We recently completed a deal worth £150,000 with our client, a highly experienced property developer located in the North West. Our client has a current portfolio of 136 residential units and 11 commercial units with a combined value of £18m with approximately £9m of debt spread between tier 1 and tier 2 lenders.
In 2018 our client had purchased an empty retail outlet on a ground floor level with two floors of empty office space above consisting of over 30,000 square feet of space. They successfully achieved planning approval for 28 apartments (split between 1 and 2 bedroom units) and 3 commercial units on the ground floor, with the smallest residential unit consisting of 45 square meters. Due to the overall size of this project, our client split the property into two separate freehold titles.
InvestGrow Financial Services successfully refinanced the 1st Stage where we managed to raise £1,098,500 and due to the success of the 1st Phase we were invited to source long term funding for Phase 2. The 2nd Phase was to create a large commercial unit (Dance Studio) and 16 x 1 bedroom apartments on the upper two floors. As per the 1st Phase, our client created 17 individual 125 leases, with the freehold being held by the ‘Groups’ holding company. Progression was made and the commercial unit was completed at the end of 2019, with a 5-year lease being in place generating an income of £30,000 which increased to £42,000 by the end of the 5th year. All 16 residential units were immediately let by way of a standard AST agreements generating £124,800 in annual rent, resulting in our client estimating an indicative value of c£1.695m across all 16 units, with the commercial unit having a value of £400K.
Our clients aim was to borrow up to 75% of the indicative value of the residential properties and 70% in respect of the commercial unit, whilst looking to complete quickly to enable the purchase of further properties for conversion. Our client wanted a fully amortising facility. (An amortised loan payment first pays off the interest expense for the period; any remaining amount is put towards reducing the principal amount.)
InvestGrow Financial Services made contact with Redwood Bank, who had funded Phase 1 of the project and understood the client operation as well as the quality of the accommodation. As with Phase 1, InvestGrow Financial Services provided Redwood Bank with a detailed synopsis of the proposal along with the client’s requirements. InvestGrow Financial Services received a very positive response from the funder with indicative terms, which split the commercial properties from the residential properties, and due to the quality of the client and the overall proposal, Redwood Bank was happy to recommend a reduction in their standard interest rates across both residential and commercial properties.
Head of Credit at Redwood Bank approved the facility within a 48-hr period – bearing in mind the case also had to supported by the banks credit committee, resulting in a quick response. With the valuation date set for the Commercial Unit which was already let in Feb 2020, valuation was approved and all legal work completed, allowing our client to raise c£300k by the end of February 2020.
Whilst COVID-19 certainly had an impact on delaying the construction of the 16 residential units, progress was made and by the end of May all units had been finished and fully let with tenants expected to move in by the 1st June. The valuer arranged a site visit w/c 25th May and was able to complete his report by 2nd June, resulting in approval by Redwood Bank on the 3rd June. All legal work had already been completed between March and end of May therefore our client was only waiting for a valuation report. The loan facility of £1.186m was funded by on the 4th June.
Our client was extremely satisfied and happy with the work achieved and the feedback received was immensely positive, we look forward to working together again. “Guys. What can I say – the service and commerciality to dealing with each and every one of you is exceptional. Thank you for pulling this out the bag once again! We have now secured 3 more acquisitions so here are to many more deals ahead”.