At Assured we can provide equity finance for residential and mixed use schemes. The developer equity requirement is typically 5%-10% of costs with the profits shared 50:50 on exit, post repayment of any senior lending. Depending on the project size and debt requirement we can also provide the senior lending Debt.
For equity finance we seek a minimum cash equity of 10% of acquisition costs (c5% of total project cost) with Assured making up the balance of equity which is typically 15%. Loans range between £0.500m – £3.500m, on the basis that the expectation is for the senior bank to lend up to 80% of the costs with a 60%-65% loan to gross development value.
Assured’s contribution is structured as an ‘Equity Loan’ and in return Assured and the Developer each receive a coupon of 9% pa rolled up on all equity introduced. The profit is split 50:50 post repayment of i) senior bank development loan ii) Assured equity loan, iii) Assured equity coupon. The Assured profit split is agreed at the outset based upon both the project appraisal and RICS Redbook valuation and is charged as a minimum profit exit fee.
The borrower then receives their coupon and profit share. In the event of increased build costs, or if the developer discounts the sales value, this would be against their profit share. If the project performs better than projected any surplus is shared 50:50. These terms are not fixed and for the right deal we will vary the terms, however this tends to be once a relationship has been established with both parties.
The security is structured similar to a mezzanine finance loan therefore we do not hold any shares in the development company/SPV or require a Development or Joint Venture agreement, thus reducing the legal costs. Personal Guarantees are typically between 10% – 20% of total Construction costs and the level is dependent on the build procurement method.