With lenders in the short term sector beginning to diversify their product range to help a broader range of clients obtain the finance they need, here at B&C we have brought you the very best in recent deals that have utilised these new and innovative niche products.

The announcement of new products exclusively to fund development projects have recently taken centre stage as lenders fulfil a gap left by the mainstream financiers who consider this high risk lending.

By providing developers with greater opportunity, the short term industry is providing a much needed finance solution, enabling both new developments to prosper and stalled projects to complete.

This week, we have two very different development deals completed by Goldentree Financial Services Plc and Masthaven Property Finance.

Goldentree

The lender’s client, Windmill Properties Ltd, used their own funds to buy a closed-down freehold pub in the city centre of Glasgow which at the time of purchase had planning permission for its existing use only – a public house.

The client obtained planning permission for the conversion of the public house into a mixed used property - two ground floor retail units and residential accommodation in the upper parts.

The retail units would be used by Tesco Express and successful negotiations regarding its tenancy resulted in an Agreement to Lease and an anchor tenant for the investment.

However, before Tesco could move into the property, substantial refurbishment works needed to be completed.

This is where Goldentree stepped in – it provided the development finance loan needed by the client to successfully renovate the site in time for the tenant to move in.

Commenting on the deal, Goldentree’s client, Phil Kavanagh of Windmill Properties Ltd, said: "Goldentree provided vital funding for our Tesco Express development when established lenders had left the market. Goldentree spent time with us so as to understand how we create value in an investment. They provide a very efficient funding service based on traditional values. It was great to have a funding partner we could phone up and talk to. We look forward to working closer with Goldentree in the future. Top chaps."

Masthaven

The lender was approached by Mr and Mrs M who are retired and their deaf son who required funds to update and extend their property.

They had a large plot with two properties on it and were struggling to raise finance to do the development for their retirement.

One was a modern property which they were living in and the other property required redeveloping and modernising.

The exit of the loan was the sale of the completed property the clients were living in, as once the new property was completed they would split the title and move across into the new property.

Brian Levin, Masthaven’s underwriting manager, dealt with this case due to its complex nature. The fact that it was a regulated case meant there were a number of factors to consider when deciding whether or not to proceed with the case.

Brian said: “During the underwriting of the loan my main concerns were that the clients were retired, their only income was from their pensions and whether the client had sufficient development experience. I needed to be confident they would be able to deal with the development of the property and that a clearly identifiable exit was in place.”

During the course of the loan application, the client decided to demolish the existing property and build a new house from scratch. This gave Masthaven comfort as it was a less complicated job and easier to monitor. The client also provided sufficient evidence of their experience in development and was using a local reputable building firm to carry out the entire build.

The gross loan was for £213,000 and Masthaven agreed to do the loan over a number of drawdowns. The lender decided to do this as it kept the risk at an acceptable level and also saved the client on interest costs, as Masthaven only charges interest beginning when the funds are drawn down.

As the client had demonstrated they had the necessary experience and had an exit route that was feasible, Masthaven was happy to proceed. From an FSA point of view, Brian was satisfied as all the interest was deducted from the advance and the client would not have to service any debt during the loan. Furthermore, the exit was a sale and therefore the client did not need to prove their income for a mortgage.