In an ever-hardening insurance market, property developers with off-plan sales strategies have been facing challenges in securing deposit release cover alongside their latent defect policies.
Recognising this, The London Belgravia Group has sourced new, exclusive capacity to bridge the gap with the return of its innovative surety product, Deposit Release Bonds.
Deposit Release Bonds (DRB) provide developers with a low-interest source of working capital for their project. The bond enables a developer to use the funds in escrow for the project’s remaining construction costs, as opposed to obtaining additional capital from traditional funding lines – which will result in a substantial saving for the developer.
These bonds – exclusively available through London Belgravia – go up to £15m, effectively supporting schemes of up to £150m GDV (with an assumed 10% deposit per unit).
Depending on how a project is already leveraged, the total 6-12% fixed cost of the Deposit Release Bond may prove more suitable that junior debt or private equity.
“We’re pleased to reintroduce this offering to property developers, many of whom are seeking to unlock working capital to complete their sites,” commented Giles Fallan, CEO of the London Belgravia Group.
“Deposit Release Bonds present a cost-effective alternative to mezzanine funding and carry no arrangement fees.”
The brokerage’s DRB Calculator provides users a comparative analysis as well as estimated saving projections versus traditional funding lines.
“From a finance broker perspective, if you pick up a scheme that is looking for additional funding partway through the politics and complexity of arranging mezz on another broker’s senior debt, it is often fraught with challenges. The DRB allows you to navigate that minefield and release funds “in” the project,” Giles explained.
