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Case Study – Semi-Commercial Capital Raise

Executive Summary:

  • Client: Limited Company
  • Client was a highly experienced property developer/investor located in the North West
  • The client overall portfolio consisted of 136 Residential Units and 11 Commercial Units, with a combined value of c£18m vs. v£9m of debt
  • All debt is on a fully amortising basis
  • Debt was spread with a mixture of Tier 1 and Tier 2 lenders
  • In 2018 the client had purchased an empty retail outlet on the ground floor with two floors of empty office space above consisting of over 30,000 square feet of space
  • Successfully achieved planning approval for 28 apartments (split between 1 and 2 bedroom units) and 3 commercial units on the ground floor. The smallest residential unit was c45 square meters
  • Due to the overall size of the project, client split the property into two separate freehold titles
  • The 1st Phase was to create two commercial units (Restaurant and Tanning shop) as well as developing 12 x 1 bedroom apartments on the upper two floors
  • During the initial development stage of Phase 1, the client created 14 individual 125 leases, with the freehold being held by the ‘Groups’ holding company
  • The commercial units were completed at the start of 2019, with 2 x new 5-year leases being agreed
  • The two commercial units are generating £33,700 in annual rent
  • The residential units were given final Building Control approval on 5th September 2019
  • All 12 residential units were immediately let by way of standard AST agreements generating £90,120 in annual rent
  • Client estimated an indicative value of c£1.65m across all 14 units

Client Requirement

  • Client wanted to borrow up to 75% of the indicative value of the said property
  • Client was looking for a committed term of up to 25-years
  • The client wanted a fully amortising facility over the committed term, ideally with an initial 5-year fixed rate
  • However the client No1 requirement was for the facility to be drawn no later than Friday 4th October, as the funds were required to purchase an iconic commercial property in the same town centre, which the client had committed to purchase no later than 4th October


  • The client made a direct approach to the Client Manager within the practice with whom he had undertaken 3 successful facilities whilst the Client Manager was working at Aldermore before joint Whiterose Finance as a Senior Client Manager
  • The client manager arranged a site meeting with the client on 5th September, the same day the subject asset obtained its final building control approval notification from the Local Building Control Officer

Client Manager’s Approach

  • The client manager made contact with 3 potential funders and provided he funders with detailed terms of the client’s requirements, together with comprehensive details of the clients existing portfolio and borrowing
  • One lender wanted to restrict the term of the facility to 20-years due to the, commercial  and residential elements of the asset being pledged as security
  • One lender would be happy to consider 75% Loan to Value and were happy to consider an initial 5-year fixed rate – however they were not prepared to commit to the client’s requirement in terms of completion
  • The client manager also approached Mark Dolphin our Business Development Manager from Redwood bank who on his recent visit to the practice advised of the willingness of the bank to look at the interest rate for top quality proposals – which this case clearly was
  • I provided Mark, with a detailed synopsis of the proposal along with the client’s requirements in terms of completion on 10th September 2019
  • I received a very positive response from Mark with indicative terms, which split the commercial properties from the residential properties
  • Due to the quality of the client and the overall proposal Mark was happy to recommend a reduction in Redwoods standard interest rates by c1%
  • The client manager provided the indicative terms to the client, which although was not exactly what the client wanted: lack of an available fixed rate, maximum Loan to Value of 70% was accepted on the basis the lender committed that they could complete the transaction within the clients timeframe

Events to Completion

  • Upon receiving a positive response from the client 11th September, the BDM prepared and submitted a detailed credit appraisal by the CoB on 12 September having already obtained the buy-in from Head Office in relation to the timescale
  • Head of Credit approved the facility by close of business 13th September, but due the size of the facility the request also required the approval from 3 board members
  • Received confirmation a sufficient number of board members had approved the facility by lunchtime on Saturday 14th September
  • Client Manager advised the client by text and advised that arrangements re valuation and legal will be done on Monday, along with the credit backed facility letter
  • By 17th September, the client had decided on the surveyor re valuation from the two who were prepared to undertake the request and report back within 5 days of site visit and also requested Redwood appoint Freeth’s as there solicitor
  • Valuation date set for the following Tuesday 24th September, with the report being available by Monday 30th September
  • By the time the surveyor was due visit the property, he was in receipt of the Certificates of Title of all 14 properties from the lender’s solicitor
  • Our BDM also arranged for his colleague to undertake a site visit on 24th September
  • Meeting arranged with the BDM and the client for the Wednesday 26th September
  • Valuation report received Monday 30th September
  • Valuation slightly lower than anticipated by c£20k, potentially reducing the client overall debt quantum by c£14k
  • BDM suggested that the arrangement fee (2%) is added to the residential element of the facility rather than being deducted
  • The commercial element of the proposal also exceeded the lenders maximum 70% LTV by 0.5% – the BDM suggested the facility remain unchanged as within 12-months the LTV would be back within 70% LTV
  • Request approved by the Head of Credit and by Tuesday 1st October was also approved by the 3 board members
  • The surveyor, confirmed his report and valuation along with the finalised Certificates of Title by the close of business 1st October
  • Facility drawn Wednesday 2nd October
  • Client completed his purchase on the next two commercial properties, which will be developed by the client into a mixed-use scheme in 2020


Overall Length of Case

  • From my initial synopsis to Redwood Bank through until completion 16 working days
  • This case generated c£11,000 in fee income received from Redwood Bank. Due to connection and potential future business (similar scheme will need funding in January 2020, client manager obtained approval from the directors not to charge the client a Funding Services Fee


Senior Client Managers Overview

  • The only way that this case was able to complete within the client’s timeframe was due to the following key points:
  1. Client had the full support and understanding of the Senior Client Manager
  2. Client Manager had the full understanding and belief that the lender could meet the client’s timescale
  3. Both sets of solicitors and surveyor being made fully aware of the timescale from the outset and there agreement to work to these timescales
  4. The client having a full understanding of what his legal team required which would enable his legal team to provide the required information to the lenders solicitors who in turn could provide the lender with the Certificates of Title
  5. The Business Development Manager being fully prepared to delay/cancel meetings in order to meet the client’s expectations and timescale
  6. The client manager maintaining regular dialogue with the client, lender, both sets of legal teams and surveyor to ensure the agreed timescales were on schedule and that no one was waiting for anything
  7. Overall a most satisfying client outcome, although not without its issues and pressures
  8. The client has already agreed to work with both Whiterose Finance and Redwood Bank on Phase 2 of the project, which will be for a lending requirement of, c£1.25m in January 2020 upon completion of Phase 2.