Manchester Conversion — 12 Apartments

An experienced Manchester-based developer had acquired a former office building in the city centre under permitted development rights (PDR), allowing conversion to residential without full planning permission. The building was well-suited to conversion into 12 one and two-bedroom apartments, with a projected GDV of £4.8m against total development costs of approximately £3.55m.

The developer had initially approached a lender directly and been refused. The lender's concern was twofold: the PDR route meant no Section 106 contributions (which some lenders view as a risk to local authority cooperation), and the building's structural survey had flagged potential asbestos in the ceiling tiles — requiring removal before conversion works could begin.

With contracts already exchanged and completion due in 6 weeks, the developer needed a facility in place urgently. The total requirement was £2.5m covering the acquisition balance and conversion programme.

PDR conversions occupy an unusual space in development finance. Some lenders treat them identically to new-build schemes, while others apply additional scrutiny because the planning route bypasses certain local authority controls. The asbestos issue added further complexity — the removal costs needed to be accurately costed and the programme needed to account for the remediation phase before conversion works could begin.

The 70% loan-to-cost ratio was at the upper end of most lenders' appetite for a conversion project with asbestos concerns. We needed to find a lender comfortable with both the PDR route and the leverage, while still offering commercially viable terms.

The tight timeline added pressure. With completion imminent, we had approximately 4 weeks to secure a credit-approved facility — from initial approach to drawdown.

We approached three specialist lenders simultaneously, each with demonstrable experience in PDR conversion schemes. We produced a comprehensive development appraisal and business plan that addressed the asbestos issue head-on — including a specialist remediation quote, a revised construction programme showing the remediation phase, and an updated cashflow reflecting the additional costs. The quality of the presentation gave the lenders confidence in the deal from the outset.

We positioned the PDR route as a strength rather than a weakness: no Section 106 obligations meant faster delivery and no affordable housing requirement diluting the developer's margins. The building's city centre location and strong rental demand provided a clear fallback exit via the private rented sector if sales proved slower than expected.

The winning lender offered 70% LTC with a day-one land advance, staged construction drawdowns, and a facility term of 18 months. We negotiated an arrangement fee of 1.75% — competitive for a conversion scheme with asbestos remediation requirements.

The facility completed within the 6-week deadline. Asbestos remediation was carried out in the first 8 weeks, and conversion works progressed on programme thereafter. The scheme completed in 16 months — two months ahead of schedule — with all 12 apartments either sold or under offer within 12 weeks of practical completion.

Total finance costs came to approximately £210k at a blended rate of 8.2% per annum. The developer achieved a profit of 26% on cost, comfortably exceeding the original appraisal. The lender who had initially refused the application has since acknowledged that our structuring and presentation of the deal addressed every concern they had raised.