What is development exit finance?

What a development exit bridge does

Development exit finance is a short-term property loan that repays an existing development facility once a scheme reaches practical completion. The original development loan is priced for build risk and is structured to fall due when the building work finishes, but the completed or nearly completed property often has not sold yet. A development exit bridge steps in at that point, redeems the development loan, and gives the developer a calmer, lower-cost facility while the units sell or a refinance is arranged.

It is a specialist form of bridging loan, secured as a first charge against the finished scheme. The build risk that drove the original pricing has gone, the asset is complete or close to it, and the lender is funding a known, standing property rather than a construction project. DevExit arranges and places this finance with specialist lenders; we are an arranger and introducer, not a lender, and the facility is unregulated commercial lending that sits outside the FCA regulated perimeter.

When a finished scheme needs an exit bridge

A scheme needs exit funding when the development loan is reaching the end of its term but the sales proceeds have not yet arrived. The trigger is almost always practical completion, or the period at or near practical completion when the building is signed off and ready to market but the units are still being sold.

• The development facility is maturing and the developer needs to refinance the existing development finance before it runs to a hard expiry
• The scheme is built or nearly built but unsold, and the marketing period needs extending without the original lender's pressure
• The developer wants to release equity from the completed value ahead of sales proceeds, for example to fund the next scheme
• The original development finance is more expensive than the project now warrants, because the build risk has been removed

How a finished-scheme bridge is sized on GDV

A development exit facility is sized against gross development value, the open-market value of the finished scheme. Lenders work to a loan-to-GDV ceiling, indicatively up to about 70 to 75 percent, which is closely related to loan-to-value because at completion the GDV and the value are effectively the same figure. The loan-to-GDV cap sets the maximum advance, and the difference between that advance and the outstanding development loan is the equity the developer can release ahead of the sales proceeds.

The worked example below is illustrative only and is not an offer of finance. It shows how a 5 million pound GDV scheme might be sized at 70 percent loan-to-GDV.

Where the developer only needs to clear the development loan, the facility can be drawn below the ceiling, which keeps the cost down. Where releasing equity for the next project matters, the facility is structured closer to the loan-to-GDV cap. These figures are indicative and for illustration only.

What sales-period funding costs against development finance

Sales-period funding is usually cheaper than the development finance it replaces, because the most expensive risk in a development, the build itself, has been removed. The monthly interest rate on an exit bridge reflects a finished, standing asset rather than a construction project, so it sits below the rate the developer was paying through the build. Interest is typically rolled up or retained, meaning it is added to the loan or held back from the advance and settled at exit, which protects cash flow while the units sell.

Pricing is quoted as a monthly interest rate, with an arrangement fee and the usual valuation and legal costs on top. The exact rate depends on the loan-to-GDV, the location and saleability of the scheme, and the strength of the exit. We place each case with the specialist lender whose appetite fits the asset, and we never quote a fixed rate in advance because the market moves. Any figure we give is indicative and not an offer of finance.

How the post-completion bridge is repaid

A development exit bridge is repaid in one of two ways, and often a combination of the two. The first route is unit sales: as each completed unit sells, the sales proceeds are used to part-repay the facility until it is fully redeemed. The second route is a refinance, where the developer moves the asset onto longer-term debt and uses that new facility to redeem the bridge in a single drawdown.

1. Reach practical completion and put the exit bridge in place to repay the existing development loan.
2. Market the scheme and apply each unit's sales proceeds to part-repay the facility as completions occur.
3. Where units are held rather than sold, arrange a refinance onto an investment term loan or buy-to-let debt.
4. Redeem the facility in full from the final sales or the refinance, within the agreed term.

The exit strategy is agreed up front, because the term length, indicatively 12 to 18 months, is set to cover the realistic sales period or the time needed to arrange the refinance. Where a developer intends to hold and let the scheme, the take-out is a refinance onto term or buy-to-let debt rather than a sale. You can read how this connects to the wider funding picture on our pillar finance page at /finance/.

How we arrange development completion finance

We structure each development exit facility around the real exit, whether that is unit sales, a refinance, or both, and we set the term and the loan-to-GDV to match. We place the case with the specialist lender whose appetite suits the scheme, its location and the developer's track record, and we line up the take-out in advance so the facility runs cleanly to redemption. DevExit is a finance arranger and introducer, not a lender; the finance we arrange is unregulated commercial lending, and every figure we quote is illustrative and not an offer of finance. More on the full range sits on our pillar finance page at /finance/.