Specialist Offshore Fund Mortgage

• Property: Business site comprising a church, residential and boarding facilities, educational buildings and external recreational space
• Property value: £8M
• LTV: 100%
• Property size: More than 82,000 sq ft across a 5-hectare site
• Finance structure: 100% of the purchase price funded by a specialist offshore fund

Acquiring a substantial mixed-use property can be particularly challenging where the site has an unusual combination of buildings, limited conventional mortgage security and significant development potential. Enness was approached by two clients operating a business from a large site comprising a church, residential and boarding facilities, educational buildings and various external recreational areas.

The property extended to more than 82,000 sq ft of buildings across approximately five hectares. While the site had considerable underlying value, many of the buildings were in generally poor condition, creating additional considerations for a prospective lender and insurer.

The clients were effectively sitting tenants of the property, which was owned by an overseas party looking to sell. This created an opportunity to acquire the site at a significant discount to its £8M valuation. The transaction was structured as the acquisition of the existing Jersey-registered company that owned the property.

Although the purchase represented an opportunity to acquire a substantial asset below its stated valuation, the clients had limited cash available to contribute towards the acquisition. They had also been unable to secure conventional funding for the purchase.

A further consideration was the development potential of a substantial area of land forming part of the site. The land was not being actively used and was included within the Local Authority Housing Plan for potential development. This provided an additional source of value that could be considered as part of the overall transaction structure.

Rather than relying on conventional mortgage finance, Enness identified a specialist offshore fund that was prepared to consider the wider opportunity. The fund agreed to provide 100% of the purchase price in return for an equity interest specifically in the development land and a share of the profits once the relevant planning permission was secured.

This structure enabled the clients to proceed with the acquisition without having to provide a substantial cash deposit. It also aligned the fund’s return with the future development potential of the land rather than requiring the clients to provide additional cash security at completion.

There was a separate challenge relating to insurance. Due to the nature and condition of the buildings, the clients were unable to obtain conventional insurance cover for the £14.5M reinstatement value. Without appropriate insurance in place, completing the acquisition presented a further obstacle.

Enness was able to introduce a specially negotiated insurance package through Lloyd’s of London, allowing the transaction to proceed and the acquisition to complete within the required timeframe.

The case demonstrates how specialist finance can provide an alternative where conventional lenders are unable to accommodate an unusual property, limited borrower liquidity or a complex ownership structure. In this instance, the combination of the property’s existing use, development potential and discounted purchase price allowed a bespoke funding structure to be created.

For borrowers acquiring unusual commercial or mixed-use property, specialist funding may be available where the underlying asset, development potential and proposed transaction structure provide sufficient support for a lender or investment fund to consider the opportunity. Each transaction remains subject to due diligence, valuation, legal considerations, planning and the relevant funder’s 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, valuation, property suitability, due diligence, planning considerations and lender or funder criteria. Terms, 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. Development and land investment can involve significant risks, including planning uncertainty, changes in property values, development costs, market conditions and the ability to realise the anticipated value of the land. Equity-based funding may also result in the borrower sharing future development profits or value with the funder.