Finance firm rescues Scottish property developer from insolvency with £400k deal

Allan Smith

Roma Finance, the Manchester-based bridging, buy to let and development lender, stepped in to help a developer who was facing impending insolvency on a site that urgently needed a cash injection to get it completed.

The development was for two executive detached chalet villas situated on the outskirts of Kelty. The properties have excellent local amenities and offer easy commuting to Edinburgh and Perth.

When the relationship with their existing lender had become untenable, the customer was referred to Roma by a contact in Galbraiths and after discussing the case direct with the customer an agreement in principle was issued and a site meeting arranged the next day.

This was because the developer was heavily personally invested in the project and continued to progress works on site with their own resources.

Roma could see the works to date were completed to a very high standard and the project represented a relatively low LTV (loan to value ratio).

The customer required a responsive and pro-active lender to step in and support them to complete the project.

After the site visit Roma issued loan documents and was able to obtain a retype of a valuation carried out for another lender, which reduced the customer’s overall fees.

At legal stage it was noted the charge with their existing lender had yet to be registered with the Scottish Land Register, which meant the deal had to be restructured between the solicitors.

Roma liaised with the existing lender to confirm the current position, the challenges faced by their charge not yet being registered, and their proposed lending solution.

This meant the existing lender held off instructing their solicitor to prevent insolvency proceedings.

At a late stage in the process it came to light that the paperwork was not in place for Scottish Water to connect the properties, which were required for Roma’s solicitors to sign off the loan.

However, Roma contacted Scottish Water and got a verbal decision within 24 hours which meant the loan could be made on the proviso of a retention until the final paperwork was in place.

Roma agreed a loan of £400,000 to redeem the existing lender and provide working capital. The term was nine months and the LTV was 60% on day one, falling to below 50% on completion of works.

The exit route for the bridging loan is to be the sale of the properties which are now being marketed and have received strong interest due to the high quality of the build.

The Scottish properties

Allan Smith, business development manager at Roma Finance, said: “This was a complex case as it was initially very personal to the developer who faced the threat of insolvency on what was actually a very viable and high quality project.

“I was able to see the potential for the development and the sale of the two desirable properties generating a good level of profit as demand would be high in the local area.

“I liaised with the previous lender to demonstrate our solution would work within the tight time frame and I’m very pleased at successfully achieving such a positive outcome for the customer.”

Michael Maloco, the developer’s solicitor, said: “We represented a client facing a number of challenges and looming deadlines. Roma, and in particular Allan Smith, made a point of driving the process in order to ensure that our client’s funding came through and a crisis was averted.”