CASE STUDY: 978 FINANCE Secure OMV Lending on Discounted Commercial Property.

CASE STUDY: 978 FINANCE Secure OMV Lending on Discounted Commercial Property.

Mr. Reeves approached 978 Finance in March 2021 with the bit between his teeth. He had been trying to secure a £1.5million commercial property for over 18 months. His offer was accepted pre-COVID, and he thought he had finance in place. One of the first major delays occurred as the country went into national lockdown and unfortunately like thousands of other developers Mr. Reeves had to put the brakes on.

Eventually, things started opening back up and a valuation was instructed by the proposed lender in late 2020. The property itself comprised of several tenanted commercial units on the ground floor and a large vacant commercial premises above. The upper floor had planning for conversion into residential.

Unfortunately, when the valuation came back it was low. There were multiple factors involved, for example, there was the issue of material uncertainty with COVID and surveyors generally unsure of which way the market was heading, but also a weak covenant on several the commercial leases which were due to end with 12 months.

Following 18 months of work and many thousands of pounds invested, it seemed impossible to raise the money needed to complete the deal. This was a particularly tough situation as Mr. R had exchanged on the property and stood to lose tens of thousands in the form of his deposit. Mr. R knew 978 Finance had a reputation for solving development funding issues involving high complexity, but having not personally worked with 978 Finance previously, he had chosen to stick with his previous broker for this important deal. Having the threat of devastating losses, he decided to call 978 just to see if there would be anything they may do to help, and after speaking directly to the MD Simon Das, he was thrilled at his level of engagement. Simon explained to Mr R. that he was determined to find a solution and knew would turn this around as quickly as possible.

Within a matter of hours, Simon was having a conference call with the director of a niche lender funded by a small group of international investors. He explained Mr R’s situation and sent all relevant information across. Within a day, Simon had a verbal agreement to proceed. Another hurdle in this situation was the fact Mr. R had negotiated a Below Market Value purchase (BMV). Simon managed to get his niche lender to lend off the Open Market Value (OMV), rather than the purchase price, giving Mr. R more than enough money to get the site acquired and the project underway.

Simon is now working on a refinance onto a development facility and an additional facility to acquire another similar site. Using the seam lender for these two facilities is saving Mr. R money by running the legal work simultaneously and instructing the same surveyor to value both sites.

Simon said ‘It was an absolute delight to close this deal. The client is well respected and experienced, but this project was not going the right way. What a pleasure it has been to ensure it stayed on track and to save his deposit funds. As soon as he picked up the phone, I knew I could call a private lender who based their lending decisions on the open market value rather than purchase price, even on a commercial property. This is very rare in the industry, but I knew it was just what we needed in this instance.’

Summary Case Particulars:

OMV 900k

Purchase Price: 850k

70% LTOMV

Gross Loan 630k

Net Loan: 567k

0.08% pcm