Tenant purchases freehold of semi-commercial premises at 99% LTV

The client: 

Ollie is the leasehold owner of a popular roadside café on an extremely busy route to the West Country counties of Devon and Cornwall. He purchased the lease in 2012 having previously been the café’s manager.

Since he took over, the café has started to do a roaring trade, so when the freehold came up for sale, Ollie was keen for his business to purchase it.

The property:

The premises consists of a two-storey detached building with single storey additions, a barn and a large car park. The large café accommodates 52 covers plus additional sofa seating areas.

There are two flats, one of which is lived in by the chef and the other by Ollie and his family. The premises also includes a popular dress shop and additional barn space which is due to be converted into a butchers.

The finance:

There were numerous hurdles we needed to overcome with this particular case:

  1. Ollie needed to borrow as near to 100% of the freehold value as possible. The key to this was getting a handle on the value of the trading business and presenting this to the chosen lender

  2. There was a history of repossession

  3. Completion was required within one month of the heads of terms coming through from the freeholder’s solicitor

  4. There had been a significant increase in turnover in the last year

We took this case to one of the high street banks. Happy with the valuation, business plan and business accounts, the chosen lender agreed to lend up to 65% of the trading business value, which equated to 99% of the freehold value.

Here are the details of the deal:

Freehold property value: £360,000

Trading business value: £550,000

Loan amount: £357,500

LTV: 65% against going concern value and 99% against the purchase price (freehold value)

Rate: 3.49% fixed for 3 years

Loan term: 25 years Capital & interest

Mortgage payment: £1785 pcm

Lender arrangement fee: Nil

Borrower details: Limited company – Ollie’s Brent Knoll Ltd

ConsultantAndy Elley, 01732 471644 

Consultant