Commercial Investment Case Studies

Consultant:	Chris Longhurst
Proposal Summary:	Commercial Investment (Mixed)

Our customer was looking for funding to purchase a property containing mixed residential and medical practitioners in a prime location in the West End of London.  Medical practitioners occupied the premises under short-term licences of one to three year terms and this was not suitable for many lenders.  Indeed, many licences had been allowed to lapse as the vendor had intended to sell with vacant possession.

The customer also required a steady cashflow in order to invest in the property during the initial years after the purchase.  A considerable amount of both internal and external refurbishment was required to achieve maximum income.

Mortgages for Business:

After a number of meetings with the clients, Mortgages for Business was able to negotiate a five year interest only period on the loan to allow refurbishment to occur and also to allow time for a review of the current medical licenses to the medical practitioners.

Mortgages for Business negotiated the following funding for the purchase:

Scheme:	Bank Base Rate + 1.25%
Bank Base Rate:	3.5%
Interest Margin:	1.25%
Payable Interest rate:	4.75%
Property Value	£2.1 million
Loan amount:	£1.575 million
Loan to Property Value:	75%
Repayment:	Interest only for the first 5 years, converting to capital and interest
Term:	20 years

Since the completion of the refurbishment exercise and a substantial uplift in income, the property has been revalued at £3m.  A further advance has been agreed to provide the capital required for a new purchase.

Consultant:	Clive Smith
Proposal Summary:	School SIPP Business Mortgage

Our client, a former teacher, used his SIPP (self invested personal pension) to buy a school in the North West.  He then spent over £250,000 expanding and re-equipping the classrooms.

The funding up to this point had been provided by the client's clearing bank, through a mix of short-term loans to the SIPP, personal overdraft, and a credit card debt.

Mortgages for Business:

We were asked to look at the project when the client identified a need for further capital expenditure of circa £75,000 to complete the building programme.  The incumbent bank was unwilling to lend additional funds for this purpose.

The decision was taken to restructure all of the existing debt and add it to the new funding requirement.  Mortgages for Business suggested this could be achieved most effectively by structuring a single new loan in the name of the SIPP, secured only by the freehold of the school buildings and site.  We drafted a business plan and approached appropriate lenders who we knew to have a good understanding of the educational market sector.  An in principle agreement was received within a matter of days.

The independent valuation process is critical in this type of project, so Mortgages for Business appointed a specialist Manchester based firm.  Three weeks later the report was delivered.  The report was fully supportive of the client's plans and the lender confirmed its support very quickly after receipt.  In addition to securing the level of funding needed by the client, Mortgages for Business also reduced the interest rate by 0.50% across the entire borrowing and negotiated release of a second mortgage over the proprietor's home.

Mortgages for Business negotiated the following funding for the purchase:

Scheme:	Bank Base Rate + 2%
Bank Base Rate:	4%
Interest Margin:	2%
Payable Interest rate:	6%
Property Value	£1.36 million
Loan amount:	£950,000
Loan to Property Value:	70%
Repayment:	Capital and interest
Term:	20 years