- Client: Property investor and developer
- Asset: Completed commercial development in South West England valued at approximately £11 million
- Challenge: Required an exit from development finance for an asset in a secondary commercial location, with a second charge required behind the new facility
- Finance: £5 million commercial investment facility on a five-year term at 2.49% at the time
Refinancing from development finance onto longer-term commercial finance can be an important step once a property development has been completed. Development facilities are generally designed as short-term funding, so moving onto appropriate term finance can provide a more suitable structure for a completed investment.
Enness was approached through an internal referral from its International team, which had been assisting with other aspects of the client’s property financing. The client was an experienced property investor and developer who had recently completed a commercial development in South West England and was looking to refinance the existing development finance.
The completed asset was valued at approximately £11 million and had the benefit of an agreed commercial lease with a large call centre operator. This provided an established income stream for the completed property and strengthened the proposition for longer-term commercial investment finance.
There were, however, several considerations for the refinance. The client was particularly focused on pricing and wanted a competitive commercial investment facility. They also required the new lender to accommodate a second charge from a wealth management group sitting behind the proposed senior facility.
The location presented another consideration. Although the property was a substantial commercial asset, it was situated outside what would typically be considered a prime commercial location. This meant the lender needed to be comfortable with both the property itself and the underlying commercial investment proposition.
Enness approached lenders with experience of larger commercial investment transactions and identified a lender with an appetite for the asset despite its secondary location. The agreed commercial lease provided additional context for the lender when assessing the completed development and its long-term investment potential.
The lender ultimately offered a £5 million facility on a five-year term at a fixed rate of 2.49% at the time. The structure provided the client with an exit from the development finance and a longer-term commercial facility for the completed investment property, while also accommodating the required wider financing structure.
The case demonstrates the importance of planning an appropriate development finance exit strategy. Once a development is complete, factors including the property's valuation, tenant arrangements, location, existing debt and any additional security interests can all influence the options available for refinancing.
For property investors and developers looking to transition from development finance to commercial investment finance, specialist lender access can be particularly valuable where the asset or financing structure falls outside conventional lending criteria.
Disclaimer:
This case study is for illustrative purposes only and does not constitute financial, legal, tax or investment advice. Finance is subject to status, underwriting, affordability, property suitability, valuation and lender criteria. Terms, rates, LTVs and availability may vary depending on individual circumstances.
Risk Warning:
Your property may be repossessed if you do not keep up repayments on your mortgage or other borrowing secured against it. Property values can fall as well as rise. Commercial property investments can be affected by changes in tenant demand, rental income, property values, market conditions and financing costs.
Information contained in our case studies is for market and illustrative purposes only. In some cases, these may be made up of multiple cases and are for illustrative purposes only.
Some case studies are made up of enquiries that have come into the business, not all business completes, and the posting of a case study does not represent a completed piece of business.
Property values can fall as well as rise, and you may not get back the amount originally invested. Property investments can be illiquid and may take time to sell. Where borrowing is used, your property may be repossessed if you do not keep up repayments on a mortgage or other loan secured against it.
