Mezzanine finance for spectacular seafront complex

On a Devon seafront is the most spectacular venture yet by Oval Estates.
With a GDV of £23m, this 31-apartment complex is the largest single-block development that Oval has been involved in and the sixth of the developer’s projects to be backed with funding from Davon.
This time it is a joint venture scheme between Alan Broadway (Oval Estates (Bath) Ltd) and Paul Mooney (Old Meadow Properties Ltd) under the banner of Fosseway Transition Ltd.
Mezzanine Finance and the Joint Venture
Oval and Fosseway Transition Director Alan Broadway sees mezzanine finance as elemental in Oval’s success and in this case the JV company Fosseway Transitions success.
He explains: “With any development, the less of your own money you have to put in, the more work you can do on other developments at any time. We can turn our cash over much quicker when we have mezzanine behind us.”
Development Background
Those Seafront apartments have been a long time in the making, so having all his eggs in one basket would have been constraining.
Oval, a specialist in luxury homes in the southwest, together with Paul Mooney bought the freehold for the site in Seaton on the south coast in 2012 having spent two years looking at the possibilities of the location.
“We came up with a few concepts and then brought in an architect to draw up plans which we evolved to fit our perception of what the market wanted,” recalls Alan.
Planning Challenges
As with any development, there would be hiccups. Having received the most positive response ever to any of our developments at pre planning stage, Alan was aghast when it came to committee and the planning officer recommended refusal of the application. Happily, the councillors on the planning committee overruled the officer’s recommendation.
Another blow was averted because consent came in just before East Devon Council adopted the Community Infrastructure Levy, which Alan reckons would have put a £0.5m dent in his spreadsheet.
Site and Construction Progress
Developments are rarely plain sailing, of course, as Alan points out: “It’s been a difficult site because we have neighbours pretty much all around so there has been work on party wall agreements, scaffolding licences and the like.”
After a tentative start in 2017, work began in earnest in 2021 and was fully underway the following year with the steel frame in place in 2023. The aim is to be fully on the market with a showhouse and completed units by spring 2025.
The architect’s brief was that every apartment should have a sea view, and a balcony which they do, and many of their occupants will be able to gaze out across the English Channel from their master bedroom too. The apartments are mainly two-bed but some of the six penthouses have three bedrooms.
Relationship with Davon
The Bath-based developer’s relationship with Davon goes back to 2008 when Oval’s response to the credit crunch was to get out of the mortgage-starved freehold market and explore build-to-rent opportunities. It was clear in discussions that Davon was interested but there weren’t enough senior lenders in that market to put together a viable scheme.
It’s a measure of how crunchy the banking collapse was that it took two years before Oval’s next scheme went ahead.
The relationship with Davon now became more solid. In 2013 alone, there were two schemes with Davon financing.
Why the Relationship Works
Alan explains why the relationship works so well: “I understand the criteria they work with so I know with any given scheme whether or not I can work with them.
“They’re easy going yet switched on in what they do. They pay attention to the project to make sure it stays on track. They’re very regular with inspections and keen to monitor reports.
“I especially like the way that, unlike some lenders, they don’t charge interest on interest.
“I’m comfortable with them, and I know a lot of senior lenders are too. For any deal to work it has to work for everyone, and we understand that.”
Financial Details
Mezzanine Facility: £850,000
Senior Debt Provider: Richard Sollis – Shawbrook
Solicitor: Liza Lam-Kee – Glovers
Oval Homes – Luxury Homes in the South West
Fosseway Transition Ltd JV Scheme in Seaton Devon