Overview
Our client had a mixed portfolio of commercial, development & residential propertyA person's main residence, or in the case of Property Development the term used to classify the end product; i.e. I am developing a mixed site of Commercial Property and Residential Property. assetsAn item of property owned by a person or company, that has a value and could be used as Security for a Loan., and was referred to us by their current bank. Their current bank were no longer able to meet their needs, as the clients pivoted more towards commercial propertyAn asset, normally to be held for the long-term and to produce an income, and / or Capital Growth. Examples include; Hospitality (hotels), Retail (shops), Leisure (pubs), Student Accommodation, Medical (GP Surgery), Light Industrial (Shed / Logistics), Heavy Industrial (Manufacturing Plant), HMO (House of Multiple Occupancy; e.g. Bedsit), Office, Care Home / Retirement and Educational (University / Private School). and property development.
LocationUsed by us to distinguish where the property is that the loan will be made against. Lenders can be location agnostic, and believe that different locations should attract different Underwriting Criteria and pricing : West London & Central London
LoanWhen something is borrowed by one person / entity from another. Normally it refers to money, and a rate of Interest is charged whilst the debt remains outstanding. More type : Bridging FinanceIn Real Estate a Bridge Loan is a short-term loan that is used to cover a funding need until a longer-term arrangement can be put in place. People bridge for a number of reasons; to purchase an asset quickly (perhaps at auction), to re-furbish a property (add value), to purchase a property from a receiver / foreclosure, or if a property is not yet financeable by a traditional lender (fire damage is one example). Bridging is more expensive, due to its shorter term nature, and perceived higher risk. The repayment source or Exit Strategy, is normally sale of the asset or Re-finance (once value is added / works are completed). / Commercial Bridging / Residential Bridging / Jumbo Bridging
LoanWhen something is borrowed by one person / entity from another. Normally it refers to money, and a rate of Interest is charged whilst the debt remains outstanding. More size : £3.77m
Loan-to-ValueThe ratio of debt to property value, expressed as a percentage; for example a Borrower that obtains a Loan of £ 6,000,000, against a property value of £ 10,000,000, would be expressed as 60% LTV. : 65% (net) LTVThe ratio of debt to property value, expressed as a percentage; for example a Borrower that obtains a Loan of £ 6,000,000, against a property value of £ 10,000,000, would be expressed as 60% LTV.
The Situation
A mixed portfolio of securitiesAn Asset used as Collateral for a Loan. can always be tricky for most banks, as normally the loansWhen something is borrowed by one person / entity from another. Normally it refers to money, and a rate of Interest is charged whilst the debt remains outstanding. More should sit in different departments. Our client preferred to deal with one lenderA company or person that lends money to another. for speed and efficiency purposes, but as the required leverage was high the situation required a flexible lenderA company or person that lends money to another.. Personal liquidity was also short, as all available income had been directed towards the mobilisation of a new development of officesUsed in Development Finance and for Commercial Mortgages, to describe any asset which is to be used as office space. in South-West London.
The Challenge
Aside from the high leverage requirement (65% net )everage was high, and our client had historic credit issues which meant several banks we approached had declined to assist. The existing bank was becoming more nervous about their exposure and wanted to exitVitally important for both Bridging Finance and Development Finance. The term refers to how the loan will be redeemed; typically this is Sale of Property, or Re-Finance. Expect the Lender to evaluate the plausibility of either option and amend the terms accordingly. as soon as possible. One of the assetsAn item of property owned by a person or company, that has a value and could be used as Security for a Loan. was a block of officesUsed in Development Finance and for Commercial Mortgages, to describe any asset which is to be used as office space., owned via a Trust and the other was a a block of 3 flats, owned by an offshore company, both of which added further layers of complexity.
Our job was to paint a picture of the wider situation and that the clients were a good risk.
The Outcome
On the day that the new banks credit committeeEach lender has a Credit Process and Credit Criteria that they follow, and whether a Loan is approved or not would normally be decided by the Credit Committee. Ordinarily made up of senior management, senior Underwriters and stakeholders. They discuss the case and the vote as to whether the Loan should be made. was due to meet to discuss the case the Head of Credit declined the case and it seemed no amount of persuasion was going to see him budge. A disaster.
However, with the supplenmentary information we were able to provide around the clients future pipeline of property deals, enabled our contact at the bank to gain the support of the owners of the bank, so that decision was overturned. We were able to get credit approval and complete as planned.
The rate we agreed was also exceptionally low for a 12 month bridgeIn Real Estate a Bridge Loan is a short-term loan that is used to cover a funding need until a longer-term arrangement can be put in place. People bridge for a number of reasons; to purchase an asset quickly (perhaps at auction), to re-furbish a property (add value), to purchase a property from a receiver / foreclosure, or if a property is not yet financeable by a traditional lender (fire damage is one example). Bridging is more expensive, due to its shorter term nature, and perceived higher risk. The repayment source or Exit Strategy, is normally sale of the asset or Re-finance (once value is added / works are completed). at 5.89%.
There are over 200 employees at the London branch of this bank, and we are convinced if we had used any other employee within the bank, then this case would have remained a Decline.
As a business we pride ourselves on not just knowing the right bank but knowing the right person within that bank.