Brokerplan franchisee, Mark Everard, was recently approached by a transport and logistics company with depots in Suffolk and Glasgow
The Glasgow depot was a specialist cold storage used for storing principally frozen fish, a new service being offered by the client’s business as a specific response to the possible adverse impact due to Brexit. The client entered into a two-year lease in 2019 with the landlord. The lease included an option for the client to purchase the target property at £1.2m, this being the value of the target asset in 2018 when the landlord was looking to rent/sell the asset.
When the client was in a position to purchase the property in November/December 2020, due to the improvement works undertaken by the client since its occupation and an improvement in market conditions for assets of this nature, the target asset had increased in value to £1.5m.
The logistics company, thus, approached Brokerplan partner Mark Everard of Michaels Commercial Finance as they needed the help of someone with commercial finance knowledge to assist them in identifying a source of funding to purchase the target property at the pre-agreed price of £1.2m as per the lease agreement after having struggled to secure the required funding from the client’s own bank.
After the client reached out, Mark contacted the head office to discuss the proposal with its senior case manager, Peter Leonard. Ideally, the client was looking for a 70 per cent commercial mortgage assessed against the vacant possession value of £1.5m, rather than against the purchase price of £1.2m.
The issue is that a majority of commercial funders are only prepared to lend against the lower purchase price or valuation i.e. £1.2m. However, Aldermore was prepared to consider advancing 70 per cent against the vacant possession value where the borrower is the existing tenant. Therefore, Aldermore was considered the most suitable fit given the client’s funding requirements.
However, whilst the rate was competitive, Mark wanted to provide the client with an option from a Tier 1 lender, therefore Brokerplan made an approach to TSB.
Whilst the interest terms were lower than those secured with Aldermore, the maximum advance would be restricted to 70 per cent of the purchase price i.e. £1.2m. This would require the client to find a further £210,000 deposit than compared with the offer from Aldermore. Having provided both options to the client, it was agreed to progress with the indicative terms received from Aldermore.
Having provided Aldermore with the relevant information including financials, management information that encompassed a list of the client’s existing financial commitments, formal credit approval was achieved within seven working days which was subject to a number of conditions.
Between the client, Mark and the head office, these conditions were quickly satisfied allowing the case to complete within six weeks of achieving credit approval due to the close involvement of all parties, including the respective legal advisers from both sides.
This case generated a total of £10,500 in commissions, but more crucially allowed the client to move forward in the knowledge that the purchase of the property had secured the long-term future of the business as well as annual saving in excess of £60,000 per annum being the difference between the annual rent and the annual commercial mortgage payments.