£5m commercial mortgage for investor refinancing large college campus

£5m commercial mortgage for investor refinancing large college campus

06.12.17 | Written by: Paul Keddy

The client: A commercial property investor and entrepreneur aged 65 who was formerly a headmaster.

The property: A large private college campus consisting of multiple, Grade II Listed buildings and land including tennis courts and other sporting facilities. The client owns the college via an SPV company - he is the majority director and shareholder. The college is leased to an organisation which runs numerous other successful, private educational establishments. 

The finance: Currently the college is financed by a high street bank on a five-year commitment basis. Our client approached us in the hope of finding a more cost-effective deal, preferably on a 15-20-year commitment basis. Refinancing every five years could cost our client c£80k each time! Not only is this costly, there is also a risk that the bank may decide to stop lending at the end of 5 years, which would mean searching for a new lender. Our client is nearing retirement and is looking for an easier life. 

The challenge: Many commercial mortgage lenders will not grant commitments longer than five years so we knew we needed to approach a bank that is innovative, has a flexible underwriting process and will also consider applicants with unusual and complex borrowing requirements.

We worked closely with the applicant to produce a strong proposal included the tenants’ business accounts which demonstrated that they could more than service the rent. We then approached the Business Development Manager of a bank which we knew, from past experience, would at least be prepared to consider offering a deal.

The BDM and underwriter wanted to visit the college and meet with our client to talk through terms. This was duly arranged and we attended too to support our client and help answer any questions.

Both the BDM and the underwriter were impressed with the whole set up and made a recommendation to the bank’s credit committee that our client was a good risk. Accordingly, terms were issued and our client was more than happy to accept a 15-year commitment on a 20-year repayment basis. Our case management team then worked hard to keep the mortgage application process on track, liaising with all parties to ensure the deal completed in a timely manner.

With the refinancing complete our client is now focusing on his retirement plans. Here are the details of the deal.

College value: £9,650,000

Loan amount: £5,000,000

LTV: 52%

Rate: Bank Rate + 3.25% (Currently 3.75%, variable)

Term: 15-year commitment with repayments calculated over a 20-year term, capital and interest.

Mortgage payment: £28,368 pcm

Rental income: £52,500 pcm

Lender arrangement fee: 1.5% (£75,000)

Gross yield: 6.5% pa

Consultant: Paul Keddy, 01732 471 655

 

If you would like to talk through the finance options for you, I can be contacted directly on 01732 471655 or paulk@mortgagesforbusiness, or call the main line on 0345 345 6788.

ANY PROPERTY USED AS SECURITY, WHICH MAY INCLUDE YOUR HOME, MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.