Serviced Apartments

Lending Query

A long standing client had secured planning permission for a Serviced Apartment scheme ona site in South West London. They had secured an offer from an operator with a strongcovenant to take over management of the scheme upon completion. The developer wantedto hold on to the asset instead of selling. They required a development facility of £5 million(including interest and fees) for 18 months with a refinance onto a long term commercialloan

Client Circumstances

The UK-based borrowers were experienced developers but had not built anything in theserviced apartment space before. They lender had to rely on their track record in othersectors 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 thebuild period) and a follow-on commercial mortgage (to refinance the development loan) tooriginate from the same lender. This cuts down on costly setup fees by keeping therefinance with the same lender. It was challenging finding a lender who could offer bothtypes of finance whilst at the same time showing enough appetite for the servicedapartments 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