How LTGDV Works - Development Finance Explained

LTGDV stands for Loan-to-Gross-Development-Value. It expresses the senior development loan as a percentage of the finished scheme's gross sale value or open-market valuation. A scheme with a GDV of £10m and a senior loan of £6.5m has an LTGDV of 65%.

Senior development lenders use LTGDV because their exit comes from the GDV - the loan is repaid when the units are sold or the finished scheme is refinanced at its post-completion value. Standard Loan-to-Value (LTV) is meaningless on a development loan because the asset is being built mid-loan. There is no stable property value to lend against on day one.

Most senior lenders cap LTGDV between 60% and 65% on residential development. Some specialist commercial development lenders go to 70% LTGDV on income-producing exits. Stretched-senior facilities (described below) typically work to the same LTGDV cap but a higher LTC.

Every senior development lender sizes the loan at the lower of two caps: LTGDV and LTC (Loan-to-Cost). LTC expresses the loan as a percentage of total project cost - land plus build plus fees plus rolled-up interest. Senior LTC caps typically run 80-85%, stretched senior 90%.

On a scheme with high margin (large gap between cost and GDV), the LTC cap usually binds first. The lender will lend up to 85% of cost, which works out at less than 65% of GDV. On a scheme with thin margin, the LTGDV cap binds first - the lender will not exceed 65% of GDV even if that leaves cost coverage below 80%.

This is why deal margin matters so much for leverage. A scheme with 25% margin on cost will hit the LTC cap and offer 85% LTC funding. A scheme with 10% margin on cost will hit the LTGDV cap early and offer maybe 70% LTC. Same GDV percentage, very different developer equity required.

The maths is straightforward but the inputs need care. GDV is the gross sale value of all finished units at the lender's valuer's number, not the developer's optimistic forecast. Lenders' valuers benchmark to the median comparable, not the top of the market. If you are appraising at £450 per square foot and the median comparable is £400, the valuer will use £400.

Senior loan is gross loan - including the working construction tranche, rolled-up interest and lender fees - not net day-one funds. A £5m gross loan with £700k rolled-up interest delivers £4.3m of net build funding to the developer. Both numbers matter, but the LTGDV calculation uses the gross figure.

To check leverage in your own model: GDV at the valuer's number, multiplied by 65%, gives you the senior loan ceiling on LTGDV. Total project cost (land + build + fees + estimated rolled-up interest) multiplied by 85% gives you the senior loan ceiling on LTC. Whichever is lower is what the lender will actually lend.

Above senior debt's LTGDV and LTC caps, additional leverage comes from mezzanine debt or JV equity. Mezzanine sits behind senior, ahead of equity, and typically takes leverage to 90% LTC. Pricing is 12-20% per annum, structured as a rolled-up coupon. JV equity sits behind mezzanine and is paid through profit share rather than a coupon.

Stacking all three layers - senior + mezzanine + JV equity - lets developers achieve true 100% LTC structures on schemes with strong margins. The senior tranche stays at 65% LTGDV. The mezzanine adds another 5-10% LTC. The JV equity fills the last 10-15%. The developer puts in zero cash but trades a profit share for the equity layer.

This works only where the scheme has enough margin to absorb the higher cost of capital on the mezz and JV layers. A 20%-on-cost margin is the practical floor for a 100% structure. Below that, the cost of capital eats too much of the developer's residual profit.

Can I get more than 65% LTGDV? Some specialist lenders go to 70% LTGDV on strong cases - typically owner-occupied or PRS-led commercial schemes with a clear refinance exit. Above 70% senior LTGDV is rare and usually only available on a stretched senior basis with significant developer guarantees.

Does the lender use day-one or finished GDV? Finished GDV - the value of all units at practical completion on the lender's valuer's number. Some lenders cross-check against day-one site value for additional comfort but the lending decision is based on finished GDV.

What if GDV moves during the build? Most facilities have a covenant requiring 110-120% headroom on LTGDV at any point. If unit prices fall and the GDV is revalued lower, the LTGDV ratio rises - and the developer may need to inject cash to restore headroom. Build a cushion into the GDV at submission rather than running tight.