Deals of the week

Deals of the week




Operating as both a brokerage and a self-funded lender, Davon offers a versatile range of finance to suit even the most demanding property developer. B&C caught up with Daniel Norman.

Operating as both a brokerage and a self-funded lender, Davon offers a versatile range of finance to suit even the most demanding property developer. B&C caught up with Daniel Norman, Business Development Executive at Davon, who shed some light on three recent projects which the lender has undertaken and demonstrates its individual flexibility…

Davon has been involved in structuring funding for property projects for almost 25 years and, as a result, has a wealth of experience in ensuring the most appropriate financial structure can be created for any specific transaction.

This experience continues to prove its value through the prevailingly turbulent finance markets.

In addition, the ability to provide mezzanine finance as principal lender through both the Strata Fund and our own investment vehicle, Davon Capital, and to marry a facility from either of these with a senior debt from a third party lender creates the optimum structure to meet our clients’ needs.

As an example of this, we have broadly outlined three deals which completed recently:

Avoiding Fulham’s wall

The proposed project comprised of a development of four new build, three-bedroom town houses in a strong location in Fulham, undertaken by highly experienced developer. The construction process was challenging, as a high-level wall at the front of the site had to be retained and all of the new properties were to be constructed behind it.

Financial summary:

Gross development value (GDV) of completed units: £7 million
Total development cost: just over £5 million
Senior debt facility of £3.65 million arranged with a specialist lender
Strata mezzanine facility of £1.09 million provided

Cheltenham Villas

This scheme was a re-development to convert two adjoining Regency-period villas in Cheltenham town centre to create a scheme of ten units, designed and finished to suit the demands of buyers whilst offering excellent value for money for the location.

Financial summary:

GDV of completed units: £2.47 million
Total development costs: £1.7 million
Senior debt facility of £1.247 million arranged with a specialist development lender
Strata mezzanine facility of £300,000 agreed

At completion, a proportion of the sale proceeds was released to Strata prior to the senior debt being repaid fully. This reduced the total length of time the client’s mezzanine facility was fully drawn down, which reduced the total funding costs for the borrower.

Nine Elms New Build

This project consisted of a new build development within the Nine Elms Regeneration area of SW8, London. The scheme required the demolition of a 1960s building and the construction of 33 new apartments to be sold on the open market, with a second block providing 23 social units to be constructed under contract for a Housing Association.

Financial summary:

GDV of open market units: circa £12.5 million
Total development costs: £7.855 million
Senior debt facility of £6.29 million agreed with specialist development lender
Strata mezzanine facility of £750,000 provided

The mezzanine facility required was relatively small as a percentage of both total value and costs, but was tailored to match the requirements of the client. The key driver in the deal was the amount of equity the client wished to release in order to assist with the costs of advancing future sites through planning.

The three examples above demonstrate the varying natures and locations of projects that we are able to assist with, as well as how the specific needs of prospective developers can be met through the use of a combination of the most appropriate senior debt lender with a mezzanine facility.

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