Auction purchase of a property with no planning permission, where the investor wanted to change its use.
An experienced property developer with a proven track record approached Brightstar to fund the purchase of a former bank building that had been vacant for a number of years and had fallen in to a state of disrepair requiring full refurbishment and modernisation. The property comprised a secondary high street location, with vacant commercial space on the ground floor and basement (the former bank), and two floors of vacant office space above.
The property is in the Crystal Palace area and the agreed purchase price was £835k.
At the time of draw-down on the first loan, the property was without planning consent or agreed change of use, which posed a higher risk for the lender should the planning application for change of use be refused.
The property was to be purchased at auction and carried a strict 28 day completion deadline.
Brightstar arranged a loan in two parts for the client. The first loan was to help acquire the property and funding of £535k was provided day one to assist with the time sensitive purchase.
The agreement was a 12 month interest only facility, with a 2% lender fee. The rate offered was 0.95% per month with no exit fees or ERCs.
Brightstar negotiated with the funder (United Trust Bank) to agree a further additional loan facility of £250k that would be available for future draw-down to fund the cost of works, once planning had been agreed. This was at the same rate as the initial purchase loan, without any additional need for valuation or legal costs and only a pro-rata lenders arrangement fee being charged on the additional loan facility.
Within 2 months of completing on the first loan, the client obtained the planning and drew-down the additional £250k in stage payments to fund the conversion of the retail unit on the ground floor and the two vacant floors above in to a refurbished commercial space (now let out and refinanced away on commercial term loan), plus three brand new apartments above. The three flats alone are being marketed for sale at a combined GDV of £1.2m (3 x £400k each) and the client has the option to sell or retain and refinance on a buy to let with a healthy rental yield of 6% PA.
The introducing broker (a Directly Authorised firm in Southend on Sea) was paid a total commission of £7,850 for simply referring the client to Brightstar.
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