Farm development finance of £720,000 for holiday park diversification in Norfolk
A family took on a project to transform their agricultural premises into a modern holiday park featuring a farm shop, lodges, shower and utility block, caravan site and tent pitches.
Faced with the challenge transitioning traditional farm structures into contemporary hospitality spaces, they encountered financial constraints that threatened to impact the project's completion.
The family, with substantial assets tied to their agricultural land, envisioned converting two existing agricultural buildings (using Class Q planning permission), into a farm shop and 2 lodges. The anticipated income from the holiday park would diversify their revenue streams by tapping into the increased demand for countryside retreats.
With limited options for traditional loans due to the unconventional nature of their project and the absence of completed structures, the family sought a development finance solution to bridge the financial gap during the development.
The holiday park would consist of a caravan site, tent pitches, shower and WC block, utility block, farm shop and two accessible lodges. All in, it was estimated to be around £1.4 million upon completion. The family, aware of a forthcoming inheritance, from which they were set to receive £1.5 million, but the probate timeline presented a waiting period of approximately 8 months.
The property had a gross development value (GDV) of £1.4 million; the total property development finance was £720k - equating to a loan-to-value (LTGDV) ratio of 65%. This finance enabled the family to quickly engage contractors, enhance infrastructure, and promote their holiday park to potential guests.
The project not only involved repurposing existing buildings but the client also required additional funds for infrastructure development, amenities, and marketing to attract holidaymakers, which was financed by way of a small bridging loan once the development neared completion.
Growing popularity of caravan and holiday parks
Investing in holiday parks can be a lucrative venture, depending on various factors such as location, management, and market conditions.
Here are some of potential benefits of this type of investment:
- Stable demand: Holiday parks often enjoy consistent demand, especially in popular tourist destinations. Holiday and caravan parks offer affordable accommodation options, and attract a wide variety of visitors.
- Recurring revenue: Holiday and caravan park owners can generate recurring revenue through site rentals and amenities. Regular bookings for holidays or weekend getaways contribute to a steady income stream.
- Low operational costs: Compared to some other real estate investments, operating and maintenance costs may be relatively low. Limited infrastructure and ongoing maintenance requirements for caravan sites compared to traditional rental properties.
- Seasonal flexibility: Potential for higher profits during peak holiday seasons. Some parks may offer year-round activities or attract visitors during specific seasons, providing flexibility in revenue generation.
- Development opportunities: Possibility for expansion or development of additional amenities to attract more visitors. Adding new features like entertainment facilities, water parks, or themed activities can enhance the park's appeal.
- Exit Strategies: Opportunities for profitable exits, such as selling the park or individual sites if property values appreciate. The potential to sell to investors seeking stable income-generating properties.
Additionally, understanding local regulations, market trends, and the specific features of the holiday park is essential for success in this type of investment.
Agricultural transformation to holiday park success
The agricultural project in Norfolk took 5 months to reach completion. The family successfully built a caravan site, tent pitches, shower and WC block, utility block, farm shop and two accessible /lodges, tapping into the growing market of holidaymakers.
The holiday park in Norfolk, quickly became operational, generating income for the family ahead of schedule. As probate concluded and the inheritance funds were released, the development loan was repaid within terms, marking a successful conclusion to this time-sensitive project.
