Leasehold storage unit taken as additional security
Read our latest commercial mortgage case study in which the property was down valued at the point of remortgage and find out how we resolved it.
The client: The owner of a successful storage company which has been trading for more than 20 years. The business operates several sites across the North of England, turns over c£500,000 a year and employs c10 people.
The property: A 4,000 sq ft industrial unit used as a public storage facility just off the motorway network. The client believed the unit to be worth in the region of £800,000.
The finance: The client wanted to raise a total of £500,000. £200,000 would be used to repay both the existing mortgage and a small P2P loan. The remainder was to be used to make improvements to some of the storage facilities and expand the operation. Projections supplied by the client showed that further investment in the business would prove beneficial in the long term.
The challenge: When we first took on the case, we thought it would be a fairly straightforward commercial remortgage deal, so we got in touch with a bank which is working hard to support local businesses. It was not only happy to take a positive view on our client’s business projections (which were backed up by his accountant), it also agreed to waive the arrangement fee and process the application quickly. Additionally, it was offering the same overdraft facility terms as our client’s existing bank. As such a commercial valuation was booked in.
When the surveyor’s report came back a week later, it had down valued the unit by a massive £250,000 dashing our client’s hopes of expanding their business. However, we were undeterred and started looking at what else the business had to offer as additional security.
The solution: We identified one of the other storage units and requested that the bank consider it as an option, even though it was owned on a leasehold basis (60 years). The bank agreed and valued it at c£200,000 which was sufficient for our client to achieve the borrowing he needed.
We then worked hard liaising with all parties to ensure that the application remained on track. The deal completed a few weeks later to the delight of our client, who was particularly impressed with the bank’s willingness to find a solution.
If you are thinking remortgaging a commercial property to get a better deal or raise funds to expand your business, do get in touch to talk through the possibilities.
Property Details
Property value: Freehold unit 1, £550,000. Leasehold unit £200,000
Loan amount: £500,000
LTV: 67%
Rate: Bank Rate +3.67%
Term: 15 years, capital and interest repayment
Mortgage payment: £3,805 pcm
Lender arrangement fee: Nil
Borrower: Trading Ltd company
Consultant: Robin Tait, 01732 471602
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30th July 2019
