Development exit finance for mixed-use schemes

Criteria for a residential over commercial exit facility

Mixed-use 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 residential and commercial elements, and a credible plan to repay. On a mixed-use building that plan has two parts: a realistic residential sales programme with sensible pricing and absorption across the sales window, and a letting strategy for the ground-floor commercial unit, including whether the space sits within Use Class E or is sui generis, any agreement for lease, the strength of the tenant covenant and the unexpired term. Lenders look closely at the commercial element, because its slower letting timeline drives how long the facility runs. A part-let or pre-let scheme is straightforward to fund; a scheme where the flats are ready but the commercial unit is empty is fundable but assessed harder on the local occupier market and the open market value (OMV) of the let space. They will weigh the developer's experience, but they are underwriting a finished, financeable asset and its sales and income, not years of trading, so first-time developers are fundable where the scheme is genuinely complete and the exit is sound. We document the sales plan, 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 funding advances on mixed-use GDV

Mixed-use 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 (LTV), with the band reflecting how much of the GDV sits in the residential element against the commercial element and how far the commercial unit is let. That figure is often higher than the development loan being repaid, because the asset is now valued on completion 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 mixed-use 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 some rental income is already flowing from a let unit. Where the building carries a title split, the residential flats and the commercial unit can be valued and geared on their own basis, which sometimes lifts the overall advance. We model the loan against GDV, the equity it releases and the all-in cost over the expected sales and letting 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 mixed-use development debt

The point of mixed-use development exit finance is the saving: refinancing off senior development debt priced for construction risk onto a bridge priced for a finished scheme usually cuts the monthly cost materially, while removing the maturity pressure that forces a discounted sale of the flats before the market is ready. Expect a lender arrangement fee, indicatively around 1 to 2 percent of the loan, a valuation reflecting both the residential and commercial elements, legal costs for both sides, and sometimes an exit fee. The largest cost lever is time, and on a mixed-use scheme time is driven by the slower of the two timelines: the flats may sell quickly, but a bridge held until the ground-floor commercial unit lets costs more than one that exits on residential sales alone. A realistic letting plan for the commercial space therefore matters as much as the sales plan. Because interest is commonly rolled up rather than serviced, the all-in cost across the expected term matters more than the monthly margin, and a development loan calculator that nets retained interest and fees off the gross loan gives a truer picture than the headline rate. 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.

Mixed-use exit finance against the development loan and an investment refinance

Mixed-use exit finance sits between two other facilities, and the choice turns on what each element of 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 across both the residential sales window and the commercial lease-up. An investment refinance, a commercial term loan or a buy-to-let style investment mortgage, is the cheaper long-term money but only fits once the commercial unit is let and the rental income is proven, because the lender sizes that loan on income and interest cover rather than on value alone. The exit bridge carries the scheme through the gap: it repays the mixed-use development finance at practical completion and funds the period until the flats sell and the commercial unit lets. Where the residential element will be sold and the commercial unit held, a title split lets the flats sell down under the bridge while the let unit moves onto a commercial investment mortgage. Rolling on with the existing development loan is usually the most expensive option of all, because construction-priced debt keeps charging for a risk that has already passed. We map the route so each element 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 scheme needs.