- Client: US national with a high-value property portfolio in France
- Property: Four chalets in Chamonix and a villa in Corsica with a combined value of approximately €13 million
- Challenge: Existing debt of €9.6 million was spread across three lenders in Switzerland, Luxembourg and Monaco, with different rates, repayment schedules and exit fees
- Finance: €9.6 million refinancing at 73% LTV, with €2.5 million equity released and €1.8 million placed under an AUM arrangement
Refinancing a substantial international property portfolio can become increasingly complex when existing debt is spread across multiple lenders and jurisdictions. Enness was approached by a US national with a portfolio of four chalets in Chamonix and a villa in Corsica, with a combined value of approximately €13 million.
The client had existing mortgage debt of approximately €9.6 million, representing around 73% loan to value (LTV). The borrowing was spread across three separate lenders in Switzerland, Luxembourg and Monaco, each with different interest rates, repayment schedules and lending arrangements.
The client was looking to simplify this structure by refinancing the existing facilities under a single banking relationship. They also wanted to release additional equity from the portfolio, creating greater liquidity while reducing the administrative complexity associated with managing several separate mortgage arrangements.
The client’s US nationality added another consideration. International lenders can apply different criteria depending on a borrower’s nationality and tax residency, which can reduce the number of banks willing to consider a substantial cross-border property portfolio.
There was also the question of exit fees attached to the existing facilities. Any new refinancing structure needed to take these costs into account while still providing a meaningful improvement to the client’s overall position. Given the size of the portfolio, even relatively small differences in the cost of borrowing could have a significant impact on the overall financing structure.
Enness therefore approached a number of international banking contacts before identifying a Swiss banking partner that was able to consolidate the existing debt. The refinancing was structured through subrogation, allowing the existing facilities across the three jurisdictions to be brought under one lead banking relationship.
Enness also negotiated the exit arrangements with the existing lenders, helping to reduce the costs associated with replacing the previous facilities. Consolidating the debt under one banking relationship provided the client with a simpler and more transparent structure going forward.
The resulting facility provided €9.6 million of refinancing against the €13 million property portfolio, representing 73% LTV. The mortgage was structured over a 20-year term, with the first four years on an interest-only basis followed by 16 years of capital repayment. The agreed rate was 1.6% at the time.
In addition to refinancing the existing debt, the structure allowed the client to release approximately €2.5 million of equity from the portfolio. The arrangement also included €1.8 million placed under an assets under management (AUM) arrangement with the Swiss bank.
The case demonstrates how large mortgage finance can be structured around substantial international property portfolios where existing borrowing is spread across multiple lenders and jurisdictions. Consolidating facilities can potentially simplify administration while creating an opportunity to restructure the overall debt and release additional equity, subject to lender criteria.
For clients with significant international property assets and complex existing borrowing, specialist private bank mortgage expertise can help identify lenders able to consider the wider portfolio and structure bespoke financing solutions around the borrower’s circumstances.
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 and lender criteria. Terms, rates, LTVs, fees and availability may vary depending on individual circumstances. Any tax, legal or regulatory implications of international property ownership, refinancing or AUM arrangements should be assessed with appropriately qualified professional advisers.
Risk Warning:
Property securing finance may be repossessed if repayments are not maintained. Property values can fall as well as rise. International property finance can involve currency, liquidity, refinancing and jurisdictional risks. Interest-only borrowing requires a suitable strategy for repaying the capital at the end of the interest-only period. The value of investments held under an AUM arrangement can fall as well as rise and may not provide sufficient funds 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.
