Commercial remortgage for comedy club directors in their 70s

We were approached by the directors of a comedy night club, whose existing commercial mortgage facility on the club was expiring and due to be repaid. The club has a traditional bar and stage layout, and importantly, a brand new, luxury loft apartment being built in the roof space.

The clients, both in their 70's, own the club via an SPV, and run the business via another of their companies that holds the lease.

The clients needed the new commercial mortgage to cover not only the maturing loan facility but also the apartment construction costs which, it was estimated, would be worth in excess of £700k when complete. Unfortunately they were struggling to find a lender because:

• A related company had gone through liquidation several years ago
• High street banks do not typically view night club investments favourably, whilst specialist lenders avoid the sector altogether
• The purpose of loan was complex (i.e. it included elements of owner-occupier, commercial investment and development finance)
• The clients wanted interest-only terms to keep the monthly payments manageable - this can sometimes be difficult to achieve with older clients

We took the deal to one of the challenger banks, which was happy to consider the application on an individual basis. In order to demonstrate that the clients were a good risk, we put together a comprehensive proposal which included information on their limited companies, certified business accounts, details of assets and liabilities, fully costed schedule of works for the loft development, and exit strategy (sale or or refinance of the completed apartment). 

The underwriters looked carefully at all of the information and agreed terms not least because  the loan exit strategy was strong and because the required loan to value was relatively small. 

Property Details

Property value: £1,300,000

Loan amount: £330,000

LTV: 25%

Rate: Bank Rate (currently 0.25%, variable) + 6.5% 

Term: 5 years interest only

Mortgage payment: £1,856 pcm

Lender arrangement fee: 2% (£6,600)

Borrower: SPV Limited Company

Consultant: Andy Elley, 01732 471644

18th April 2017