The Borrower, is a construction / development firm in the Cavan / Meath area. It has requested that we provide them with a €472,000 development facility for a period of 14 months (6 months term certain), secured against the Property, to allow them to construct 5 houses on the property. The Borrowers equity and the proceeds of the loan facility will be used to fund the construction of the first three houses, with a portion of the sales proceeds from these houses being used to fund the construction of the final two houses. We will allow the LTGDV to rise to 50% to accommodate the use of the proceeds.
We will take a charge over the entire site. Initially, our LTGDV (Loan To Gross Development Value) will be 37%, and our LTC (Loan To Cost) will be 53%
The site is located on the Cluain Mullach Estate in Mullagh. Construction has commenced on the first house, which is now 75% complete and is sale agreed. A second house which occupies a corner site and has an uninterrupted view has gone sale agreed at €330,000. Mullagh which is located on the Cavan /Meath border, is close to the M3 motorway, which makes it part of the Dublin commuter belt.
Avanco is a building company that was set up in 2016, with the aim of building houses in the Cavan / Meath area. The principle behind Avanco is Gerard Briody, who has many years of experience in residential building both in Ireland and the UK. He has built up a team of reliable subcontractors which he can call on to allow him to develop sites like the Mullagh property.
Avanco has used a number of local advisors and consultants such as Boylan Engineering to ensure that the site, and works that had been completed on it meet present-day standards. This view has been confirmed by our QS Advisors, OCFPM.
Our QS has carried out a detailed review of the building project, looking at such areas as planning, building regulations and the cost schedule. They have confirmed that all costs are in order and the construction plan is achievable. Their full report is available on our platform.
The loan will be secured by a first legal charge over the Cluain Mullach site, supported by a cost overrun guarantee from Gerard Briody. This will ensure, should there be any additional unforeseen costs outside of the original budget, they will be the responsibility of the Borrower, without having any negative impact on the facility.
The Cluain Mullach Estate already has 15 houses which were built circa10 years ago. All roads, footpaths and services for the Estate, including the site, have been completed. The Borrower has already commenced work on one of the five houses, which is now 75% complete and has gone sale agreed. A further house has gone sale agreed at €330,000.
The Estate is located on the Moynalty Road leading into Mullagh, and is less than a 5-minute walk of the main street. Mullagh itself is a 10-minute drive from Kells and the start of the M3 Motorway and is regarded as part of the commuter belt for west Dublin. Currently, in the Mullagh area, there are no other multi-residential construction projects, and very few in the general area reaching from Cavan town to Navan, both of which are a 30-minute drive away.
Mullagh has many facilities and services that you would expect in a small town, and which are required by young families, which is the target market for this development. Within walking distance of the development, there are a number of shops, a post office, a pharmacy, Garda Station, national schools and creches.
The houses will be detached with 4 bedroom homes (c.2,000 sq ft each) and all will be “A-rated” for energy efficiency. The houses had a guide price of €290,000. As has already been documented the guide price has been exceeded in two of the three sale agreed. It is the view of the selling agent that they will be all sale agreed by the end of the year.
The total gross sales value of the site is €1.495m, based on the sale guide prices for the individual units and sale agreed prices. This value has been supported by our independent valuer's report, and the presales already in place, which are in excess of the guide price which is the main evidence behind the gross sales value. Based on this figure the LTGDV is 37% (€472,000/€1,277,000).
It is proposed that the borrower's equity and the proceeds from the loan facility will fund the construction of the first three houses, with a portion of the sales proceeds from these houses being used to fund the construction of the final two houses. It is proposed to let the LTGDV rise to 50% to accommodate the use of proceeds for build costs.
An independent valuer based in the Meath Cavan area has provided us with a market value for the proposed development. They have determined that the market value for the completed development, based on agreed sales and guidance price is €1,495,000. They have also valued the current value of the site at €355,000 based on work completed so far.
The valuer commented that there is a good demand in the area for new houses and that the five houses were competitively priced. They also commented that the existing Cluain Mullach development is well maintained and occupies a good location on the Moynalty road in Mullagh.
In reaching this opinion the valuer commented that there are “limited market comparisons for new detached house in the Mullagh area. He has used evidence of new house sales in Kells, where sales in The Deaconry on the Moynalty Road for 4 bed detached houses are completing at between €430,000 to €465,000. Second-hand house sales in the general Mullagh area has seen 4 bed detached houses selling at €380,000 and €390,000.
The site has received full valid planning permission from Cavan County Council, under the planning reference 14/385.
It is proposed to have a term of 14-months on this facility. The Borrower will have the ability to repay the facility after month 6 either partially or in full.
The Borrower is relatively new to residential property development, however, the principal behind the company, Gerard Briody, has many years experience in development and he has built up a reliable team around him.
The Property is a site which is very straight forward to develop, with foundations completed and all services in place.
There is a strong demand in the general area for the type of family homes that will be developed on the site, with very little supply. The level of demand is evidenced by the number of pre-sales already in place, with two out of five having already gone sale agreed.
The LTGDV and LTC levels in this deal are very strong, which provides us with a good deal of comfort regarding the security of this facility.
The loan facility provides a good return from Investors, this coupled with the level of security and the demand for the completed houses, allow us to recommend this facility to lenders.
Valuation and facility agreement are available for viewing at our offices.