DFL001 - Exeter Loan 1 - DEFAULT

They've just found an extra house for DFL 1 (was 10 detached houses, is now 11 detached houses)......

That's nice to know..... be nicer to see the frigging valuation report that indicates GDV.......

Fire, Load, Aim at the moment from SS.  They may have all the answers but for us perception is our only reality! They must by now have a basic check list that they should follow that includes Lender communications.

DFL 1 & 2

Existing investors will automatically ‘rollover’ into these loans as we are effectively extending the ‘bridge’ element of the loan for a further 12 months and increasing the loan to provide build finance.  

We are seeking to borrow the interest to pay SS investors and the required funds for the construction element.  Some of the properties can be expected to be sold off plan/before completion and therefore it is not certain whether 100% of the full build finance will be needed (good thing for SS as our risks will be therefore lower).

1. How will the DLF loan tranches be released (i.e. will every DFL loan tranche be available for pre-funding or will they just be dumped on the SM)?

We will create a new £500k tranche in the pipeline a week or two before it is required to control allocation fairly and to allow us to gauge funding availability.  When we launch a new tranche, all investors in that particular tranche will be ‘blended’ into the loan and  secured on a pari paru basis.

2. What method will be used to decide how much of the total loan is released at each stage?

Each tranche will be for £500,000 and will be payable to the developer on receipt of a satisfactory QS report. We will release this to SS investors for review before drawing down upon it. 

3. It has been suggested that DFLs will reduce in value during development; how will the LTV be represented during these periods, and will updated valuations be provided during the redevelopment?

Re valuations through the build process, we will release them as we receive them. It is doubtful except if there is a macro market event, that we will amend the LTV downwards through the build. We are in it for the duration and will push it through to the GDV figure.

4. Because DFLs require due diligence from us investors other than just the LTV (and GDV), will we have further details in regards to the company behind the development, their track record of completing developments and further details of their strategy (i.e. Term of the project, estimated costs, etc.)?

At the moment, Lendy is making the underwriting decision for each loan i.e the developers capability, track record etc and hope that our investors will trust us enough to only provide the platform with high quality loans.  We would not consider a loan to a developer without a successful track record.

We do appreciate our investor’s due diligence and in future we will consider providing much more detailed analysis for you.  On another note, most borrowers don’t like their name or business ‘splashed all over the internet for the whole world to see’ so we are limiting that level of detailed information for now.  We are aware that this might need to change in the future so just please bear with us whilst we work through these first ones and see how the dust settles.

5. If the company behind the development suddenly went bust, would the development site be sold "as is" or would SS look to have the site developed further to regain more of the loan value?

At the height of the last market collapse, many banks immediately called in all of their loans and refused to build out their projects to completion. In hindsight, most people now believe the fallout would have been much less if they had provided the funds to build out the schemes and would have had completed units to sell rather than half built sites. It is our intention to step in wherever necessary to complete these schemes to maximise the value at all stages subject to available funds. 

6. Is the interest retained up front (the same as PBLs), and if so; is it retained up front on the entire loan or each tranche?

We are taking interest for the land element at day 1 to cover SS investors for the entire period.  For the build cost tranches, we will take interest out of the tranche specifically for that tranche i.e £500k tranche 12 months @ c1% per month is £60k, the borrower gets £440k to use for construction for e.g.  Each consecutive tranche we will take 12 months worth and thus build a pot for any overruns.

7. Will interest still be paid monthly?

Yes.

I appreciate the savingstream response, but it is still only partial enlightenment, since I'm not sure whether my prefunding (suppose it was £1k) is against the whole project (therefore % allocated) or against a 500k tranche (bottom up then) and whether it includes or is in addition to whatever I may have in the loans being rollled over (whichever those are).

I sort of suspect the DFLs may be =only= going to roll over the original land-value loans, plus maybe one dose of £500k (=£440 cash in hand) for developer to start, but that isn't exactly crystal clear yet! Makes a big difference to how deep the trench is tomorrow.

My thoughts exactly, I'm still not sure what to set my pre-funds to in order to try and get the level I want in total. Could do with at least knowing what tomorrow's initial amount released will be.


in edit, this was supposed to be a response to GSV3MIaC 's post, but ilmoro intervened   .

Arrrhhhh... I want to do it, but im not going to... DFL's and "don't touch with a barge pole" .... I cant separate the two in my head.

Iv been brought up for the last 2 years by SS on a nourishing combination of 60% or less LTV% AND 12% interest.

And not once got indigestion, I really really want get involved in DFL's.... But the Uncertainty is just too much for my delicate constitution to digest... Im gonna let you suckers  test the market for me..... Rest assured I will have fingers and toes crossed for you all.

savingstream - development finance usually requires commitments on the part of the lenders (us) to release further funds as the development progresses. So what happens if SS are unable to fund any future tranches (lack of investor demand etc) and where would that leave existing lenders in that loan. Would it be a breach on the lenders part? Would that have any implications? 

Can we please have the intended loan agreement between us/SS and the borrower uploaded for review so we know what we are getting in to? Can you please upload them as a matter of course on all loans?