£2.6m Refinance Unlocks £320k for Property Improvements

Client Background

The clients approached Key Commercial to refinance two commercial properties, with existing borrowing of approximately £2.27m.

The portfolio comprised a Grade II listed former textile mill, now converted into separate commercial units on predominantly short-term leases, and a mixed-use property comprising ground-floor commercial units with student accommodation above.

A number of the student accommodation units were vacant and required refurbishment before they could be re-let.

The clients had been with their existing lender for several years, but the lender would only provide a 5-year commitment.

They were therefore looking to refinance onto a lower interest rate, increase the level of borrowing and, importantly, secure a longer-term funding commitment to provide greater certainty.

Challenges Faced

There were several factors that needed to be considered when structuring the refinance.

Some of the student accommodation was vacant and required refurbishment before it could be re-let, while the commercial units included a number of short leases.

The Grade II listed former textile mill also presented additional considerations, with some lenders unable to accommodate this type of property.

Additional funding was required to complete the necessary improvement works, and the transaction needed to be completed within a relatively short timeframe.

How We Helped

Key Commercial reviewed the clients' requirements and the wider property portfolio to identify a lender capable of accommodating the combination of property types, existing tenancy arrangements and refurbishment requirements.

We secured a longer-term funding commitment, providing the clients with greater certainty than their existing 5-year arrangement.

We also negotiated a reduction in the interest rate while increasing the overall level of borrowing to provide additional funds for the required property improvements.

The structure of the new facility also allowed the clients to manage cash flow while works were undertaken and parts of the portfolio remained vacant.

Outcome

Key Commercial secured a £2.6m commercial mortgage, including an additional £320,000 specifically to fund property improvements.

The facility was structured over a 25-year repayment term, with the first three years on an interest-only basis. This provided the clients with greater flexibility while refurbishment works were completed and the vacant student accommodation was brought back into use.

The refinance delivered a lower interest rate, additional funding of £320,000 to support the required property improvements, and a longer-term funding commitment, giving the clients greater certainty and flexibility in managing and developing their property portfolio.