What Does LTGDV Mean?

LTGDV is an acronym which, when expanded, means Loan To Gross Development Value.

It is most commonly used when referring to property development finance.

A more commonly used phrase is LTV, or Loan To Value, which refers to the size of a loan against the value of a property. With LTGDV the same applies, it is the percentage of a development loan against the expected end value of a property development project.

Example of LTGDV

Here is a worked example of LTGDV on an example property development loan.

Imagine a developer is building 10 properties which will be worth £200,000 each when completed.

Total loan facility: £1,000,000

End value of properties (GDV): 10 x £200,000 = £2,000,000

LTGDV: £1,000,000 divided by £2,000,000 = 50%

Therefore in this example the LTGDV for the project is 50%.

Why LTGDV is the number that usually decides the deal

Development lenders cap against several ratios at once and lend whichever produces the smallest figure. LTGDV is normally the one that bites, because it is the lender’s protection against the scheme being worth less than the developer expects when it finishes.

Most lenders sit between 60% and 70% LTGDV, with 65% the common position and a small number stretching further for experienced developers on straightforward residential schemes. At 65% the example above would have supported £1,300,000 rather than £1,000,000.

The figure that counts is the valuer’s GDV, not the developer’s. Lenders instruct their own valuation and will discount optimistic sales assumptions, particularly on unit mix, absorption rate and anything in a thin comparable market. A scheme priced on the developer’s own GDV and then valued 10% lower does not simply lose 10% of the loan, it can lose the deal, because the loan to cost cap then leaves too little day one advance to buy the site.

Related terms

See also LTC, loan to cost, and OMV, open market value.

For how a scheme is actually funded and drawn down, see development finance, or development exit finance if the build is complete and the units have not yet sold.

Bolton Business Finance is a whole of market commercial finance broker. Call 0161 546 9128.

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