A large portfolio landlord who specialises in HMO properties and student rentals was seeking to refinance and raise additional capital to expand their commercial property portfolio.

The Challenge

Our client had £1.6million secured against 7 properties (worth £4m) with a large Commercial Bank and an additional tranche of £700k with other commercial lenders. The client was hoping to refinance raise additional capital to reduce the interest cost and raise additional funds as they saw an opportunity to expand, but due to the Loan-to-Value restrictions and higher margin base rates quoted at the time by the current lenders, raising further funds presented a challenge.

The client approached adviser Asif Mohammed for a structured commercial property finance solution and after assessing, it was clear there were multiple hurdles to overcome. Not only were there restrictions from their current lender in lifting the current charges, but the portfolio which included large HMOs did not have Sui Generis Planning. Being a key criterion for most specialist lenders, without Sui Generis Planning it was evident that this case was not going to be straightforward.

The Solution

After reviewing the case, Asif got to work to assess the client’s commercial property financing options. It was clear that an alternative lender would be required to raise the capital needed. At the time, the market was incredibly volatile; base rates were rising rapidly, and lenders were pulling products daily, making it difficult for advisers to secure deals. Time was of the essence, so it was imperative to work as fast as possible.

Asif approached a specialist lender, where we enjoy a strong relationship and quickly began negotiating a deal to refinance. The lack of Sui Generis Planning caused an immediate halt to the deal as expected. To combat this issue, Asif evaluated the substitutions that could work in place of Sui Generis to satisfy the lenders requirements.

Without the required Sui Generis, a 10-year track record was required to evidence the properties were functioning as HMOs. Knowing it would be a big ask of the client to provide 10-years’ worth of evidence, Asif continued to negotiate with the lender and work with the legal team on what could be used to satisfy this requirement. Simultaneously, Asif contacted the City Council responsible for the properties’ planning permissions on the client’s behalf to aid further in facilitating the evidence. By assisting the client and negotiating the criteria with the lender, Asif was able to secure almost double the desired figure of financing at £2.8million, at significantly lower cost in comparison to the Base plus margin rate being quoted by the commercial lender. On the back of this deal, the specialist lender also agreed to a forward funding facility of £2million for the client’s future purchases.

Furthermore, after assessing the entire portfolio, Asif was able to see potential in a high-yielding proportion of the properties. These properties did not fit the criteria for this lender, so Asif went back to the market and was able to secure another deal with another property finance lender for £1.3million to replace the second tranche and raise capital to expand the portfolio further.

The Outcome

By repackaging the deal across multiple lenders and heavily negotiating the criteria, Asif was able to raise £4.1million of funding for the client with a substantial saving in interest costs and product fees. The capital raise allowed the client to purchase multiple new properties at a reduced rate as a cash buyer, enabling them to expand their portfolio by securing offers on multiple properties in their target market whilst saving roughly £40,000 on each purchase.

The adviser’s tireless work allowed for a quick completion during an unstable time for the market, saving the client another £65,000 in product fees alone. On top of this, a forward funding facility was arranged in anticipation of further purchases which allowed the client to continue growing their portfolio, of which £1million has already been drawn.

The client was very appreciative of Asif’s dedication and ability to secure this impressive deal on their behalf. They were able to expand their portfolio beyond their initial expectation are now set up with financing facilities and strong relationships with specialist lenders.