Refinancing £8m PCL property for developer, without the need for AUM
The situation?
My property developing client approached me with circa £17m of debt on a portfolio of Buy to Let (BTL) properties worth £30m in prime central London. As a property investor, the client also had an income from the portfolio, however this was inconsistent due to income structures and holding of property in different limited companies.
For the subject property, they wanted to refinance 75% LTV onto a long-term debt facility on a property worth £8m. However, this property had a lower rental yield than most lenders would require to support the borrowing amount required.
The current debt was with a private bank who wanted an additional £500,000 assets under management (AUM) to be deposited on account to continue the borrowing with them.. Naturally, the client wanted to retain liquidity to continue investing in property therefore enlisted my help in finding a long-term facility – at a reduced rate – without requiring any AUM.
One of the most difficult issues with this application was the client’s inconsistent income. As with many BTL properties in the south east, the rental yield was also low. In a challenging environment whereby interest rates are volatile, it was tricky to find a lender that was able to deem affordability for loan repayment on the rental coverage offered.
Additionally, some lenders do not like stretching to this LTV against single asset properties – most had capped at either a specific loan amount or around 50% LTV.
Using my strong relationship with one particular lender, I was able to discuss bespoking one of their existing products. I encouraged them to take a view on the whole portfolio rental cover (including other BTLs in other companies that were not as highly leveraged).
The solution?
Working closely with the lender, I was able to secure a mortgage with a significantly lower interest rate than what the client was currently paying. This equated to a saving of over £150,000 in interest payments over the next 5 years! The facility was for long-term debt with no requirement for AUM.