Example Scenario: Croydon Residential Development Finance
An illustrative example of how development finance for a residential conversion project in Croydon could be structured. Not a completed transaction.
This is an illustrative, hypothetical scenario showing how Construction Capital might structure development finance for a residential conversion project in Croydon, where average property values are £380 per square foot. It is not a record of a completed transaction — real facilities are agreed individually based on each developer's circumstances and a lender's underwriting.
The Project
In this scenario, a developer with three completed projects approaches us to fund a permitted development conversion of a former commercial building into residential apartments in Croydon.
Key Numbers
| Metric | Value | |--------|-------| | Location | Croydon, Croydon | | Project Type | Residential Development | | GDV | £3,040K | | Build Period | 14 months | | Local Rental Yield | 4.7% | | Planning Approval Rate | 78% |
The Challenge
The developer needs to move quickly — the vendor has set a 6-week exchange deadline. Traditional bank funding would typically take 8-12 weeks, risking the loss of the site. Additionally, the developer wants to maximise leverage to preserve capital for a second project in the pipeline.
A Possible Solution
A combined senior debt and mezzanine facility could be structured along these lines:
The key would be finding a senior lender comfortable with Croydon's market dynamics. Croydon's 78% planning approval rate and 58 active development sites tend to give lenders confidence in the local market.
An Indicative Timeline
A Plausible Outcome
In this scenario, the project completes on time and within budget at 14 months, with all units selling within 3 months of practical completion at or above the projected GDV.
The developer's return on equity could exceed 25%, significantly enhanced by the leverage structure. Every deal is different, and actual outcomes depend on the specific site, developer, and lender terms.
Lessons for Croydon Developers
1. Speed matters — Having a broker with established lender relationships can cut weeks off the process 2. Leverage enhances returns — Combining senior and mezzanine finance can significantly improve a developer's ROE 3. Local knowledge counts — Understanding Croydon's planning environment and market values helps in securing competitive terms 4. Exit strategy flexibility — With 4.7% rental yields in Croydon, developers typically have the option to sell or hold
Discuss your Croydon project with us — indicative terms within 24 hours.
This is an illustrative example for guidance only, not a completed transaction. Rates and terms shown are indicative and individual facilities are subject to underwriting.
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