AREA: Cotswolds
AMOUNT RAISED: £2.7 million
PRODUCT USED: Bridging loan
Client Scenario
A high-net-worth client approached Respect Capital with a unique challenge.
They had recently purchased a Grade II listed property in the Cotswolds for £4.5m, which required extensive renovation. The client’s goal was to restore the property to its former glory and eventually sell it for a profit.
However, the client faced two significant hurdles:
- Traditional lenders were hesitant to provide financing due to the property’s listed status and the extent of renovations required.
- The client had already invested a substantial amount of their liquid assets into the property purchase, leaving limited funds for the renovation work.
The client required:
- £2.3m for the renovation works, including structural repairs, modernisation of utilities, and restoration of period features
- £400,000 to refinance an existing short-term loan used for the initial purchase
Total funding needed: £2.7m
The Challenges
Property Type: Grade II listed buildings often present challenges for lenders due to potential restrictions on renovations and increased costs.
Loan-to-Value (LTV) Ratio: The client needed a relatively high LTV, given the property’s current value and the extensive renovation costs.
Exit Strategy: The sale of a high-value, unique property can take considerable time, requiring a longer loan term than standard bridging loans typically offer.
Funding Solution
After a thorough assessment of the client’s situation and needs, Respect Capital sourced a bespoke financing solution:
- Loan Structure: A 24-month bridging loan for £2.7m
- LTV: 60% based on the property’s current value (£2.7m loan against a £4.5m property)
- Interest Rate: 0.89% per month, simple interest, rolled up and paid at the end of the term
- Lender: A specialist private bank with expertise in high-value, complex property transactions
- Security: First charge on the Cotswolds property
After an in-depth analysis of the client’s financial situation and the property’s potential, we leveraged our extensive network to identify a lender comfortable with listed buildings and major renovation projects.
We worked closely with the client to develop a robust exit strategy, including:
- A detailed marketing plan for the property post-renovation
- Analysis of comparable sales in the area to establish a realistic target sale price of £8m post-renovation
- A contingency plan for refinancing if the sale took longer than anticipated
Our team facilitated smooth communication between the client, lender, and other professionals involved in the transaction. We expedited the valuation and legal processes, ensuring a quick turnaround despite the complexity of the case.
Final Outcome
Thanks to our broker’s expertise and tailored approach:
- The client secured the necessary funding within three weeks of initial contact.
- The longer loan term provided ample time for the renovation work and subsequent sale of the property.
- The client was able to proceed with their renovation plans without depleting their liquid assets.
- The rolled-up interest option meant no monthly payments, allowing the client to focus their resources on the renovation.
Key Takeaways
- Complex property transactions often require bespoke financing solutions.
- A longer-term bridging loan can be an effective tool for major renovation projects, especially for high-value properties.
- Working with a specialist broker can provide access to lenders who understand unique property scenarios.
- A well-structured bridging loan can enable property investors to take on ambitious projects while managing their cash flow effectively.