Grade II Conversion with 75% LTV on Day One

Overview

Converting commercial space into residential units is often complex. When the building is Grade II listed, the challenge increases: approvals are more tightly controlled, design changes can be slower, and costs can be harder to forecast.

This case study looks at how a specialist development finance facility was structured for an overseas developer in Surrey, converting three serviced offices into high-end townhouses.

Key deal details

• Location: Surrey
• Property type: Grade II listed building conversion (commercial to residential)
• Loan amount: £1.8m
• LTV (day one): 75% NET
• LTGDV: 70%
• Term: 14 months
• Asset value referenced: £965k
• Projected GDV: £2.5m

The challenges

1) Listed building constraints

Grade II listed conversions require careful preservation of historical features. That typically means:

• tighter limits on what can be altered
• more detailed approvals and documentation
• additional cost and programme risk if requirements evolve

From a funding perspective, these constraints can affect both the build plan and the lender’s confidence in the valuation and drawdown milestones.

2) Planning amendments during the project

Midway through the development, the borrower submitted amendments to the existing planning application, which triggered a judicial review period.

Planning risk matters because it can influence:

• the timing of approvals and works
• the final specification used for valuation
• what can be relied on when setting lending terms

3) A request to extract equity from the deal

The borrower was an overseas investor with no personal cash equity and relied on third-party funding. At one point, they requested cash from development drawdowns by acting as the project manager and treating management fees as equity.

Most lenders view this type of structure cautiously because it can blur the line between genuine equity contribution and cash extraction.

The solution

Specialist listed-building experience

A key part of the outcome was using a development finance approach that accounts for listed building realities—particularly around how valuation and drawdown assumptions are formed when approvals and constraints are more complex.

Late-stage terms adjustment to reflect the updated consent

Rather than treating the planning amendments as a reason to restart the lending position, the facility was structured with late-stage terms adjustment. This allowed the borrower to benefit from the updated planning consent without adding unnecessary conditions.

Backing a credible scheme despite unconventional equity mechanics

Where management fees were involved, the facility was supported by a wider assessment of the deal, including:

• the strength of the location
• the borrower’s experience
• confidence in the scheme’s delivery path

This enabled the lender to take a pragmatic view of how the project could be funded and progressed through the agreed milestones.

The outcome

The facility was structured as a bespoke £1.8m development arrangement with 75% NET day one and 70% LTGDV.

With the financing in place, the borrower could move forward with the conversion and unlock value from a £965k asset, targeting a projected £2.5m GDV.

This case highlights how specialist development finance can be used to manage the practical realities of listed conversions—particularly when planning timelines shift and deal structuring needs careful, lender-aware handling.