Market town development project
Borrower:
Family Trust
Loan amount:
£7m
Term:
10 years
Repayment:
Interest only
Security:
Residential and commercial property
Loan to Value:
50%
Interest rate:
1.75% over bank base
Summary
A long-standing property owning family were introduced to Ashbridge Partners by their private family office.
A purchase opportunity arose in the prestigious market town that the family already owned significant parts of. This strategic purchase facilitated a much larger development scheme which included retail, hospitality, office and residential lettings.
Our ability to understand the wider family finances and objectives, and present a banking request that met lenders’ requirements, delivered a funding package which included an initial development phase.
Goal
Our clients are risk-averse and have an ingrained determination to hand on their property portfolio to the next generation in a better state than they received it. They are also emotionally invested in their location of ownership and so wish to consider the local community and the legacy of any work done on their watch. Therefore, the project is not only concerned with financial return, but with providing a valuable asset for the community.
The structure of the family trust means that loan monies cannot be ‘repaid’ in the conventional sense without causing practical tax planning issues, therefore, an interest only facility was insisted upon, and the clients sought a minimum of a five-year term.
Challenges
Income – the borrowing entity didn’t produce sufficient income to support the level of debt during the development phase and in advance of formally agreed pre lets on the various commercial space. However, we were able to demonstrate that the wider family businesses could satisfy the lender’s debt servicing requirements, and these were addressed by the use of cross guarantees.
Security – in order to obtain the most efficiently priced money and flexibility of structure we needed to offer a minimum level of residential security. This was in addition to the commercial assets available with the borrowing structure but meant us using residential assets from other family businesses to bolster the security package.
Added Value
- Our clients have transformed a section of the town’s high street and enhanced its attraction to retail shoppers, office workers and diners.
- Access to the funding has enabled the project and prevented them from being forced sellers of other assets to raise the required capital.
- Our bank tendering process has driven out the very best terms and structure in the market.
- The experience of this project has given them greater confidence to pursue the next one, which we have also assisted with.
Next Steps
Since the original project we have worked with these clients on a number of occasions and across the whole of their portfolio, both personally and for the businesses. We attend an annual review meeting to discuss the funding arrangements and keep up to date on the changing objectives and plans. This type of ongoing and long term relationship offers the best value for all parties.