Structured Finance facility refinances a pub and residential development project
United Trust Bank was approached by an established broker contact to consider a structured finance facility for a client active in the hospitality sector.
The client wished to borrow around £1.5m to facilitate the refinancing of an existing bridging loan which had recently expired, to settle a substantial Capital Gains Tax bill triggered by the sale of an asset and to cover fees and interest associated with the transaction.
The client had started in the hospitality sector when he purchased a London pub which, over the next 12 years, he developed into a successful pub and restaurant business. Having sold this business, the client identified another London pub with scope for improvement, additional residential space and the potential to develop further new residential units.
Using his own funds and a bridging loan from another lender, he bought the pub and invested a further £150,000 in refurbishing it. The pub is now let to a group of experienced entertainment venue managers and the existing flat above the pub is also let. Together they are returning a healthy rental income.
The client is also working with planning advisers to put together a scheme to develop additional residential units at the property. This and the borrower’s own main residence formed the security for the loan.
The Structured Finance team was able to quickly appraise the two security properties, one of which comprised a mix of commercial and residential use and two unusual tenancy agreements, and were comfortable that a number of possible exits existed. Taking the borrower’s previous track record in the hospitality sector into account and the potential for further capital gain if planning permission is successful, UTB were pleased to approve the facility.
Once planning is obtained for the additional residential units above the commercial space, the existing facility may be split into a commercial holding loan for the pub and a standard UTB development facility to fund the proposed new apartments. The Structured Finance team worked closely with the Bank’s Development Finance team to ensure that the funding could be restructured to meet the borrower’s requirements at the appropriate time.
Loan Amount circa £1.5m
Term: 6 Months