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£2.3m commercial owner-occupier mortgage for railway siding

£2.3m mortgage for business to purchase freehold of railway siding

12.02.19 | Written by: Paul Keddy

The client: A locomotive engineering company which overhauls decommissioned trains. The company was established in 2013 by a former city financier who, as a director, manages the business. The director approached us for help in financing the purchase of the freehold of the railway sidings yard from which the business operates.

The business is considered an asset to its local East Midlands’ community providing jobs and training opportunities. In recent years, it has developed a new brake system for trains which is proving very successful.

The property: The yard is one of only three independent sidings linked to the national rail network in the UK. The seven-acre site has more than 1km of track split into 10 sidings, a maintenance shed, a canopy and refuelling point including pumps, oil fuel separator and two large fuel tanks. There is also a recently refurbished outbuilding used as an office for meetings, breakout area and training workshops.

The business had been approached by Network Rail who needed extra track space to store locomotives whilst maintenance work was carried out on their site.

Our client’s site, although operational, was in need of modernisation; the fuel bunkers were old, and it was suspected that asbestos might also be present. Network Rail offered to upgrade our client’s site to include extra flood lights, walkways and new fuel bunkers.

Recognising the opportunity that such an upgrade would bring to the business, the director felt that purchasing the freehold would be a sensible commercial decision. However, he also realised that the business would have to purchase the freehold of the site before it was upgraded if they were to ensure security of tenure.

The finance: As a former financier, our client had already secured a loan offer but was curious to find out whether the terms could be bettered and asked for our help. To complete the purchase, the business needed a loan of £2.3m.

The application process: After an extensive research, we found a relationship manager at high street bank with a passion for and a degree in engineering which meant he had a good understanding of the business and its future potential.

Our client had already put together a strong business plan which clearly demonstrated the commercial advantages of obtaining the site. We used this in support of the loan application and made sure we were in attendance when the lender made a visit to the site. Throughout, we acted for our client as the main point of contact for the bank which meant that he was able to focus on running the company.

The bank was very impressed with all the directors, the business and the future opportunity, and subsequently issued a formal mortgage offer which our client was delighted to accept because we had managed to improve upon the original offer.

As is common with deals of this type, the bank took a debenture over the business as a legal charge together with small personal guarantees from each director.

The client and his fellow directors were delighted with their new offer and we now have a great relationship with them. The deal completed without a hitch and we remain in contact to see how their business grows and where this new freehold adventure takes them.

Here are the details:

Property value: £2,850,000

Loan amount:
£2,350,000

LTV:
82%

Rate:
2.65% 5-year fixed

Term:
25 years capital and interest

Mortgage payment:
£8,208 pcm

Lender arrangement fee:
£17,500 (1% added to loan amount)

Consultant: Paul Keddy, 01732 471655

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

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

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