New Build Residential, Meridian Water Area

The developer, a limited company with a track record of six previous residential schemes ranging from 4 to 10 units, acquired a 0.6-acre former industrial site on the boundary between Edmonton N18 and the EN3 postcode area, directly adjacent to the Meridian Water regeneration zone. The site was occupied by a derelict warehouse and hardstanding previously used for vehicle storage. Planning permission had been granted for 14 apartments comprising a mix of one-bedroom, two-bedroom, and three-bedroom units across two blocks of three and four storeys.

The primary challenge was the scale of the project. At a total development cost of approximately 4.9 million pounds, this was significantly larger than any of the developer's previous schemes, and the funding requirement of 3.2 million pounds was at the upper end of what many specialist lenders would consider for a developer stepping up to this level. The site also presented environmental challenges, with a requirement for contamination remediation of the former industrial land, removal of an underground fuel storage tank, and the installation of a gas membrane beneath the building footprint.

Additionally, while the Meridian Water regeneration was generating positive momentum for the area, the comparable evidence for residential sales at the values required by the development appraisal was limited. Most existing residential stock in the immediate area consisted of older local authority housing and ex-council flats, with few examples of new-build quality apartments achieving the values projected in the scheme. The developer needed a lender who could look beyond the existing market evidence and take a view on the direction of travel for the Edmonton market.

The 20-month build programme also meant the facility would span a significant period, during which market conditions could change. The developer needed to factor in interest rate risk and the possibility that the sales market might soften during the construction period, which required a robust and conservative approach to the development appraisal.

We worked closely with the developer to prepare a comprehensive funding package that addressed the lender's likely concerns about scheme scale, environmental risk, and market evidence. This included commissioning an independent market report from a local agent specialising in the Edmonton area, which provided detailed evidence of the Meridian Water effect on local property values, recent off-plan sales at comparable schemes in nearby postcodes, and the pipeline of infrastructure investment supporting future value growth.

We approached three lenders simultaneously and secured competitive offers from two. The selected lender was a specialist development finance house with significant experience funding schemes in London regeneration areas. The finance was structured as a senior facility of 3.2 million pounds at 65 percent of total costs, with a rate of 0.72 percent per month and a 1.5 percent arrangement fee. The slightly more conservative LTC of 65 percent reflected the step-up in scale from the developer's previous projects and provided the lender with additional margin.

The contamination and environmental remediation requirements were addressed by incorporating a detailed remediation budget within the facility, ring-fencing these funds for the specific purpose, and requiring the developer to obtain an environmental insurance policy covering any residual contamination risk. The developer engaged a specialist remediation contractor who provided a fixed-price contract for the environmental works, eliminating cost uncertainty in this area.

The drawdown schedule was structured in nine tranches, with the first covering site acquisition, demolition, and remediation works, and the subsequent eight aligned to the construction milestones for each block. The monitoring surveyor was instructed to provide particularly detailed reporting on the early-stage works, given the environmental complexity of the site.

The project was completed in 19 months, one month ahead of the 20-month facility term. The environmental remediation was completed in the first three months without incident, with the underground fuel tank removed safely and the gas membrane installed across the entire building footprint as required. The remediation cost came in on budget, validating the fixed-price contract approach.

The construction programme progressed well despite some weather-related delays during the foundation works. The contractor maintained an efficient site, and the staggered construction of the two blocks allowed for a phased approach that optimised labour deployment and material deliveries. The total build cost came in approximately 1.5 percent over the original budget, with the overage covered by the project contingency.

Sales performance exceeded expectations. The developer launched an off-plan marketing campaign six months before practical completion, and eight of the fourteen units were reserved within the first four weeks of marketing. The remaining six units were sold within three months of practical completion. The total sales revenue was 5.18 million pounds, exceeding the projected GDV of 5.1 million pounds by approximately 80,000 pounds, driven by strengthening demand in the area as the Meridian Water regeneration continued to progress.

The developer achieved a net profit of approximately 680,000 pounds after repaying the development finance facility and all associated costs, representing a return on equity of 40 percent. This project established the developer as a significant operator in the Edmonton market and demonstrated the viability of larger residential schemes in the Meridian Water corridor. We have subsequently arranged finance for their next project, a 22-unit scheme on a nearby site, at a facility size of 4.8 million pounds.