The Client: An experienced developer who purchased and developed property via his Limited Company. While he often sells on his developments, he has retained several residential and commercial units to rent out.
The Property: A former hotel, the Grade II listed building is situated in the centre of a town in the South of England. The client had been granted planning permission to convert it into a mix of residential one to two-bedroom flats and commercial units.
The Finance: The client needed a £1.5 million development loan to complete the works in compliance with the Grade II listing planning regulations and to a high standard, in order to maximise profits through rental income and/or sale.
The Challenge: Due to the Grade II listing of the property and the complications this can incur, the number of lenders who would consider providing finance was limited. The other hurdle to overcome was that the commercial units did not have tenants lined up to move in upon completion, which would usually put lenders off as in their eyes it makes the funding at a higher risk. With no tenants in place, it would be almost impossible to sell the units, so the client would have to keep them and rent them out himself.
The Solution: Having spoken at length with the client to understand his property development experience, we approached a lender which we knew would look at the business case on an individual basis, rather than tick-box criteria. Due to the prime location of the property and the experience the client had with developing and managing commercial units, we were able to convince the lender that the commercial units would be in high demand so their funds would not be at risk. As well as offering the full loan required, the lender only asked for a guarantee on 5% of the loan, rather than 100%, and the product has no exit fee, much to the delight of the client! Here are the details:
Property Purchase Value: £1 million
Property Value after Development: £2.8 million
Loan amount: £1.5 million
Rate: 5.6% per annum rolled up.
Lender arrangement fee: 1.5% (£22,950) added to loan.
SPV Ltd Co
Consultant: Paul Keddy, 01732 471655
2nd January 2020