Can you get 100% bridging?

THE QUESTION

Can you 100% fund with bridging an optioned project using planning gain as equity?

The project is a conversion of offices to residential, with planning for Change of Use.

The projected uplift in value is 35% upon consent. total circa £1m.

Although I have no actual direct experience, I do have a few very large client successes and similar smaller scale projects in my portfolio.

THE ANSWER

In terms of loan to purchase price, bridgers divide into broadly 3 camps

1. Those that lend on the lower of the purchase price or value, exactly the same as mortgage lenders do
2. Those that will recognise a value uplift, but put in a maximum loan to purchase percentage override i.e. the lower of 70% of value and 85/90% of purchase price. This would mean whatever value uplift you created they would still require a minimum of at least 10% of purchase price input from you
3. Those that genuinely ignore the purchase price and lend on value

Of those, No. 3 is the rarest, but they do exist and we deal with them regularly on behalf of our clients.

You would also need to consider what the bridger requires as security.  Some bridgers will decline to lend on a commercial office block, others will be OK with it.

Experience is less of an issue for purely purchasing the site, but becomes more relevant if you intend to do the conversion yourself.  In that situation, experience is far more of a requirement, but it matters less if that experience was for your own or someone else’s project.  In other words you were the key person for it i.e. the project manager.

You also need to consider, when you go for planning gain/value uplift on either an option contract or subject to exchange of contracts, you reveal your intent to the seller.  Quite naturally the seller will then want to negotiate a slice of that uplift if you achieve it.  So that will act as a factor in limiting how much uplift against purchase price you actually achieve.

In summary, the answer to your question is - pretty unlikely, but not completely impossible, depending on the precise nature of the deal in question.

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