Capital | Development Finance
London development isn’t for the faint-hearted. With increased build costs and a slow re-sale market it is imperative you build a product that delivers the wow factor. Developers have faced huge pressures over the last few years and at the higher price points those pressures have compounded.
The Client Brief
P10 was approached by an existing client to deliver a mandate for an acquisition and development facility to convert a large London town house into two large duplex apartments.
Our client came to P10 as they know we have extensive knowledge of West London and the surrounding areas. What makes West London unique is the huge variance in price points. You see from one end of a road to the other end. So when you are assessing your GDV and resale numbers it is extremely important to know your local price points.
The Numbers at a Glance
Purchase Price: £3,400,000
Total Build Cost: £1,800,000
GDV: £7,200,000
The Challenge
The biggest challenge we were facing in this deal was down to the recent market commentary at the time. There has been a softening in the local area. We had seen assets that should be trading for £2,500 per sq ft, being sold at much suppressed values of £1,800 to £2,100 per sq ft.
Also there is a lot of talk about Prime Central London having huge corrections in valuations at the moment does not help anybody's cause.
Our client needed to apply for planning and this was not due to be granted until after the clients completion deadline, which creates huge difficulties for a lender to assess the development properly.
There was also a further issue in that our client had not yet sold one of their existing assets from a previous development. This sale from this asset was supposed to fund the equity for the onward purchase.
The Solution
We worked with the client to design the facility around their own build programme and financial situation. We were able to use their unsold assets to acquire the new site and deliver a flexible lending structure which allowed our client to buy their new site without having to wait for a sale of their existing development.
Our team then created a flexible facility that unlocked the construction part of the facility at a later date once planning was granted.
Gross Loan: £4,900,000
Day 1 Loan: £2,700,000 (80% of purchase price)
Build Loan: £1,800,000 (100% of build facility)
Pricing: 8.8% PA
Interest Structure: Rolled Interest
Term: 21 months
Deal Submitted: 26 June
Deal Completed: 8 August
Six weeks, start to finish - not bad going given the moving parts of this deal.
Prime Central London
Prime Central London values are still around 22% below their 2014 peak, and dipped another 3.7% year-on-year in Q2 2025.
There is a huge opportunity for London developers at the moment. This suppressed Prime market is allowing entry points to be a lot more fathomable than previous years. Then if you are able to deliver the correct high spec, beautifully designed, turnkey product, the finest assets in class will be eaten up.
Americans are now the largest overseas group in Prime Central London, accounting for 11.6% of overseas purchases in Q4 2024. A strong dollar helps, but so does handing them a finished product where the hard work’s already been done. It’s exactly the sort of thing they’ll pay a premium for.
We are confident our client will deliver beautifully designed homes that will outperform all local comparable sales as they have done many times in the past. We are looking forward to this development coming to the market.