformative effect it would have. We are in constant contact with lenders and brokers so the progression to joint products is a natural next step.
“The country is falling short on housing supply, yet there are some very capable developers and willing lenders out there. The disconnect is often linked to finance and equity, Development Plus goes a long way towards removing this and opening up opportunity for SME housebuilders.”