Construction financing

Development loan for real estate projects

Capital to finance the construction of your development in Spain and Portugal, with disbursements linked to works certifications and no mandatory pre-sales. €7 to €100 million and terms of 24 to 60 months.

Analyze your project

We assess every deal case by case

Amount: 7 – 100 M€
Maximum LTC / LTGDV: 85 % / 70 %
Annual interest rate: 5,5 – 7,5 %
Term in months: 24 – 60

What is a development loan

A financing solution designed to cover the construction costs of a real estate development. Unlike a conventional mortgage, the capital is disbursed in tranches linked to works certifications, as the project progresses.

Milestone disbursements

The capital is released in tranches linked to the progress of the works: foundations, structure, envelope and finishes.

No mandatory pre-sales

We finance based on the viability of the project, not on the percentage of off-plan units sold.

Exit through sales

Repaid through the sale of the units or the refinancing of the completed asset.

This product is also known as a construction loan or development finance — different names for the same instrument.

How a development loan works

Five moments, from a permitted project to the sale of the last units.

Project

Land under ownership, a building permit, and a closed construction budget.

Structuring

The amount is set according to total cost and the final value of the development, with a mortgage guarantee.

Certifications

Each drawdown is released against a works certification validated by the monitor.

Sales

Sales progress in parallel with construction, with no minimum pre-sales threshold.

Repayment

Through the handover of the units or the refinancing of the completed asset.

Development loan for companies, not a self-build mortgage

Two different products for two different clients: the individual building their own home and the company developing a project.

Individual

Self-build mortgage

Borrower: Private individual
Purpose: Building your own home
Amount: Hundreds of thousands of €
Who grants it: Retail banks
Assessment: Personal solvency and payslips

Professional

Development loan

Borrower: Developer or company
Purpose: Building a development
Amount: Millions of euros
Who grants it: Specialised funds and platforms
Assessment: Viability of the project and the developer

Xenia Capital finances professional transactions exclusively. If you are looking to finance the construction of your own home, your counterpart is a retail bank, not us.

Development loan conditions

Reference conditions. Each transaction is assessed individually and final terms depend on the asset, the developer and the agreed structure.

Maximum LTC / LTGDV: 85 % / 70 %
Minimum amount: 7.000.000 €
Maximum amount: 100.000.000 €
Interest rate (p.a.): 5,5 % – 7,5 %
Arrangement fee: (PIK)1 % – 2,5 %
Non-utilisation fee: 30 % of the interest rate
Exit fee: 0,5 % – 1,5 %
Minimum term: 24 months
Maximum term: 60 months
Interest payment: (100 % bullet)Partial or at maturity
Interest capitalisation: Monthly, bimonthly, quarterly or semi-annually
Disbursement: Against works certification

How to read a development loan’s conditions

Four concepts that determine how much capital you can obtain and what it really costs you.

LTC

Loan to Cost

Percentage of the total cost of the development (land, construction and indirect costs) covered by the loan. An LTC of 85% means you contribute the remaining 15% as equity.

LTGDV

Loan to Gross Development Value

Percentage of the gross development value of the completed project (GDV) represented by the loan. It acts as a second limit: the more restrictive of the two applies.

PIK

Payment In Kind

The arrangement fee and, where applicable, the interest are not paid in cash: they are capitalised and paid at maturity, with no cash outflows during construction.

Certification

Works certification

A document certifying the works completed in each period. Each drawdown of the loan is released against a certification validated by the project monitor.

When to use a development loan

Five scenarios in which a development loan solves something bank financing cannot yet solve.

Building without reaching the bank’s pre-sales threshold

Banks usually require between 30% and 50% pre-sales before financing construction. A development loan starts construction based on the viability of the project and allows sales with a more advanced product.

Developing a typology banks rule out

Build-to-rent, hospitality, coliving or flex living fall outside many banks’ risk policies. We assess the asset and the developer, not the label.

Replacing a bridge loan with construction financing

When the land was purchased with a bridge loan and the permit arrives, the development loan repays the bridge loan and finances construction under a stable structure.

Completing an insufficient bank pool

When banks only cover a percentage of the cost, the development loan covers the remaining tranche without using up more bank risk capacity.

Refurbishing a building to reposition it

Full refurbishment works or a change of use, with drawdowns by certification and an exit through sale or lease.

Is your case different?

Tell us about the transaction and our investment team will assess whether it fits a development loan or another of our products.

Development loan or bridge loan

These are complementary products, not alternatives: in many transactions the bridge loan precedes the development loan.

Variable	Development Loan	Bridge Loan
Project phase	Construction	Acquisition
What it finances	Construction or refurbishment costs	Purchase of land or asset
Disbursement	Progressive, against certification	Single
Leverage	85 % LTC / 70 % LTGDV	80 % LTC / 50 % LTV
Amount	7 – 100 M€	7 – 50 M€
Interest rate	5,5 % – 7,5 %	6,5 % – 8,5 %
Term	24 – 60 months	6 – 24 months
Typical exit	Sale of units	Refinancing or development loan

Is your transaction not yet permitted and you need to close the purchase of the land? What you need is a bridge loan. And if you want to finance the purchase and the construction under a single structure, the product is Whole Loan.

Development loan versus bank financing

We do not compete with banks: we step in where they cannot yet.

Reference

Traditional banking

Decision criteria: Risk policy and pre-sales
Pre-sales required: 30 % – 50 %
Leverage on cost: 50 % – 60 %
Eligible asset types: Standard residential
Drawdowns: Against certification, with pre-sales
Interest structure: Periodic amortisation
Uses up bank risk capacity: Yes

Our proposal

Xenia’s development loan

Decision criteria: Viability of the asset and the developer
Pre-sales required: Not required
Leverage on cost: Up to 85% LTC
Eligible asset types: Residential, hospitality, alternative living
Drawdowns: Against certification, without pre-sales
Interest structure: Capitalised or at maturity
Uses up bank risk capacity: No

What assets we finance with a development loan

New-build and full refurbishment in Spain and Portugal.

Residential build-to-sell

Residential developments for sale, on finalist land with a permit.

Residential build-to-rent

Rental developments, exiting through refinancing once the asset is stabilised.

Hospitality

New-build or fully refurbished hotels and aparthotels with a defined operator.

Alternative living

Coliving, student housing, flex living and serviced apartments.

Requirements to obtain a development loan

Each development is assessed separately, but we always look at the same things: who is building, what the development is, and how the financing is protected during construction.

Who is developing

Demonstrable experience
Track record in residential, hospitality or alternative living development, managing works from start to finish.
Relevant track record
Developments already delivered of similar typology and size to the one being financed.
Own equity contribution
Significant own funds in the land and the works, aligning interests with Xenia.
Solvent counterparties
Contractor, site management, project manager and sales agent with proven capacity.

The development

Clearly defined project
Detailed design, a closed works budget and a realistic construction and sales schedule.
Viable financial structure
LTC, LTGDV and development margin compatible with the construction risk.
Clear exit strategy
Sale of the units or, for assets that are operated, refinancing once construction is complete.

The land and the works

Control over the land
Land under ownership or a binding contract, free of encumbrances incompatible with the mortgage.
Planning visibility
Building permit granted or well advanced, with approved zoning.
Transparency and reporting
Certifications, sales and costs available to the project monitor throughout construction.

What we do not finance with a development loan

Before sending us a development, check it is not on this list: these are transactions Xenia Capital does not review.

Mortgages to buy a home
Moving primary residence
Self-build of your own home
Works and renovations on private homes
Personal or consumer financing
Projects without a real estate asset
Developments outside Spain and Portugal
Works requiring less than €7 million

Documentation to apply for a development loan

With the permit, the works budget and the sales plan on the table, the preliminary review is much more precise. If something is missing, we start with what is available anyway.

Executive Summary

Summary of the development: land, product, works budget, amount requested and exit through sales.

Financial information

Accounts of the developer company, its partners and any guarantors who will sign.

Valuation

Valuation of the land and the final value of the completed development (GDV) by an accredited valuation firm.

Planning information

Building permit, applicable zoning and any encumbrances affecting the plot.

Business Plan

Works schedule, sales plan by typology and expected pace of sales.

Developer’s experience

Developments delivered by the team, with units, construction duration and results.

Financial model

Model with a drawdown schedule against certification, monthly sales and stress scenarios.

Registry status

Land registry extract of the plot and status of encumbrances that will form the basis of the mortgage security.

Development loan application process

Six stages from receiving the development to the first drawdown against works certification.

Step 01
Receiving the development
You send us the summary of the project, the permit, the works budget and the sales plan.
Executive summary
Step 02
Preliminary review
The investment team cross-checks costs, product and market, and confirms whether it fits a development loan.
Investment team
Step 03
Letter of intent
Amount, LTC and LTGDV, drawdown schedule, price and guarantees.
Term sheet
Step 04
Due diligence
Valuation, technical review of the budget, legal and planning review, and KYC/AML.
External advisors
Step 05
Investment committee
Approval of the development and the final structure of the financing.
With Oaktree
Step 06
Formalisation and first drawdown
Signing before a notary and the first disbursement; subsequent ones against certification validated by the monitor.
Notarial deed

Frequently asked questions about the development loan

About the development loan for developments in Spain and Portugal.

How much capital can I obtain?

We work with tickets from €7 million upwards. The final amount depends on the asset, the business plan and the structure of the deal: each case is analysed individually.

Do I need pre-sales to access financing?

No. Pre-sales are just one more factor in the analysis, not a prerequisite. We assess location, product, the development team and the viability of the business plan as a whole.

How is the capital disbursed?

It depends on the product. In the development loan, in tranches linked to works certificates. In the bridge loan and the investment loan, in a single drawdown at closing. The schedule is set out in the term sheet.

What is the usual term of a development loan?

Between 24 and 60 months, depending on the duration of the works and the sales plan. The loan schedule is adjusted to each project.

What are the costs?

Interest rate, arrangement fee and formalization costs, detailed in the term sheet before signing. Each deal has its own terms: we do not work with a single flat rate.

What is the difference between a bridge loan and a development loan?

A bridge loan provides short-term liquidity to buy, refinance or launch a project while the definitive financing is being closed. A development loan finances construction, with drawdowns against works certificates and no mandatory pre-sales.

What documentation do you need?

A description of the project, its location and planning status, the cost budget, the sales or operating plan, and information about the development team. That is enough for an initial assessment.