Commercial Investment Purchase

The client was a relatively new property investor looking to add a commercial property to their portfolio. The client had purchased a number of residential properties plus one mixed-use property, but this was their first step into pure commercial investment property. The purchase price was £900,000 and the client wanteda 65% LTV interest only facility.

Many commercial lenders do not consider interest onlyfacilities, so we were limited to the funders that we could approach. Additionally, the property itself was only 50% occupied and the rental lease had less than a year before expiring. This meant that our options were even more limited as the general rule is that it is only the actual rental income that can be used to assess debt service cover.

We were able to structure the proposed loan with one of our challenger bank contacts that were able to offer an interest only facility. They were also able to use their surveyor’s commentary for demand in the area and the surveyor’s opinion on the market rent for the whole building. This allowed the client to raise funds on the terms they required. The trade-off to allow this to happen was that the client had to demonstrate that they had savings equivalent to 6 months interest payments as this was the estimate to let the vacant space.