How To Get Your Property Development Deal Over The Line
There are two very important aspects to get your property development deal over the line. The certainty of funding and the execution of timing.18 February 2020
There are two very important aspects to get your property development deal over the line. The certainty of funding and the execution of timing. Doubts or delays with either can hiccup any transaction and bog you down with lenders or capital partners in the funding process.
When asked how to finance property development and how long it takes, we aim to be realistic. If everybody in the process is quick, concise and precise – providing what’s required of them – funding can take 6 to 8 weeks.
Timing is everything
Property brokers tell me all the time “To get the best deals you need to move fast.” Timing and certainty are key. Yet, disappointingly, few deals come with all info and due diligence required to make quick funding decisions.
Most developers provide high-level information, not backed up with factual, well-referenced data or research. This will either have the funder declining (after, naturally, taking a fee) or actually building the deal memo themselves on the developer’s behalf. Most funders won’t do the latter; some will, but at the cost of time and money…both of which are critical!
It’s fair to say that many developers starting out will be great at finding and building sites. But they probably won’t have the financial skills or the experience required to construct a fully baked deal memo. Such skills must be developed, or a suitable broker or debt/equity Advisory used to undertake this work on the developer’s behalf.
Do everything you can to move the process along
A broker or Advisory is a good way to go before you seek property development finance. But you should do everything within your power to help. For example, it’s possible to provide much of the information surrounding supply and demand economics, regeneration and infrastructure investment data, simply reproduced or updated from a template for each application.
The introduction of increased KYC/AML over recent years has undoubtedly made the process more tasking. That said, most of this is usually predictable and replicable so it’s best to have it ready in advance. With practice, providing certified sources of equity, SALIES, proof of identity and structure charts becomes mostly straightforward and hassle-free.
Having to hand important reports such as ground investigations, (numerous) contractor quotes and stakeholder permissions helps streamline the process. Funders cannot acquire such reports on your behalf. Not having them ready slows the process and expectations (such as vendors and land agents) will need managing.
To get a deal over the line developers must have their solicitor, contractor, architects, engineers, the appointed QS and valuer all up-to-date with the information required to speed up the necessary due diligence.
Deal certainty and execution timing will improve if you present a decent deal memo and the required ancillary information. Such deals are also likely to see the best terms.
Overall the cost of finance is a marginal cost of the deal. But extra early effort in putting together a comprehensive deal information pack will pay dividends. It forms a statement of intent, encourages favourable terms and gets you working on your property development deal quicker.