Loan to GDV explained for a development exit

What LTGDV measures on a finished scheme

Loan to GDV expresses the loan as a percentage of gross development value. Gross development value is the figure a finished scheme is expected to sell for, valued before sales costs are deducted, with net development value being the same figure after those costs. The ratio answers one question on a finished-scheme bridge: how much debt the completed asset can carry against the money it will realise. A loan of 5.25 million pounds against a GDV of 7 million pounds is a 75 percent loan to GDV.

The head term, loan to GDV, is the lending criterion that caps the facility from the value side. Lenders also describe it as the loan to GDV ratio or maximum loan to GDV, and a developer may meet a loan to gdv calculator that works the percentage from a GDV figure and a loan figure. On a development exit the GDV is real and close at hand, because the scheme is at or near practical completion, so the valuation rests on a built asset rather than a drawing.

How exit funding sizes against GDV, LTV and LTC

Three ratios sit close together in development finance, and they are easy to confuse. Loan to GDV measures debt against the finished, sold value. Loan to value (LTV) measures debt against the current value of the asset as it stands today. Loan to cost (LTC) measures debt against the total money spent, meaning land, build costs, professional fees and contingency. Exit funding is sized primarily on loan to GDV, because the scheme is finished and the end value is what repays the loan.

During the build, a development loan leans on loan to cost, because there is no finished value yet to lend against and the lender is funding spend through a staged drawdown. At exit the picture inverts. The asset is complete, a finished value exists, and loan to GDV becomes the governing test while loan to cost falls away. A development exit bridge is the product that carries the scheme through that switch from cost-based to value-based sizing.

The numbers are not interchangeable, because the denominators differ. A scheme can sit at a comfortable loan to GDV and still show a high loan to cost if the developer put in little equity, and a lender will often test both and lend to the lower of the two caps. On a refurb GDV loan the same logic applies: the loan is sized against the post-works value the property will reach, not the price paid before the works.

Typical leverage bands on a development exit

Sales-period funding on a development exit is indicatively capped around 70 to 75 percent of GDV. That band is lower than the loan to cost a developer may have reached during the build, because the exit lender prices the remaining sales risk and wants a clear cushion to the gross development value. The figures below are illustrative and not an offer of finance.

Two figures matter when reading a quote. The gross loan is the full facility, which includes the day one advance plus the retained interest and arranged fees that build up over the term. The net loan is the cash actually advanced on day one. The loan to GDV cap is normally measured on the gross loan, because the rolled interest still has to sit inside the value cushion at the end of the term. We structure the facility so the gross loan, with interest roll-up included, stays inside the maximum loan to GDV the funder will accept.

How lenders set the ceiling on the GDV-based loan

Lenders set the maximum loan to GDV against three things: the strength of the GDV evidence, the saleability of the units, and the developer's profile. The starting point is always the valuation. The total facility cannot be agreed until a RICS valuer has confirmed the gross development value on a Red Book basis, because that number is the denominator the whole ratio rests on.

• The RICS Red Book valuation that fixes the GDV, ideally supported by recent comparable sales
• The mix and saleability of the units, since a block of standard flats sells differently from a single high-value house
• The lending criteria of the funder, which set a hard maximum loan to GDV by product and asset type
• The developer's track record, with a first-time developer often held to a lower band than an experienced one
• The interest roll-up over the term, which must still fit inside the value cushion at the end
• The clarity of the exit strategy, whether that is unit sales or a refinance onto term debt

The market shows a spread rather than a single number. Specialist development and bridging lenders publish development loan terms with their own maximum loan to GDV caps, and whole-of-market finance arrangers compare those caps across a panel of funders. A first-time developer, including a self-builder using the government Help to Build scheme or a Homes England backed plot, will usually find the band set more conservatively until a track record is built. We place each case with the funder whose lending criteria fit the scheme, and we never quote a development loan interest rate as our own, because we arrange finance rather than lend it.

Working out the advance against gross development value

The calculation is simple arithmetic once the gross development value is fixed. Divide the proposed loan by the GDV and express the result as a percentage. The worked example below is illustrative and not an offer of finance.

1. Confirm the gross development value from the RICS Red Book valuation, for example 7 million pounds.
2. Take the proposed gross loan including retained interest and fees, for example 5.25 million pounds.
3. Divide the loan by the GDV: 5.25 million divided by 7 million is 0.75.
4. Express it as a percentage: that is a 75 percent loan to GDV, at the top of the indicative band.
5. Check the figure against the funder's maximum loan to GDV and against the loan to cost cap, and size to the lower of the two.

If the result sits above the funder's cap, the facility is trimmed back to the cap, and the developer either contributes more equity or accepts a smaller advance. We model the loan to GDV alongside the interest roll-up and the term before a case goes to a funder, so the number that reaches the lender already sits inside their lending criteria. DevExit is an arranger and introducer, not a lender, and the development exit finance we arrange is unregulated commercial lending.