Example Scenario: Quayside Warehouse Conversion Finance in Newcastle
An illustrative example of how senior and mezzanine finance for a Victorian warehouse conversion on the Newcastle Quayside could be structured. Not a completed transaction.
This is an illustrative, hypothetical scenario showing how Construction Capital might structure development finance for a heritage-led warehouse-to-apartment conversion on the Newcastle Quayside, where new-build apartment values sit at around £300 per square foot.
The Project
A Newcastle-based developer with three completed Tyneside conversions approached us to fund a Victorian warehouse conversion off the Quayside, sitting within the Quayside conservation area.
Key Numbers
| Metric | Value | |--------|-------| | Location | Quayside, Newcastle upon Tyne | | Project Type | Heritage warehouse conversion (mixed-use) | | GDV | £7.2M | | Build Period | 17 months | | Local PRS Yield (city centre) | c.5.5% | | Conservation Status | Quayside Conservation Area |
The Challenge
The vendor had set a tight exchange timeline, and the building required full structural review, replacement of the roof structure, and significant remedial works to the original brickwork facade — all subject to conservation-area design controls. The developer wanted to maximise leverage to preserve capital for an Ouseburn project already in due diligence.
Our Solution
We structured a combined senior debt and mezzanine facility:
Key was finding a senior lender comfortable with the heritage-spec build cost and the absorption profile for one- and two-bed Quayside apartments.
The Timeline
Illustrative Outcome
In this scenario the project completes at month 17, one month inside the facility term. All 14 residential units were sold within five months of practical completion at an average price 6% above original appraisal. Two ground-floor commercial units were let to independent operators on five-year leases.
The developer's profit on cost was approximately 21%,.
Lessons for Newcastle Developers
1. Conservation areas don't kill deals — they shape build cost and contingency, not lender appetite 2. Mezzanine economics work for Quayside conversions — the GDV-to-cost ratio is usually strong enough to absorb mezz pricing 3. Local knowledge counts — understanding Quayside absorption rates and heritage-spec build cost helped secure competitive terms 4. Pre-arrange your exit — exit finance or refinance onto BTL/BTR should be planned at the term-sheet stage, not at PC
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Case study arranged by Construction Capital. Details have been anonymised to protect client confidentiality. Rates and terms are indicative.
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