Octane closes £4.12m development exit deal

Octane Capital has completed a £4.12m development exit loan for a repeat client’s £5.7m GDV residential scheme in Littlehampton, west Sussex.

The project — comprising nine detached, semi-detached and bungalow homes — was originally due to be completed in June 2021, but was delayed to April this year by labour and material shortages, coupled with the developer enhancing the planning consent and the specification of the scheme.

As the existing development facility expired in January, with an extension of just three months to the end of March, the client required the funds urgently.

Octane was able to help the borrower with a 12-month term facility, split into three tranches.

On day one, the lender provided £3.27m to refinance the client’s existing debt and £160,000 cash release for the completion of the scheme.

The second tranche will consist of £200,000 to be released when the development is at full practical completion and on receipt of copies of all building control sign offs and new build warranties.

The third tranche will comprise £300,000 to be releases once three or more houses have sold.

Once the development/equity release tranche has been fully drawn and further sales have occurred, Octane will begin providing further cash/equity release on each subsequent unit sales, providing the liquidity the developer needs for further schemes.

Mark Posniak, managing director at Octane Capital (pictured above), said: “This deal is a glowing example of what we do — Octane steps up fast, with flexible terms to assist developers that have been caught out by unexpected changes in completion dates and where traditional lenders appear rigid on their original facility. 

“Octane also allows the developer to release equity off the table before the entire scheme is fully sold, which in today's market is vital in ensuring the developer can start their next scheme sooner; plus they do not have to panic to sell the overrunning scheme, often to the detriment of resale value. 

“Frankly there’s no such thing as ‘standard’ anymore where the complicated and uncertain process of funding housebuilding is concerned, and our approach fills a significant gap left by the traditional lending market.”

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