I recently attended a function where I spoke to one of the directors of a newly formed property company. She explained to me the company had a complex structure with tiered sub-companies and bond holders but they were looking to acquire a £1.5million loan to purchase a £3.5million block of student flats in the popular university city of Leicester.
Quality student accommodation is a growth area for developers. Student developers are increasing in density, in the small city of York, for example, four developments ranging in funding of £4million to £11million plus developments are being built, two of which are on the same street. This was, therefore, a sound investment for the company.
The company had a very complex structure; the directors of the company were predominantly middle eastern nationals with little prior experience in student development projects. On top of this, the borrowing vehicle my clients were using was multi-jurisdictional. All this meant a lot of explanation would be needed before negotiations with the bank could begin.
Due to the complicated structure of this case, I approached a trusted lender whom I had worked with before. I quickly set up a meeting with the lender, my clients and their professional advisors to help dissect their complex company structure and put any reservations the bank may have had with regards to lending to the company.
The bank was reassured the complex structure, with different equity investors for each acquisition, was merely a tool to allow the clients to grow a large portfolio. The lender knew that this being the case, there was the opportunity for repeat business with my client and were therefore all too happy to assist my clients.
The loan I negotiated had exceptionally low rates and I was able to acquire the full loan amount for my clients. A £1.5million loan at a rate of 4.08% over a five year fixed term.
My clients were delighted, as was the bank. This was the first of many business opportunities between myself, my clients and the bank.