Each quarter in Reality Check, Stuart Buchanan of Acuitus Finance reviews the current property lending outlook and gives examples of financing which has been secured on the type of assets that are regularly offered for sale at auction.
Q1 2011: The Lending Outlook
Stuart Buchanan of Acuitus Finance comments:
“Since the beginning of the year, property lending conditions – apart from some increases in pricing – appear to have stabilised.
“Because lenders now have differing ideas about which property assets they want to lend on this can lead property investors to think that the finance market is closed.
“However, if the same property is taken to the right lender they will probably be able to provide acceptable terms. Lenders are being quite consistent with their terms as long as the property asset falls within their lending criteria.
“Investors who are considering unlocking equity from an existing property, need funds for a new purchase or have an existing property term loan coming to an end in 2011, should particularly consider the following points:
What’s out there?
Examples of recent financings secured in the market:
Short lease properties
Three properties with lease lengths between 3 and 5 years comprising a bank and two retail investments. The loan was £1.5m at a 58% LTV with a margin of 2.45% over a five-year swap rate and a five-year term loan.
Financing to enable new purchase
An unencumbered Co-Op supermarket was used as security for a five-year interest-only facility to buy another investment property. The loan was for £1.2m with an initial 5-year interest only period and then a 10-year capital and interest repayment term. The margin was 2.5% over a five-year swap rate.
Bank & supermarket portfolio
A portfolio consisting of two banks and two supermarkets with a combined value of £4m and with unbroken leases between 10 and 15 years. The loan was for £2.2m with a 55% LTV, the interest margin was 2.25% over Libor with a 20-year amortisation profile.
Mixed commercial and residential portfolio
A portfolio of 5 commercial and residential mixed investments with local covenant commercial tenants. The portfolio was valued at £1.5m. The loan was for £1m with an interest margin of 3% and a 20-year capital and interest loan.
Hotel/fast food outlet development
Finance to build a turnkey hotel and fast food outlet using two existing investment properties (a Tesco and Wickes stores) as security. £4m loan with an interest margin of 2.75% over BOE base rate.
Enterprise Inn pub purchase
Finance for an Enterprise Inn pub, the loan was 55% LTV at a margin of 3.3% over BOE base rate with a 7-year term and a 15-year amortisation profile.
If you would like more information on any of the points raised here or need to discuss financing, please contact Stuart Buchanan at Acuitus Finance:
Direct line: + 44 (0)20 7193 2108 / Mobile: +44 (0)7879 432868