Upton Lane - FOREST GATE, East London

Pivot funds ground-up combined residential and commercial development in busy East London suburb location

GDV £4.37 LTGDV 66% UNITS 7 flats and 2 townhouses + commercial space at street level DEAL DURATION 15 MONTHS

The Opportunity

Pivot’s borrowers were seeking finance for this four-storey development, bought for cash as a vacant building at auction, which will comprise 9 residential units over a street-level commercial outlet. Although the borrowers had limited development experience of their own, they were employing a seasoned contractor to carry out the full design and build of the scheme and the intended exit is by way of a BTL refinance.

The development is in Upton Lane, a busy shopping street in the East London suburb of Forest Gate. There is a nearby selection of both Overground and Underground train services offering a 15-minute commute to and from central London and demand for residential accommodation is high in this locality. This area of East London presents a value opportunity following the urban change exhibited in surrounding areas such as Hackney, Stratford, Walthamstow and most recently, Leyton.

The Deal

The borrowers are proprietors of a chain of twenty-one 99p shops in and around the M25 and are first-time developers who are equity and asset-rich but lacking in actual construction experience. This will be the first of three projects they are in the process of planning, with two further builds in Croydon and Barking, and similar to this asset, they own the assets outright, unencumbered, and have planning permission for all three sites.

Planning consent for Upton Lane was granted in 2019 for the demolition of the existing building and construction of a ground-up new property to accommodate 9 residential units of seven 1 and 2-bedroom apartments and two 3-bedroom townhouses and a ground-floor commercial unit.

All units will benefit from outdoor space and the two townhouses will also benefit from off-street parking spaces. The ground floor commercial unit permits Class E-business and extends to 106m2/1,140ft2. The completed units will be delivered to a similar specification to that at Upton Lofts, which is situated across the road at 11-13 Upton Lane and was recently delivered by the main contractor on this scheme.

The intended scheme exit is re-finance with the strategy of a longer-term yield play rather than build to sell.

Key Transaction Highlights

· Lending above 65% LTGDV

· Lending to borrower with limited experience but with a strong asset base and professional team, namely experienced contractors who had just finished a similar build adjacent to the development.

· Unencumbered assets added to the security package

Deal Team

Relationship Manager: Vishal Dixit, Pivot

Credit Manager: Jay King, Pivot

Legal: Field Fisher

Valuation: Knight Frank

Project monitoring: Adair

Vishal Dixit at Pivot, said:

“This was a great opportunity to fund a new development in an area of east London undergoing significant regeneration with a genuine need for quality residential apartments.. Pivot have once again taken a commercial view on lending to sponsors with limited ground-up experience, but with a robust asset base and superb construction team to realise the borrowers’ aspirations. We look forward to working with the entire team on the next scheme.

Quote from the broker

“We approached Pivot after a challenger bank, who were previously looking at the case, started to show general apathy about the case and their appetite towards the transaction waned. We were delighted with the pro-active attitude adopted by Vish and, of course, the package offered by Pivot. They made a real effort to understand the developers’ situation and long-term plans for this and two other sites they already owned and want to develop. Communication with all stakeholders was exemplary as was the flexibility exhibited. This was my first deal with Pivot and what a great introduction to the lender.

Project Progress Update

We just love it when a plan comes together!

Our borrower’s development in Forest Gate, East London, is well underway, and work is powering ahead as planned. Demolition was completed, the massive crane has been and gone, all the below-ground work, substructure and drainage is finished, and the outside shell is up. External windows and doors are now going in, together with partitions, insulation, heating, plumbing and electrics, and sanitaryware.