The Client: A well-established property investor, with a substantial London-based portfolio built up over the past two decades.
The Property: A four-storey freehold office block located in central London. The client had owned the property in their portfolio since 2006 and had six reliable, long-standing tenants occupying the offices with licence agreements.
The Finance: Our client wanted to remortgage from their high street bank as their five-year committed mortgage facility was due to expire, so was looking to find a competitive, interest-only commercial finance option.
The Challenge: The main challenge with this case was the stability of the commercial property market. Following Liz Truss’ ill-fated ‘Mini-Budget’ in September combined withthe economic turmoil we saw at the end of 2022, many commercial mortgage providers withdrew their products from the market, leaving our client with limited options.
An additional side-effect of the economic turmoil and back-to-back Bank of England Base Rate rises was that our client’s existing variable rate had increased significantly, meaning they needed to refinance as quickly as possible to reduce repayments and maximise cashflow.
Furthermore, due to unexpectedly high business volume levels, the turnaround of the valuation report and subsequent reviews from the lenders took much longer than expected, and these time constraints only added more pressure to the case.
Due to the scale of this deal, our client also tasked us with finding a lender that not only offered interest-only commercial mortgage products but would negotiate on the interest rate pricing. To further extenuate this challenge, we were directly competing with our client’s existing broker, who was also trying to broker the case!
The Solution: Our prolific expertise in the commercial mortgage market meant we could quickly approach the appropriate lenders that would be open to offering on this case. Our client’s demonstrable experience within the sector facilitated this process and worked to reassure many lenders of the stability of the case.
Having approached a key specialist lender with this deal, we negotiated the interest rate and a reduced lender arrangement fee. This new mortgage saves our client over £10,000 per month on repayments, so they were more than happy to accept these new terms! Here are the details:
Property value: £10,300,000
Loan amount: £6,300,000
Rate: 6.69% fixed for five years
Term: 20 years, interest-only
Mortgage payment: £35,473 per month
Lender arrangement fee: 1%
Rental income: £94,500 per month
Gross yield: 11% per annum
Application: SPV Limited company
2nd August 2023