LAND AND DEVELOPMENT

Land and development finance for real estate developers

TELL US ABOUT YOUR PROJECT

Banks usually finance a development once there is a building licence and enough pre-sales. Before that point, the land purchase, the design phase and the start of construction depend on the developer’s own capital or on alternative finance.

At Manifest we structure the financing for each phase and combine bank and alternative finance so the project keeps moving.

Residential, industrial, logistics and hotel developments.

If any term is unfamiliar, it is explained in our financing glossary.

PHASES

How each phase is financed

Each phase of a development carries a different risk and therefore a different type of finance:

1. Land purchase

Finance secured on the land itself, easier to obtain the further its planning status has progressed. Also equity partners who contribute capital.

2. Design and licence

A bridge loan or equity to cover design, fees and costs until the licence is granted.

3. Construction

A bank development loan once there are enough pre-sales. If there are not yet, alternative construction finance that is later refinanced with the bank.

4. Sale and handover

Buyers take over the loan, or it is repaid from sales.

WHEN

When the bank cannot go far enough

  • Pre-sales do not yet reach what the bank requires.
  • The land has no licence or is still in the planning process.
  • The developer needs to complete the equity the deal requires.
  • The developer is small or has a short track record with that bank.
  • The bank already has a high concentration of risk with the developer or in the area.
  • The deal timetable does not fit the bank committee’s timing.

INSTRUMENTS

Instruments

We combine debt and equity according to what each project needs:

Land finance

Loans secured on the land, to buy it or to release capital already invested in it.

Bridge loan until licence

Covers the period between purchase and the licence or construction finance. More →

Construction finance without pre-sales

Funds that finance construction before the pre-sales required by the bank are reached.

Mezzanine debt

Completes the developer’s equity without bringing a partner into the project. More on mezzanine and subordinated debt.

Equity partner

Investors who put capital into the project in exchange for a share of the result.

Real estate crowdfunding and crowdlending

Regulated platforms that finance developments with contributions from many investors.

CRITERIA

What the lender looks at

  1. The land: location, planning status and licences.
  2. Feasibility: realistic sale prices, costs, margin and market study.
  3. Equity: how much of the cost the developer contributes (LTC) and how much is financed.
  4. The developer: experience and completed developments.
  5. Sales: pre-sales and expected sales pace.
  6. Construction: contractor, budget and control of execution.
  7. The exit: how each tranche is repaid, from sales or a bank refinancing.

METHOD

How we work

  1. First conversation, free of charge. We look at the land, the project and the phase you are in.
  2. Feasibility analysis. We review the numbers, timetable and available capital through a credit committee’s eyes.
  3. Phase-by-phase structure. We define what finances each part of the project and how bank and alternative finance fit together.
  4. Information pack and presentation. Feasibility study, cash flow forecast and documentation, presented to the lenders that fit the project.
  5. Negotiation and closing. Terms for each tranche and coordination between lenders through to signing.

Fees: we work mainly on a success basis. Terms are agreed in writing before we start.

QUESTIONS

Frequently asked questions

Can the land purchase be financed?
Yes. It depends mainly on the planning status: fully permitted land, ready for a building licence application, is easier to finance than land still going through the planning process.

Can I start construction without the pre-sales the bank requires?
Yes, with alternative construction finance. It costs more than a bank development loan, and it is usually refinanced with the bank once the pre-sales are reached.

How much equity do I need?
It depends on the project and the lender. Part of our job is to structure the deal so the equity required is as low as possible.

Can bank and alternative finance be combined?
Yes, and it is the most common approach: alternative finance for the phases the bank does not cover, and a bank development loan when the project allows it.

What documents are needed?
To start, a description of the project, the status of the land and the main figures. Then the feasibility study, the project, the licence or its status, the construction budget, the land registry extract and the developer’s track record.

Do you work across Spain?
Yes. We work on deals across Spain, from our base in Catalonia.

Have land or a development that needs financing?

Tell us where it is, what phase it is in and which part you need to finance. We will tell you how we would approach it. You can also call us on +34 678 131 989.

The information on this page is general and does not constitute an offer of finance. Each deal is analysed individually and approval always depends on the lender.

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