Development Finance Insight

LTC vs LTGDV Explained

Loan-to-Cost (LTC) and Loan-to-Gross-Development-Value (LTGDV) are two of the most commonly used metrics in development finance, and lenders often apply both when sizing a facility.

What Is Loan-to-Cost?

LTC expresses the loan amount as a percentage of the total development cost, typically including land or acquisition cost, build costs, professional fees and finance costs. It gives a lender a straightforward measure of how much of the scheme's cost is being funded by debt versus sponsor equity.

What Is Loan-to-Gross-Development-Value?

LTGDV expresses the loan amount as a percentage of the scheme's projected gross development value on completion. This metric is more sensitive to the underlying viability and sales or letting assumptions of the scheme, and acts as a check against optimistic valuations.

Why Lenders Use Both

A facility might comfortably clear an LTC test but appear tighter on an LTGDV basis if development margins are slim, or vice versa. Lenders typically size a facility to the lower of the two tests, and sponsors should model both when approaching the market.

How Granya Capital Can Help

We work with developers to structure a capital requirement against both metrics before approaching lenders, helping to identify realistic gearing levels and appropriate senior, stretched senior or mezzanine structures.

Structuring A Development Finance Requirement?

Discuss your scheme with Granya Capital and understand how it is likely to be viewed against current LTC and LTGDV benchmarks.

Discuss A Capital Requirement