Can 100% full development funding help housebuilders unlock projects and sites that have stalled due to a lack of finance? PHPD takes a look at Go Develop, whose 100% finance model has a growing track record of assisting developers in delivering new homes.
Finance is often cited by SME housebuilders as one of the more considerable barriers to building more homes. The latest Federation of Master Builders House (FMB) Builders Survey, conducted in 2018, revealed that nearly half of all builders (46%) considered finance a major barrier to their ability to build more new homes. Commenting on the survey – which was conducted in September last year – Brian Berry, Chief Executive of the FMB, said: “Our research suggests that it is the low percentages of project cost that builders are able to borrow that remain the greatest financial barrier to increasing their levels of house building.”
One company looking to tackle this problem head-on is Go Develop, which provides 100% land and build funding for developers and housebuilders – including stamp duty and project costs.
Jason Tebb, Chief Operating Officer at Go Develop explained how the funding mechanism works: “Through our joint venture partnerships, developers and housebuilders can approach us with a project and need not put in a penny to develop it. We create a ‘SPV’ to hold the project and once it’s developed and sold we split the profits in the developer’s favour. One of our partners has called it ‘an industry game changer’ and we think that’s a fair summary.”
It is an approach that is being increasingly accepted by the sector. Currently, together with its partners, Go Develop is involved in building over 1,100 units across the UK at more than 29 sites. This is a good level of growth in the two years since the company launched and the future looks bright too; Go Develop explained that it has a forward pipeline of projects valued at £40million. Plus, Ultimate Holdings (the main hub of Go Develop and Ultimate Capital) has recently been ranked at number 823 in the Financial Times 1000 Fastest-Growing Companies 2019 list.
Go Develop is a privately owned and privately funded business. It is backed with capital from the Chairman, Mark Holden – who has 30 years’ experience in the property industry – and a close long-term strategic partner. At the helm of the day-to-day operations is Chief Operating Officer Jason Tebbs – who has over 16 years’ experience in the industry. Consequently, it is well placed not only to offer finance, but also have a deep understanding of the opportunities and challenges faced by developers.
Considering the opportunities in the market Chairman Mark Holden recently said: “SME housebuilders often have local knowledge and a much closer relationship with the community. Those that focus on new-build, quality family housing where employment and infrastructure is in place, have a unique advantage. This is improved further when smaller schemes offer more features and benefits for buyers and differentiate themselves from the mass new build housing estates of the big boys, who need scale and synergies and rely on templates that fail to add personality to projects. Any SME housebuilder that is able to ramp up their brand and housebuilding through having significant funding help, where no money is required from them has a fantastic opportunity.”
With strong backgrounds in property development both Mark and Jason ensure the company’s partnership approach goes beyond funding; it can also provide assistance with many aspects of the housebuilding process. Jason told us: “Go Develop are far more than a funder, we’re experts in property with legal, surveying, marketing and accounting support for our partners. You’ll find a whole team of dedicated and experienced professionals to remove the strain and drain of administration, VAT returns, valuations, chasing solicitors and surveyors allowing the housebuilder to claim back their Sunday evenings and weekends.”
Jason explained that many of its recent partners have also taken advantage of the full marketing suite offered by the company. This can include branding, brochures, and website design as well as hoardings, CGIs and drone footage.
One developer working with the company noted: “Having funding certainty and a partner that has a building not banking background makes it so easy. Draw downs are always on time, swift and efficient and Go Develop are very easy to do business with.”
There are, of course, a range of conditions that Go Develop has established which a developer must meet before a Joint Venture can be progressed. Jason explained: “The project should involve a multi-unit residential new build or conversion with full planning permission in place. We ask that the project has an estimated 24-month duration or less, and a GDV between £2m and £15m. There also needs to be a margin of 25% on GDV pre-finance and we prefer developers or housebuilders with some experience of the industry.”
However, ‘simplicity’ is another attribute for which the company wishes to be known. Jason told us: “We don’t wrap our developers up in complex terms and conditions, we keep it simple and are known to be easy to do business with. It’s something we’re very proud of and our returning partners are testament to.”
The company is keen to work with all housebuilders/developers who meet their criteria and promises to ‘turn-round’ enquiries rapidly, to ensure project delays are kept to a minimum. Jason explained: “100% funding is available for any professional housebuilder as long as the project meets the criteria. The first step is to send us your development appraisal and cash flow for the project, along with the full planning notice. We will review and advise within 24 hours as to whether we can progress further.”
Some examples of recent projects the company has funded include 33 apartments in Kelham Island, Sheffield; 21 new homes and four apartments in Birmingham; 24 family homes in Audlem, Cheshire; and 49 apartments in Bedford.
Through its 100% funding offer Go Develop has introduced a new solution to ease one of the main constraints identified by SME housebuilders. And, with a £250million facility ready for deployment, it looks set to help many more developers build their projects on firm financial foundations.