The situation
In Preston city centre sits a building that used to be government offices. The offices have been empty since they moved out over a year ago. We were able to provide a £2.1m loan at a 65% LTGDV over a 15 month term for this heavy refurbishment from a commercial office building to 25 residential apartments.
A short walk from Preston railway station and the Grade II listed Avenham Park, this is a location with residential potential. The area has seen several successful office to residential conversions in recent years. The demand is there and the opportunity is clear.
The challenge
The developers behind this scheme had a vision and the track record to back it up. They had completed a similar conversion in Preston just twelve months earlier. Same type of building. Same contractor. Successful delivery. But their build costs came in below industry benchmarks. For many lenders, that creates hesitation. What if costs overrun? What if the projections are optimistic?
How we approached it
We asked a simple question: if the borrower has successfully delivered a scheme like this before, at similar costs, in the same location, and with the same contractor, could we rely on their build cost estimates?
The sponsors could demonstrate delivery, not projections or assumptions, but completed work delivered at the proposed cost levels. Their experience with comparable projects gave us confidence that we could rely on their figures.
The people
With a high combined guarantor NAV, these are sponsors with meaningful skin in the game and resources to address any unexpected issues.
The plan
The scheme comprises twenty-five apartments, including studio, one-bedroom, and two-bedroom units, designed to appeal to both the rental and investor markets. With Permitted Development approval already in place, the project benefits from no planning risk and requires no structural works.
What happens next
The building that once processed probation cases will be converted into 25 new homes. The location, a short walk from the station and overlooking one of Preston's best parks, will find a new purpose.
We provided £2.1m at 65% LTGDV. The borrowers have clear exits and strong forecast returns.
This deal was delivered by Max Herman and Tom Williams.
