Our client owned a multi-tenanted property in Central London. The property consisted of commercial ground and first floor, together with residential uppers (27 apartments). The commercial tenants were a mix between food retail (Sainsburys), offices and leisure (a gym). The client owned the freehold of the building and wished to re-finance and release some equity to pursue other property investments.

Location : Central London

Loan Type : Commercial Finance

Loan Size : £11.5m on £23m value

Loan to Value : 55% LTV

The Situation

The client’s loan was due for renewal and the existing lender was a mainstream bank. He’d found that the relationship had deteriorated due to his relationship manager being constantly replaced. He also felt that they were taking advantage of the longevity of the relationship and not offering him the most competitive terms. The current loan was £ 6m, so the additional £ 5.5m being raised was to be put towards advancing planning permission and therefore enhancing value on other property assets.

The Challenge

Multi-tenanted properties always prove a challenge, due to the mix of tenancy lengths and covenant strengths. The retail space was occupied by a national retailer, so this was fine, but part of the office space was occupied by a relatively new, serviced office operator and this was only their 2nd site. The other office tenants were predominately small companies with little public profile. The gym had been a tenant for a number of years, but there had been some recent press reports about the long-term prospects. All in all, it made for a complicated underwrite.

The Outcome

We were able to work with the client and lender and help allay some of the lenders fears around some of the tenant profiles. We were also able to navigate a lower offer from the lender by supplementing some of the perceived rental shortfall by leaving some money on deposit to cover the shortfall. The lender normally preferred a fully amortising loan over the term, but our client didn’t want to tie up their cashflow unnecessarily, so we settled on a part amortising loan to 50% LTV, which meant only a 5% capital reduction over 8 years.

Our client’s preference was for a long-term fixed rate, and we managed to secure a phenomenally low fixed rate of 3.05% fixed for 8 years.