Development exit finance for commercial schemes

Criteria for a let-and-sold bridge on commercial units

Commercial development exit lenders are most comfortable once a scheme has reached practical completion, because the construction risk that drove the development finance has been removed. They want sight of the completion certificate, building control sign-off, structural warranties and any collateral warranties, a valuation of the finished commercial asset, and a credible plan to repay. On commercial property that plan turns on the lease position: signed leases or agreements for lease, the strength of the tenant covenants, the unexpired term and any break clauses, and a realistic view of how the remaining units will let and sell. A pre-let or part-let scheme is straightforward to fund; a fully speculative completed scheme is fundable but assessed harder on the letting evidence and the local occupier market. Lenders will weigh the developer's experience, but they are underwriting a finished, financeable commercial asset and its income, not years of trading, so first time developers are fundable where the scheme is genuinely complete and the exit is sound. They are stricter on the exit than on the borrower, because a development exit bridge with no realistic let-and-sold or refinance route simply moves the problem along. We document the lease position and the exit before the exit facility draws, so the bridge does its job and is repaid on time rather than rolled repeatedly.

How much the exit facility advances on commercial GDV

Commercial development exit finance is sized against the gross development value of the completed scheme on a loan to GDV basis, indicatively up to 70 to 75 percent of value where the units are let or pre-let, with a more conservative band on a fully speculative scheme that is complete but not yet income-producing. That figure is often higher than the development loan being repaid, because the asset is now valued on completion and on its investment value rather than on cost, and the headroom can release surplus equity for the developer to put into the next scheme. Pricing is lower than the commercial development finance it replaces, because the build risk is gone, and is set per month or per year depending on the lender and the length of the facility. Interest is usually retained or rolled up, so the net day-one advance is the gross loan less retained interest and fees, with serviced interest an option where lease income is already flowing. We model the loan against GDV, the equity it releases and the all-in cost over the expected sales and lettings period before approaching lenders. All bands are illustrative, vary by lender, asset and scheme, are subject to principal sign-off, and are not an offer.

What a finished-scheme bridge costs against commercial development debt

The point of commercial development exit finance is the saving: refinancing off senior development debt priced for construction risk onto a bridge priced for a finished, let or letting asset usually cuts the monthly cost materially, while removing the maturity pressure that forces a discounted sale of a commercial scheme. Expect a lender arrangement fee, indicatively around 1 to 2 percent of the loan, a valuation reflecting the let or part-let position, legal costs for both sides, and sometimes an exit fee. The largest cost lever is time: a bridge held for a few months while the final units let and sell costs a fraction of one held across a long, slow lettings cycle, so a realistic sales and marketing plan and a clean exit matter more than chasing the lowest headline rate. Because interest is commonly rolled up rather than serviced, the all-in cost across the expected term matters more than the monthly margin. We disclose our broker fee in writing, quote the all-in cost over the expected term, and never claim a fixed panel or an exclusive tie to any lender. The figures are indicative and not an offer of finance.

Commercial exit funding against the development loan and an investment refinance

Commercial development exit finance sits between two other facilities, and the choice turns on what the finished scheme does next. The development loan is the wrong debt once the build is finished, because it is priced for construction risk that no longer exists, which is exactly why replacing it with a development exit bridge lowers the cost and buys time. An investment refinance, a commercial term loan or commercial investment mortgage, is the cheaper long-term money but only fits once the units are let and the lease income is proven, because the lender sizes that loan on rental income and interest cover rather than on value alone. The exit bridge carries the scheme through the gap: it repays the development finance at practical completion and funds the let-and-sold or pre-let period until either the units sell or the income supports the investment refinance. Where a commercial scheme will be sold once let, the bridge holds it through the sales and marketing period; where it will be held, the bridge hands the asset to an investment term loan at the top of the lettings cycle. We map the route so the scheme is on the right debt for what it is about to do, and only arrange the exit facility where it genuinely lowers the cost or secures the time the asset needs.