£15m HMO Portfolio Refinance

The Situation

Our client owned a portfolio of 30 properties worth £24m. They required borrowing of £12m to refinance their current debt, with an additional £3m required for a development project.

 

The Solution

We arranged £12.5m in loans against 25 out of the 30 properties through three high-street lenders. This left five high-value properties free for future sales or projects. We achieved an overall Loan-to-Value (LTV) of 70% at a lower composite fixed rate than a single lender could offer. Additionally, we raised a £2.5m development loan against one of the unencumbered properties.

 

The Process

Despite our client’s high-net-worth status, many private banks were hesitant to refinance due to a high number of Houses in Multiple Occupation (HMOs) in the portfolio.

Some corporate real estate banks were willing to offer a 50% loan-to-value (LTV) across the portfolio. However, this would not generate the necessary capital to complete the client’s other projects.

Securing individual mortgages for each HMO was complicated, particularly as the client had recently transitioned to a partnership and was contemplating forming a limited company. Most banks would impose new terms if the portfolio shifted to corporate ownership, including new interest rates and potential exit fees.

The client’s problem was that to secure the required borrowing, they had to apply for a 5-year fixed-rate mortgage. If the ownership of the portfolio were transferred to a company, most banks would apply a new interest rate, charge an additional fee, and possibly levy exit fees on the loan.

We managed to secure a loan for the majority of the client’s borrowing, where the lender would continue the loan in the event of incorporation. The loan would novate to the new limited company on the same terms, with no extra fees charged.

This was particularly crucial as, during the course of the mortgage applications, we entered a period of rapid interest rate increases. We had secured two additional branches of borrowing with banks that could offer loans on non-standard properties within the client’s portfolio. These properties included large multi-unit blocks, HMOs and ex-local authority flats.

Throughout the application process, swap rates increased dramatically. Two of the three banks’ funding lines were pulled, and the original products offered were withdrawn. We entered into negotiations with the banks at the board level, and after a series of counter-offers, we reached a compromise on the rate.

The Outcome

We successfully navigated a volatile financial market to secure a £15m loan for our client at an unbeatable rate. Despite unexpected challenges, including withdrawn loan offers, our 15 years of expertise enabled us to renegotiate terms swiftly. The structured loan met both the client’s immediate capital needs and future business plans, securing their borrowing at an extremely low rate for five years.

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