Interest only commercial mortgage for property with just 2 years left on lease

We were approached by a broker whose clients, the directors of a limited company, were looking to raise capital on an interest-only basis against a commercial property in order to expand their portfolio.

The clients have considerable experience in residential buy to let but this is their only commercial investment. The property in question is leased out to independent café owners and is located in a side street of a busy south-eastern market town.

The lease has just two years left to run and situated close by, on the high street, is another café which is part of a large franchise, leaving some doubt over the property’s income potential in the longer term. An interest only deal and the short lease meant that no high street lender would touch the case.

So, we approached a specialist provider that caters to SMEs and can only be accessed by intermediaries. The lender’s valuer felt that although the property was in a secondary location, the town was large enough and busy enough to support two cafes in such close proximity, so there would be no problem in leasing the building in future.

The underwriters agreed that the clients’ limited company showed a strong trading record and agreed the following terms at 60% loan to value.