- 13th July 2021
- Posted by: DMM
- Category: Joint Venture
Finding 100% joint venture funding, or JV property development finance as it is also known, has seen a resurgence in recent months as lenders have increased their appetite. For developers that can show experience but are lacking cash to put into a deal, this finance can be a means to grab a land opportunity.
There can be many reasons why a developer may not have equity to put into a deal, for example their cash may be in another project(s), but this is not necessarily a barrier to taking on another development site.
What is JV Property Development Finance?
- The lender will provide up to 100% of the acquisition, build and professional costs
- The developer does not, therefore, have to put in any cash
- Personal guarantees not taken
- A formal valuation may not be required
- Assets will be held in a Special Purpose Vehicle (SPV)
- Profit is split between the lender and developer
This is good news for experienced property developers that may be finding the right opportunities but are being held back by a lack of liquidity.
What are the Criteria for 100% Development Funding?
- Facilities between £500k to £4 million are the most common but funding up to £20 million is possible
- The developer will have a track record of having completed similar developments
- Developers that are also the contractor preferred
- Project terms up to 18 months, but longer may be possible
- Profit on GDV, before finance costs, should be at least 27%
- Outline or full planning consent in place
- Project types will typically be new build or conversion residential or mixed
Downsides to 100% Funding
Where a lender is putting in all of the equity into a deal then their risk will be high and, therefore, they will want a high return. This will include rolled up interest rates that may start from 1.25% per month and a share of the profit. The latter will vary but usually on a 50:50 basis.
Developer Money Market is a specialist in JV property development finance and provide bespoke funding solutions to your requirements.