100% Commercial Mortgage of £1.6 Million Secured on B1 use commercial property in Wandsworth, London.
THE BRIEF: OBJECTIVES/PROBLEMS/CHALLENGES:
Fox Davidson were asked to finance a leasehold property with B1 office use in SW18. The property was currently a shell and would allow our client to expand his business to the new premises.
Our clients business involved a non-UK-resident director that would not sign any personal guarantees. The lending would be made to an SPV Ltd company and the clients business would occupy the premises.
The client required 100% funding and a VAT loan and a period of interest only for the fit-out period.
We first took the enquiry in 2016 and discussed terms with the client and agreed to work together. It was not until 2017 that a suitable property was found.
One of the unusual things about this case was that the client’s business required the premises, but the client wanted to own the property personally through his own separate SPV limited company. The SPV owned several commercial rental properties already and would purchase the new premises and rent it to the trading business.
Most commercial mortgage lenders would treat this as an owner occupier loan as ultimately is it the same client buying the commercial property and the same client then occupying it.
Following meetings with several traditional commercial lenders they could not get around the fact that they could not have a charge across the trading business (which would involve guarantees from the non-resident director).
The traditional banks also questioned the market rent and valuation of the property. We needed a commercial lender with a positive outlook, one that would let the professional surveyors be the judge of market rent and property value.
The lending of 100% would be made possible by utilising the existing business premises which was being retained and another buy to let property already held in the name of the SPV.
a lender that could see that this was a quality business. The lender agreed to lend only with guarantees from the directors of the SPV limited company.
Luckily, there are many new banks that have come to play in the commercial lending arena over the last 5 years. The commercial market place is now much more competitive. Using our vast contacts of lenders in London we worked with
Fox Davidson secured a commercial mortgage of £1.6m at 3% over the bank of England base rate. We agreed an interest only period for 6 months to allow for the fit-out period and a loan for the VAT which would be claimed back in due course.
IN OUR OWN WORDS:
The reason clients come to us is because they often have complex situations or simply want to know they are getting the best terms. On the face of it this was a very simple commercial loan that could be financed by any of the major lenders. The issue was that the client was not prepared to provide guarantees form the trading company and this does not tick the boxes of the major commercial lenders.
Finding a solution for a client is always satisfying but even more so where other lenders had questioned that this could work at all and even cast doubt on the property sale price and rental income figures.
This client is now moving the banking of their multi-million-pound turnover business to the new lender and the relationship will be good for both the lender and the clients business.