A vacant three-storey office building in a secondary commercial location just outside Manchester city centre. The developer had secured prior approval under Class MA for conversion to 14 residential flats — a straightforward permitted development route that avoided the full planning process. The challenge was not the planning; it was the finance. The building's commercial heritage, the conversion's cost profile, and the developer's relatively thin track record at this scale combined to make this a deal that required careful lender selection.
We arranged a £2.1 million facility — £650,000 for the purchase and £1.45 million for the conversion works — funded in five weeks from initial enquiry to drawdown. Here's how the deal was structured and why the lender choice mattered.
| Detail | |
|---|---|
| Finance type | Development finance — office-to-residential PD conversion |
| Total facility | £2,100,000 |
| Site location | Manchester (secondary commercial zone) |
| Purchase price | £650,000 |
| Land loan | £520,000 (80% of purchase) |
| Build/conversion facility | £1,450,000 (staged drawdowns) |
| Developer contribution | £130,000 |
| Projected GDV | £2,900,000 |
| LTGDV | 72% |
| Profit on GDV | 24% |
| Planning route | Prior approval — Class MA (office to residential) |
| Build programme | 9 months |
| Time to completion | 5 weeks |
The security property was a commercial office building — not a residential asset. A significant number of bridging and development lenders will only lend against residential property, and those that do accept commercial buildings often apply stricter LTV caps or require full planning consent rather than prior approval. The pool of lenders comfortable with a commercial-to-residential conversion under permitted development rights is narrower than it first appears.
The developer had completed several smaller residential projects — refurbishments and single-unit conversions — but had not previously undertaken a 14-unit scheme. Development lenders place significant weight on track record at or near the proposed scheme size. A developer stepping up from 3-unit schemes to a 14-unit conversion is a meaningful jump in complexity, and several lenders we approached initially declined on this basis alone.
Office-to-residential conversions under Class MA can appear deceptively cheap on paper — no new structure, no foundations, just internal reconfiguration. In practice, this building required substantial mechanical and electrical upgrades, new fire compartmentation, acoustic insulation between flats, and a complete new external envelope to meet residential standards. The conversion cost of £1.45 million worked out to approximately £1,800 per square metre — significantly above what a superficial appraisal would suggest but in line with the real cost of bringing a 1980s office block up to modern residential standards.
We identified a development lender with a specific appetite for permitted development conversions and a track record of funding office-to-residential schemes in northern cities. This lender did not view the commercial building as a problem — they viewed it as the asset class they specialise in. Critically, they were comfortable with the Class MA prior approval route and did not require full planning consent before issuing terms.
The developer's experience gap was addressed through three mechanisms. First, we presented a detailed project programme demonstrating that the conversion — while larger in unit count — was structurally simpler than a new build, with no groundworks, no superstructure, and a well-understood scope of works. Second, we introduced an experienced project manager with a track record of similar PD conversions, whose involvement gave the lender confidence in delivery. Third, we agreed a slightly higher developer cash contribution — £130,000 rather than the £65,000 that a 75% LTV would have suggested — which improved the LTGDV from 75% to 72% and gave the lender a more comfortable equity buffer.
The £1.45 million conversion facility was structured with five drawdown stages aligned to specific milestones: strip-out and demolition (£200,000), M&E and fire compartmentation (£450,000), internal partitions and first fix (£350,000), second fix and finishes (£300,000), and external works and snagging (£150,000). Each stage required monitoring surveyor certification before release — standard practice for development finance, but particularly important here given the developer's first scheme at this scale.
💡 Key point on Class MA conversions: The prior approval route saves time on planning but does not simplify the finance. Lenders need to see a detailed cost breakdown that reflects the real cost of upgrading a commercial building to residential standards — not a per-square-foot figure borrowed from a new-build appraisal. Underestimating conversion costs is the most common reason PD schemes run out of funding before completion.
Developer approached us with prior approval in place and a draft cost schedule. We reviewed the appraisal, identified that the conversion costs were underpriced by approximately £200,000, and worked with the developer's quantity surveyor to produce a realistic cost breakdown. Two specialist PD lenders shortlisted.
Full credit submission including revised cost breakdown, comparable residential sales evidence, developer CV with supporting project details, and project manager's track record. Decision in Principle issued within 4 working days. Valuation instructed.
RICS valuation completed on a desktop-plus-inspection basis. GDV confirmed at £2.9 million. Formal facility offer issued with staged drawdown schedule. Legal work commenced in parallel.
Purchase completed. £520,000 land loan drawn. First stage of conversion facility (£200,000 for strip-out) released on day one. Developer on site immediately.
"The developer came to us with a solid scheme but a cost schedule that would have run out of money at second fix. We caught that in the first week, adjusted the facility size, and the lender never saw the underpricing — they saw a properly costed, properly structured conversion. That's the value of a broker who actually reads the appraisal before it goes to the lender."
— MW Capital AdvisoryWhether it's Class MA, Class Q, or full planning — we know which lenders fund conversions and how to present the real costs. If you've got prior approval and a building lined up, speak to us before you approach lenders directly.
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