Retail Conversion Loans

Retail conversions can be lucrative opportunities, but developers must ensure they have appropriate funding to secure planning permissions and carry out work

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Property developers are always seeking to find new opportunities, and while the UK’s real estate market offers many avenues to explore, a consistently under-exploited one is retail conversion. When many developers consider which projects they’ll take on, most picture the renovation or wholesale construction of a building, and while construction and refurbishment projects constitute the bread and butter of many development projects, retail conversion projects are also a highly profitable and undervalued niche of the market.

Retail conversion can constitute an enormous number of different projects; it could be changing a shop into a restaurant, a residential home into a cafe or even a warehouse into an outlet store. The enormous variety of different applications in retail conversion projects makes it an intensely varied and ever-shifting marketplace, where developers need to work quickly in order to turn a profit. In this article we’ll discuss the challenges that face property developers when working with retail conversions, and how the finance options available help alleviate these challenges.

Before taking on a loan of any type, developers need to carefully consider the financial impact it will have on their project. As with property development, retail conversion loans are part and parcel of the whole process; however, the repayment obligations associated with these loans can impact the borrower’s bottom line. It’s vital to consult a financial advisor before committing to a loan package of any type, to ensure that it’s appropriate for the developer’s needs.

What are the needs of retail conversion development?

Retail conversion projects occupy a middle ground between refurbishment and construction; as with refurbishment projects it’s often necessary to completely overhaul a property that’s going to become a retail premises. However, the change of use associated with the building’s new purpose must be approved by the authorities, which means there’s usually a good deal more paperwork and “behind the scenes” negotiations involved in retail conversion.

As anyone who’s decided to put up an extension will know, planning permission can be a tricky thing indeed. Local authorities will use their own judgement to decide whether a development is viable or not, which can make it difficult to be sure of a project until the paperwork is finalised, and creating plans which satisfy the authorities can take time. Because work cannot begin until planning permission is received, it’s important that retail conversion developers pay close attention to the application process.

If a developer intends to alter a building’s usage, they need to receive permission to do so. This is to allow local authorities to shape the character of their local areas, preventing overzealous developers from throwing up hordes of identical businesses in the same area. This control helps keep the spirit of a neighbourhood intact and preserve the nature of the local area, ensuring that commercial premises aren’t created in inappropriate areas. The authority will also require the building to meet commercial codes, rather than residential ones, which can compel developers to make alterations to the property; fire safety considerations, for instance, are different for buildings which will house a business rather than a family.

In addition to sourcing planning permission, property developers are working against the clock to complete projects as quickly as possible. This is largely down to the issue of finance, because developers use loans to fund their projects - loans cost more the longer they’re held for, so a project that drags on for months and months will inherently cost a lot more. Completing quickly is vital, so developers need to act fast and get started as soon as they receive planning permission. It’s important, then, to have a source of finance already in place before work begins, which can be implemented immediately, and retail conversion finance can be quickly used to get the ball rolling.

Retail conversion finance

As we’ve seen, the needs of retail conversion development hinge on acting quickly and having sufficient finances in place, in order to support development whilst planning permission is being sought. Before work even begins there are plenty of expenses to take care of, so it’s important that retail conversion projects have access to flexible finances that meet their needs. Lenders in the retail conversion sector cater to these needs by presenting highly adaptable lending solutions which can be altered to meet the needs of their clients.

Retail conversion can be intensely varied; one project might involve turning a small cafe into a shop, while another may constitute major repurposing of a large commercial area. As with other areas of development finance, retail conversion finance must be adaptable to almost any need, and lenders accommodate this by tailoring their lending to each client’s specific projects. Depending on the exact nature of the work that’s being carried out, a retail conversion loan may not be secured against property; some lenders will supply capital in small enough amounts that it isn’t necessary to secure it against an asset. In these cases, the lender can simply supply the money up front, because the loan will be granted against the borrower’s own company.

For larger projects, developers will need to seek a secured loan. Usually these loans will be secured against the property being converted, and may be arranged in several different ways. Depending on the current value of the property versus its proposed gross development value (or GDV - how much the property will eventually be worth), a lender might be able to provide capital up front. If the conversion is going to add significant value to the property, however, it may be necessary to break the loan up into several “tranches”, so that capital is supplied incrementally as the value of the property increases.

Using Retail Conversion Loans

The needs of retail conversion development are as varied and diverse as those of other property development projects, and require a specialist lender to properly finance. The lenders operating in this sector are able to provide high-quality finance that suits their clients’ needs, and can vary their lending criteria to meet different circumstances.

Common Uses Of Development Finance

  • Overview

    Reliable finance is a crucial part of any successful development project, and bridging lenders offer a wide variety of attractive products in this sector.

  • Barn Conversion Finance

    Barn conversions can result in amazing properties, but require a lot of work. Specialist lenders provide vital financial backing to keep these projects on track

  • Construction Finance

    Successful completion of a property development project relies on a strong, stable source of finance from start to finish, which construction finance provides.

  • Conversion Finance

    Conversions come in all shapes and sizes, and conversion finance lenders provide the flexibility and adaptability that developers need in conversion projects.

  • Development Exit Finance

    Development exit finance enables property developers to react flexibly to changing situations, and to restructure their financial commitments to maximise profits

  • Inexperienced Developer Finance

    Inexperienced developers may well have access to lucrative opportunities, and the flexible approach of development lenders enables them to take on projects

  • Land Acquisition Finance

    Successful property development requires stable funding from the very start, and land acquisition loans are an important element of any construction project

  • Mezzanine Finance

    Mezzanine finance is an important ingredient in property development, and it enables developers to take on opportunities they’d otherwise struggle to fund

  • New Build Development Finance

    New-build projects need stable funding from start to finish, and new build development finance lenders provide the tools property developers need in this sector

  • Pre-Construction Finance

    There’s plenty of work to do before construction starts, and the costs of paving the way for a successful project must be met with pre-construction finance.

  • Property Development Finance

    Property development requires specialised financial solutions, and the UK’s development finance sector provides a variety of highly flexible funding options

  • Retail Conversion Loans

    Retail conversions can be lucrative opportunities, but developers must ensure they have appropriate funding to secure planning permissions and carry out work

  • Refurbishment Finance

    Refurbishment finance lenders provide the tools that property developers need to quickly seize and escalate renovation projects from beginning to completion

  • Self-Build Finance

    Self-build projects require a specialist touch, and there are many development lenders dedicated to providing self-build finance for precisely this purpose.

  • Site Acquisition Finance

    Moving quickly is vital for successful property development, and site acquisition finance is an indispensable part of any development finance package.

  • Unmortgageable Property Finance

    Unmortgageable property finance allow property developers to take out flexible finance solutions to refurbish and renovate properties for mortgage or resale

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