Creating a contingency plan for a protracted conversion strategy

Loan Amount:
£244,000

Property Value:
£340,000

LTV:
70%

There is opportunity in converting, or better utilising existing property space in the current market. The pandemic led to many commercial premises being left vacant as we tried to recover, and many of these properties remain empty to this day.

But, there is willingness and motivation to make improvements here. An investor turned to us to fund a purchase for a mixed use building, in which the commercial element was left dormant. They planned to convert the commercial space to accommodate a more desirable, and hopefully more profitable industry.

Before we could deliver funding, our underwriter had to make sure the investor’s plans were feasible over the long-term. Especially considering there’d be a relatively long wait until the property generated income.

Factoring in the reality of a schedule of works

Immediately, our underwriter gathered a schedule of works for the project. We saw that every single element of the conversion was accounted for while, individually, the tasks at hand weren’t complicated.

But, collectively, they would take several weeks to complete. Also, once the works were completed, it would then take another few weeks to secure tenants. As such, we looked into the borrower’s wider details to ensure our funding could be covered.

We saw they had several resources at their disposal, along with a clear refinance exit strategy at the ready. This reassured us but, for added security, we allowed for a longer term for this deal, which gave the borrower additional leeway.

Addressing a crucial need

The question of what to do with all our empty building still looms large in the UK, with our own research showing many want to see ramped-up efforts to amend the issue.

Fortunately, in the lead up to the general election, both of the main political parties have laid out plans to get building, and/or make conversions easier. At the very least, the needs of the market will likely force action over the coming months.

For our part, we will do what we can to support property investors planning to add to much needed supply levels. Whether that means providing purchasing loans for expanding landlords, auction finance to secure unappreciated properties, or conversion funding to bring rundown spaces back to life.