The Clients: The primary applicant was an experienced commercial landlord who operated through a UK registered limited company, of which he was one of two directors. This company also had an offshore shareholding company which included one ex-pat director.
The Property: The freehold for five retail units, all on separate leases of varying lengths. The tenants all ran strong, “internet proof” businesses in a prime High Street location of a large town in the East of England.
The Finance: The clients wished to refinance the existing mortgage, held with a High Street bank, onto a significantly lower rate in order to reduce monthly repayment costs.
The Challenge: This case had two main issues; the first being that the property was made up entirely of retail units, and the second the complex company structure, including the ex-pat director.
With ongoing concerns around the demise of the High Street, many lenders were reluctant to take on new business in this sector, considering it too much of a risk.
The complex structure of a limited company, which had an offshore shareholding company with an ex-pat director, meant that some lenders would be unwilling to underwrite the mortgage, further limiting the options available to us.
The Solution: Using our knowledge of the market, we were able to identify the lenders which we knew would underwrite the mortgage despite the complex limited company structure. From the short-list, we were able to identify those that we thought would not be put off by the retail tenancies and that were offering lower commercial rates than the clients existing mortgage.
The first lender we approached wasn’t especially positive about the combination of the limited company structure and retail tenants. Undeterred, the second lender we contacted was more positive; recognising the strength of the five leases with businesses that could not be replaced by online equivalents and happy to underwrite for the unusual company structure. We were also able to secure a new lower rate with them for the client. Here are the details:
Property value: £2.6 million
Loan amount: £900,000
Rate: Variable 3.45% (BBR + 2.7%)
Term: 5-years, capital & interest (capital repayment calculated over 10 years)
Mortgage payment: £9,021 per calendar month
Lender arrangement fee: 1.5% (£13,500)
Rental income: £18,333 per calendar month
Gross yield: 8.4% per annum
Application: SPV Ltd Co
Consultant: Steve Bedford, 07850446230
18th February 2020