Construct a three-page summary
Residential developments can be as complicated as big commercial ones, and bank executives often receive dozens of proposals a day. You should be able to summarise a lending proposal in three pages. What you say in those pages must excite and convince them that this proposal is worth further attention. Cash flows, accommodation, schedules and floorplans can be tucked away in appendices. The summary should focus on the reasons why the development will be a success.
A picture tells a thousand words
I am astonished at the number of developments submitted without a photo of the site or a map showing its location. A good colour photo brings your proposal to life and breaks up pages of text. If you are converting existing buildings, photos are essential. Now that digital cameras are available, there is no excuse.
A map allows the reader to get their bearings. Don't assume that there will be an A-Z at the bank; a good presentation provides all the information necessary for the banker to say yes. For example, a map of St Ives should show that there are two A-roads that link it with Huntingdon (A1123 and A1096). With city development proposals, include street plans in your presentation: at some point your bank manager may want to visit the site.
Don't hide problems
If your site is next to a sewage treatment works, it will be embarrassing when it suddenly comes to light at a site visit. You wouldn't submit the proposal unless you thought that would be successful, so don't be afraid to explain it.
A good presentation provides all the information necessary for the banker to say yes
Another mistake is to have blank sections within a CV. If you have taken a year off and travelled the world based on the success of a previous transaction, then fantastic. Say so, otherwise bankers like me will presume that you have been locked up for VAT fraud or have just undertaken a spectacular failure; I am a naturally suspicious person! This leads nicely on to my next point …
Be open and honest
Gone are the days when banks looked for a 30% return on residential development. They will probably have financed developments in whatever part of the country you operate in and will have an idea of sales prices (on a pound per square foot basis), construction costs and land values. If you expect to get over the odds, explain why, giving evidence where possible. A letter detailing the proposed selling prices from a local agent is helpful but must be backed up by recent comparable sales in the area.
Construction costs – the bottomless pit?
This is one of the most sensitive areas of any proposal. What will construction cost per square foot? Who has checked it? What sort of contract will be used and what stage are you at in the tender process? A good proposal will deal with all of these points.
What is the competition up to?
Don't assume that having a whole raft of national housebuilders nearby is a bad sign. In any market, the presence of the nationals will help potential buyers to see your product (as long as you have strong visual displays). Your product may well be at least as good and probably significantly cheaper. It also indicates that there is likely to be a demand for housing in the area. You should review your competitors' product and location, and then attach a summary to your submission.
Postscript
Peter Roscrow is managing director of Close Property Management, the property fund management division of merchant bank Close Brothers.
