Stretched Senior Debt

Stretched Senior Debt

Stretched Senior Debt refers to a first charge development facility that provides an even higher Loan to Cost or Loan to Value percentage than a typical Senior Debt facility can allow. “Stretched” suggesting the loan goes further than a normal Senior Debt loan would, in terms of leverage.

What is Stretched Senior Debt?

Stretched debt can typically provide up to 75% of the Gross Development Value or 90% of total project costs (whichever is the lower of those two figures). Naturally, such products are only available for well experienced, professional developers, given the developer’s cash contribution will be a small percentage of overall costs. Due to the enhanced risk associated with stretched senior debt the lenders will typically charge a higher rate of interest compared with senior debt.

A Stretched Senior facility can allow a developers’ equity to go further and is very often used by a developer who has more than one scheme to develop, but a limited amount of capital to deploy.

What are the Key Features of Stretched Senior Debt?

  • Up to 75% of the Gross Development Value, or;

  • Up to 90% of Total Project Costs (including finance costs). - Arrangement Fees from 1%.

  • Interest Rates from 6% per annum.

  • Exit fees on a case by case basis.

  • Minimum loan size £250k, with no maximum loan size.

  • No profit share.

  • Up to 36 months.

What are the Stretched Senior Debt lending criteria?

  • On a First Charge basis only.

  • Experienced Developers only.

  • Detailed planning consent has to be granted, though it is possible to arrange a bridging/acquisition facility for sites with Outline planning.

  • To be monitored by the lender’s appointed QS/MS.

  • Multi-unit schemes preferred.

  • Available for property development schemes in England, Scotland and Wales.

  • Personal Guarantees are required from most lenders, however, there are a small number of lenders who do not require PG’s.