Sadly, many of the challenges of completing a development occur towards the end of a project. It can be heartbreaking to reach the final stages of a deal, just to see it fall apart at the final hurdles.
Shaun Bains, one of our underwriting team leaders, explained: “We don’t provide ground up development finance, but we are there for developers who are coming to the end of their works.
“Our development exit funding is there for investors who need to cover their existing facilities, and move onto their long-term plans. We see everything from single house builds through to largescale multi-unit freehold blocks (MUFB)
“What we’re seeing more and more though, is that investors are turning to us specifically when unexpected, last-minute delays threaten to upend a development entirely.”
Specifically, Shaun revealed he’s seen many developments delayed by a lack of power capacity courtesy of the National Grid[1].
“This may only become more common over the coming months and years too,” he said.
“Look around you, our reliance on power – and electricity specifically – has never been more apparent.
“Electric cars, heat pumps, the A-roads – our infrastructure and electrical system is so complex. It looks like the National Grid may be struggling to keep up.[2]”
From a property development viewpoint, all this creates challenges with plot handovers.
“I’m seeing investors, through no fault of their own, hit by surprise costs as they need to suddenly source portable generators, or temporary connections.
“Added expense is the last thing anyone needs. Especially when budgets are spread thin as is.”
Fortunately, there are a few ways in which our specialist loans can be useful here. An investor may be able to find a solution to these kind of power issues, which would allow the final work to be completed without any hold up.
Shaun continued: “But, in sorting out the power dilemma, it may leave a borrower completing on a 12-month development loan in month 11. This doesn’t leave much time left over for selling the new units.
“One of our development exit bridging loans could provide them with another 12 months of breathing space to effectively market and sell the properties, and avoid selling at a loss just to make a deadline.”
Getting anything built in the UK is hard enough as it is without unexpected hiccups or roadblocks. We understand that at MFS, which is why we will always do what we can to minimise the property market’s uncertainties where we can.
[1] https://www.developmentfinancetoday.co.uk/article-desc-10228_Power%20constraints%20cause%20delays%20for%20one-third%20of%20developers
[2] https://www.theguardian.com/business/article/2024/may/04/capacity-crunch-why-the-uk-doesnt-have-the-power-to-solve-housing-crisis
