- Client: Experienced property developer with an established UK property and business portfolio
- Property: Newly developed London hotel valued at approximately £24 million
- Challenge: Required refinancing shortly after opening, with limited trading history and some adverse credit
- Finance: £14 million capital raise at 60% LTV, fixed at 5% for five years over a 10-year term
Refinancing a newly developed hotel can be challenging where the property has only recently opened and therefore has limited trading history. Enness was approached by an experienced property developer looking to refinance a newly developed hotel in West London valued at approximately £24 million.
The client had an established portfolio of property and business interests in the UK and was looking to replace the existing bank facility with a more competitive term financing structure. The objective was also to release capital that could be used to support future investment and development plans.
The hotel had only recently opened its doors to guests, meaning there was limited trading history available for a prospective lender to assess. For commercial property finance, a lender will typically want to understand the property’s trading performance and the borrower’s ability to service the proposed debt. The limited operating history therefore presented an additional challenge.
The client’s financial profile also required careful consideration due to some adverse credit accumulated during the preceding period. This meant that the application required a lender prepared to take a broader view of the client’s experience, wider assets and the underlying property rather than relying solely on the hotel’s short trading history.
Enness approached a lender that had not previously been considered by the client. The lender was prepared to assess the wider circumstances of the application and was able to offer a competitive term facility alongside the potential for a longer-term lending relationship as the client’s investment plans developed.
Following negotiations, Enness secured a £14 million capital raise against the £24 million hotel, representing 60% loan to value (LTV). The facility was arranged at a fixed rate of 5% for five years over a 10-year term at the time.
The resulting structure provided the client with a significant release of capital while moving the property onto a longer-term financing arrangement. It also gave greater scope to pursue future property and development opportunities.
The case demonstrates how commercial property finance can be structured around the wider circumstances of an experienced developer, particularly where a newly opened asset has limited trading history. Property experience, asset value, existing financial commitments and the future performance of the property can all influence a lender’s assessment.
For developers looking to refinance commercial or development assets, specialist property development finance expertise can help identify lenders able to consider more complex situations and substantial capital requirements.
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, property suitability, trading performance and lender criteria. Terms, rates, LTVs, fees and availability may vary depending on individual circumstances.
Risk Warning:
Property securing finance may be repossessed if repayments are not maintained. Property values can fall as well as rise. Commercial property and development finance can involve significant risks, including changes in property values, trading performance, construction costs, 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.
