How a BTL portfolio investor went from modest refurbishment projects to a multi-unit scheme, assisted by the development finance services of Blueray Capital.

1. Property Development Finance
Case Study

2. Development Finance Case Study
Page 1
Client
Experienced property investor with a portfolio of buy-to-let (BTL) properties which she had
grown over several years. Her main development experience was property refurbishment
prior to renting out properties to tenants.
Investment property
A former church in the North-West which the client acquired for just over £200,000 as a
speculative investment with a plan to obtain change of use and develop into several
apartments.
Property Design
An architect was retained to develop options and present the development appraisal to
the local authority. Eventually an agreed scheme for 9 x 2-bedroom apartments with
parking and landscaping was approved. The gross development value of the scheme was
estimated at £1.2m.
Build costs
Several building contractors were approached by the architect, and tenders received from
selected firms. The summary build cost breakdown:
Site clearance & security £ 85,000
Demolition & strip out £ 75,000
Main works £150,000
1 fix £ 125,000
st
2 fix £ 65,000
nd
External works £ 100,000
Contingency £ 20,000
Total build cost £620,000

3. Development Finance Case Study
Page 2
Funding Costs
Development Finance
Blueray Capital was appointed by the client to secure development funding for the
scheme. We presented client information, property details & project cost data to selected
lenders from our panel for whom the scheme would be a good fit in terms of size, property
type and location. We worked with the client to shortlist lenders from whom one was
selected to proceed to valuation stage and due diligence.
The indicative offer from the lender included the following terms
Gross Loan Amount: £640,000
Less deductions
Arrangement fee
Retained interest
Monitoring cost
Loan Facility (available for monthly drawdown)
£560,000
Term 18 months (12 months build & 6 months marketing)
Exit fee 0.5%
Repayment: Bullet repayment of gross loan
Additional costs
Acceptance fee (non-refundable but deducted from arrangement fee)
Valuation survey cost
Legal costs
The facility did not include the VAT element of the build costs which the client would be
claiming back from HMRC. This was factored in to the project cash flows.

4. Development Finance Case Study
Page 3
Valuation and due diligence
Three RICS approved property surveyor firms were presented to the client with their fees
and one was selected to prepare the valuation survey which would confirm the gross
development value (GDV) of the completed scheme. This was submitted to the lender
following a site visit.
The lender-appointed monitoring surveyor (MS) presented an assessment of the scheme,
build costs and program to confirm the achievability of the program and suitability of the
nominated contractor.
Credit sanction
The finance application was submitted to the lender's credit committee which sanctioned
the indicative offer. A final offer was submitted to the client for acceptance.
Blueray Capital liaised with the lender, surveyor and MS during the entire process,
covering off any queries or requests for additional information.
Following acceptance of the final offer the legal documents were drawn up and the facility
available for draw down.
Monthly monitoring
The contractor was formally appointed, mobilised on site and commenced work.
On a monthly basis the MS visited the site and agreed work packages that had been
completed with the contractor. The MS provided a report to the lender which facilitated a
draw down of the facility directly to the contractor.

5. Development Finance Case Study
Page 4
Project completion
Once the final account and completion certificate had been received from the MS the
lender provided a redemption statement to the client detailing the loan repayment amount.
This was lower than expected as the marketing period had been shorter than the planned
6 months.
Lender refinance
The client planned to rent the apartments and had engaged the services of a local agent
to obtain suitable tenants. This had been a successful process with all units being let
shortly after practical completion.
The client appointed Blueray Capital to obtain a Limited Company BTL mortgage to re-
finance the development lender prior to completion. Blueray Capital managed this
process and secured a £900,000, interest-only mortgage over 15 years for the client at a
favourable rate. The mortgage fully repaid the development finance lender, some other
project debts and provided a useful surplus which went towards the client’s next project.
Email: enquiries@blueraycapital.co.uk
Call: 0203 393 8864
Visit: www.blueraycapital.co.uk
Blueray Capital is an FCA regulated commercial finance specialist providing development
finance, commercial mortgages and bridging finance to help you achieve your property
objectives.