Commercial properties can be tricky for investors to deal with. They can come with added complications when compared to residential assets, and values can be swayed by the type of industry the building accommodates.
But, while commercial assets can offer up challenges, our underwriting practices and products can deliver plenty of solutions to match. Our underwriter, Jemima Hayes, broke down how we may be able to find a way forward for an investment in a potentially difficult property.
“An owner-occupied care home would likely prove to be hard to accommodate,” she said.
“This kind of commercial investment and setup would require a lot of due diligence. From a lending perspective, we’d really have to make sure everything lined up perfectly before we could progress.”
Much of this would depend on the exit strategy. Which, as Jemima explained, even if there were many, we’d still need to move forward carefully.
“Many borrowers investing in this space have faced a tough few years.
“A typical investor is unlikely to have particularly good accounts, most likely due to Covid-19 related difficulties.
“We’d be able to accommodate this, but we’d want to see evidenced back up exit strategies at the ready.”
Jemima could also take steps to make this case more palatable in other areas.
“We would lend against the bricks and mortar value of the property,” she continued.
“So, if we were to also take into account the trading value, the LTV on this kind of deal could be quite low, which would make us more comfortable.”
As for the exit options, this kind of property can present a number of options to counterbalance the risk involved. There are the usual refinance or sale options, but Jemima pointed out a few other unique options.
“These kind of sites can include multiple plots of unused land.
“If a borrower plans to work with developers to sell or utilise this land, that would make a great exit strategy for our loan, for example.”
Regardless of what commercial related challenges our borrowers face, we will always do what we can to support their investment goals. Evidently, our underwriters have plenty of tools at their disposal to get complicated deals over the line. We’ll use them wherever deemed necessary.
