Specialist risk brokerage, London Belgravia is now offering a surety product that enables residential property developers with an off-plan sales strategy to use the received deposits towards the cost of construction
Deposit Release Bonds (DRB) provide developers with a low-interest source of working capital for their project.
The bond enables a developer to use the funds in escrow for the project’s remaining construction costs, as opposed to obtaining additional capital from traditional funding lines – which will result in a substantial saving for the developer.
‘Filling an important gap in the market’
“Deposit Release Bonds fill an important gap in the market,” said Giles Fallan, managing director of the London Belgravia Group.
“For over five years, London Belgravia has been offering insurance and risk solutions to meet the changing needs of various businesses and property professionals.
“As one of the largest specialist risk brokerage firms in the country, we have benefited from an unmatched knowledge and insight into our clients’ needs and motivations.
“As we selectively expand our offering to solve new challenges, we do so with the full support of our client book.”
London Belgravia has started offering Deposit Release Bonds all the way up to £15m (that’s a project GDV of £150m at an average of 10% deposit per unit).
The total cost of the Deposit Release Bond can vary between 6-12%, which can be more attractive if senior debt is either relatively expensive or you’re near the maximum limit of the LTGDV. It is certainly far more cost-effective than mezzanine funding which normally starts at 18% plus charges.
The brokerage also released a DRB Calculator that provides users a comparative analysis as well as estimated saving projections versus traditional funding lines.
Fallan added: “As we see the hardening of the insurance market, which has already resulted in the withdrawal of loss of deposit cover from a number of leading insurers, we believe the introduction of this surety project will be very timely for developers.”
The roll-out of the new surety product comes a few months after the group launched a specialist finance division as well as entered the renewable insurance market.