Refinancing a Completed Development: From Construction Facility to Term Loan

How an owner moves a finished Saudi building from construction funding onto longer-term finance, what a lender tests at each stage, and where owners lose time.

Refinancing after completion replaces short, expensive construction funding with a longer facility priced against the income the building now produces. The sequence is: stabilise the income, assemble the evidence, obtain a valuation, approach lenders with a complete package, negotiate terms, then complete and discharge the old facility. Lenders are testing the reliability of the rent, not the quality of the architecture, so the documentation that proves income is what moves the process.

Before stage one

Approach lenders when the building can demonstrate income rather than potential. A part-let building with incomplete documentation receives conservative terms, and each round of questions costs weeks. Do the tidying first, because the same building presents very differently depending on the file behind it.

• Completion and occupancy documentation in place, with services commissioned and certified.
• A tenancy schedule with registered contracts, expiry dates, rents and the payment record for each tenant.
• Twelve months of operating costs, or a credible budget where the building is newer.
• Clean accounts for the owning entity, with the structure confirmed by a licensed adviser.
• The existing facility terms read carefully, including early repayment and discharge requirements.

Stage 1: Stabilise the income and the record

Get occupancy to a level you can defend, make sure every tenancy is registered and documented, and clear or explain arrears. A lender reads the rent roll for reliability: staggered expiries, tenants who pay on time and rents consistent with the market. Three strong tenancies signed at the last minute look less convincing than a year of collections.

• Deliverable: A tenancy schedule with registered contracts and a collections record per tenant.
• Owner: Owner with the property manager.
• Approval gate: Occupancy and collection evidence sufficient to present without explanation.

Stage 2: Assemble the lender pack

Prepare one package: title documents, completion and occupancy approvals, the tenancy schedule and contracts, operating cost history, service charge arrangements, insurance, entity documents and accounts, and a short summary of the asset with photographs. Every gap in this pack becomes a question, and every question adds a cycle. A complete file also signals that the asset is properly managed.

• Deliverable: A single indexed pack, ready to send to more than one lender.
• Owner: Owner with the adviser and manager.
• Approval gate: Nothing sent until the index is complete or the missing items are explained.

Stage 3: Obtain a valuation on the right basis

Lenders rely on valuations by accredited valuers, with Taqeem accredited valuers as the reference point in the Kingdom, and the basis matters: a valuation of an income-producing asset will lean on the rent and the market yield rather than on what the building cost you. Understand what the valuer will use before the inspection, and make sure the documents supporting the income are available to them.

• Deliverable: A valuation report on a basis acceptable to the lender.
• Owner: Valuer instructed on the correct basis.
• Approval gate: Valuation assumptions reviewed and understood before any term sheet is discussed.

Stage 4: Approach more than one lender

Send the same pack to several lenders and compare the offers on the whole structure, not the headline rate: amount advanced against value, term, amortisation, any interest-only period, fees, security, covenants on income cover and occupancy, personal or corporate guarantees and early repayment terms. A slightly better rate with a tighter covenant can be worse for you.

• Deliverable: A comparison sheet of indicative terms from at least two lenders.
• Owner: Owner, with an adviser if available.
• Approval gate: No exclusivity or arrangement fee paid before the comparison exists.

Stage 5: Negotiate the terms that constrain you

Negotiate the covenants and the practical clauses as hard as the price: what happens if occupancy dips, what consents you need before granting a lease or selling a unit, whether income must be paid into a designated account, how insurance and valuations are refreshed, and what triggers a default. These are the clauses that decide whether you can operate the building normally.

• Deliverable: A term sheet with the covenants and consent requirements written out plainly.
• Owner: Owner with legal review.
• Approval gate: Legal review of the covenants completed before signature.

Stage 6: Complete, discharge and reconcile

Complete the new facility, repay and discharge the old one, release the security, and confirm that registrations reflect the new position. Then reconcile: what was actually drawn, what fees were paid, what cash was released to you, and what the new monthly obligation is. Owners frequently discover the released cash is smaller than expected once fees and retained amounts are counted.

• Deliverable: A completion statement showing drawn amount, fees, discharge and net cash released.
• Owner: Owner with the adviser and both lenders.
• Approval gate: Old facility formally discharged and security released, in writing.

Stage 7: Set up the ongoing compliance routine

New facilities bring obligations: financial information at set intervals, insurance evidence, occupancy reporting, periodic valuations and consents before certain actions. Put them in a calendar with an owner, because a covenant breach caused by a late report is an avoidable and entirely self-inflicted problem.

• Deliverable: A compliance calendar listing each obligation, its date and who delivers it.
• Owner: Owner with the property manager.
• Approval gate: First reporting cycle delivered on time.

Handovers between stages

The tenancy schedule feeds the valuation, the valuation feeds the amount a lender will advance, the advance feeds your cash release calculation, and the covenants feed the compliance calendar you will live with for years. Prepare them in that order, because a lender conversation opened before the rent roll is presentable sets the terms you then have to argue against.

How you know it is finished

The refinancing is complete when the new facility is drawn, the old one is discharged and the security released, you can state the net cash released after all fees, and the compliance obligations are in a calendar with named owners. Tax and structuring consequences of the refinancing should be confirmed with a licensed adviser, since they depend on how your ownership is arranged.

Domira designs, builds and manages projects across Saudi Arabia for owners who are based abroad: land appraisal, feasibility, design, construction, handover and asset management under one accountable contract. Send us the plot or the brief and Domira will put the numbers in front of you before you commit.