- Client: Offshore corporate trust with a substantial UK property portfolio
- Portfolio: 41 mixed-use residential HMO and freehold commercial properties valued at £11 million
- Challenge: Complex offshore ownership structure and a requirement to refinance without a personal guarantee from the ultimate beneficial owner
- Finance: £8 million portfolio refinance at 72% LTV over five years, with interest at 1-month LIBOR + 3.90% per annum
Commercial property finance can become particularly complex when a portfolio contains a large number of individual properties and is held through an offshore ownership structure. Enness was approached by an offshore corporate trust looking to refinance a substantial UK property portfolio and release equity to fund major repair and refurbishment works.
The portfolio comprised 41 individual addresses, consisting of a combination of residential HMO properties and freehold commercial units. Collectively, the properties were valued at approximately £11 million, with an existing loan of £5.6 million.
A significant proportion of the properties were in poor condition and required substantial investment to prevent further deterioration. The client therefore wanted to refinance the existing facility and release additional capital that could be used towards the repair and restoration of the properties.
The ownership structure presented one of the principal challenges. The properties were held through a combination of the offshore corporate trust and a British Virgin Islands (BVI) company. This type of structure can significantly reduce the number of mainstream lenders willing to consider a transaction, particularly where the lender is required to undertake enhanced due diligence across multiple entities and jurisdictions.
The number of individual properties within the portfolio also added complexity. Rather than assessing a single asset, the lender needed to consider 41 separate addresses comprising different types of residential and commercial property.
A further consideration was that the ultimate beneficial owner (UBO) of the trust and BVI company did not wish to provide a personal guarantee. This removed a form of security that many lenders would typically seek when lending to a corporate or trust structure.
Enness therefore looked beyond mainstream lenders and approached an offshore private bank with experience of more complex international ownership structures. The objective was to find a lender prepared to assess the portfolio as a whole and take a broader view of the trust, its management and the underlying property assets.
The lender was comfortable with the structure and recognised that the portfolio was being professionally managed by the trustees. Following negotiations, Enness secured £8 million of mortgage funding against the £11 million portfolio, representing a 72% loan to value (LTV).
The facility was arranged over a five-year term at an interest rate of 1-month LIBOR plus 3.90% per annum. The refinancing provided the client with a new relationship with an offshore private bank that understood the nature of the portfolio and its ownership structure.
The additional funding provided greater scope for the client to carry out the necessary repair and refurbishment works across the properties, while consolidating the financing arrangement with a lender familiar with the wider circumstances of the portfolio.
The case demonstrates the importance of identifying an appropriate lender when refinancing a substantial mixed-use portfolio held through an offshore structure. The number of assets, property types, ownership arrangements and requirements around guarantees can all influence lender appetite and the structure of the finance available.
Enness has experience working with complex property portfolios, offshore structures and international lenders. Where mainstream lenders may be unable to accommodate a particular ownership structure or portfolio composition, specialist private banks may be able to take a more holistic approach, subject to their individual 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, valuation, security, property suitability and lender criteria. Terms, rates, LTVs, fees and availability may vary depending on individual circumstances.
Risk Warning:
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, property securing finance may be repossessed if repayments are not maintained. Commercial and mixed-use property finance can also involve risks relating to rental income, property condition, market conditions and the ability to refinance or repay borrowing when required.
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.
