Serviced Apartments – Lending Query
A long-standing client had secured planning permission for a Serviced Apartment scheme on a site in South West London. They had secured an offer from an operator with a strong covenant to take over management of the scheme upon completion. The developer wanted to hold on to the asset instead of selling it. They required a development facility of £5 million (including interest and fees) for 18 months with a refinance onto a long term commercial loan.
Client Circumstances
The UK-based borrowers were experienced developers but had not built anything in the serviced apartment space before. They lender had to rely on their track record in other sectors whilst gaining additional comfort from the strong covenant of the proposed operator.
Problems To Solve
The main issue with this query was the need for both a development facility (to cover the build period) and a follow-on commercial mortgage broker (to refinance the development finance) to originate from the same lender. This cuts down on costly setup fees by keeping there finance with the same lender. It was challenging finding a lender who could offer both types of finance whilst at the same time showing enough appetite for the serviced apartments sector.
Solution Provided
Development Loan £5 million
Rate 6.25% + LIBOR
Term 18 Months
65% Loan to GDV / 80% Loan to Cost
Covered 100% of Build Costs
10% Personal Guarantee
Commercial Refinance Loan £5 million
Rate 3.25% + LIBOR
Up to 70% Loan to Value
Term 5 Years
Interest Only