Central London holds a wealth of investment opportunity for property developers who are seeking to both increase their property portfolio and also for those who are focused on developing property for resale. It is essential in both of these cases that property investors have the access to the funding they require quickly, to ensure valuable opportunities are not missed.
Central London does not offer a great deal of opportunity and scope for ground up new build development. There are however a vast number of reconfiguration and refurbishment opportunities available. Acquisition and redevelopment of these properties will rarely get funded through a traditional mortgage facility route, effectively being unmortgageable with no yield income at the point of acquisition. The use of short term finance enables property professionals to acquire and invest in property projects they may otherwise have to pass on.
There are also some “niche” residential investment opportunities in Central London, if indeed buyers are well networked and have the connections. Many properties are owned on Long Leaseholds, but of these a high number have unexpired lease terms of less than 50 years. This clearly therefore has a direct impact on the marketability and value of the property. Bridgebank Capital will provide acquisition and redevelopment funds for these shorter lease term properties, and assist in financing the lease premium that will need to be paid to the ultimate Freeholder in order to secure a new lease term of (say) 125 years; which in turn will materially enhance the capital value of the property well in excess of the additional investment costs incurred.
Bridgebank Capital has recently assisted an experienced property investor client with a £2.4 million bridging loan facility, which has allowed them to both reconfigure a property and secure a new longer leasehold term.
The borrower, an experienced property developer had acquired a ground floor leasehold apartment in a highly prestigious area of London. Following on from this there was an opportunity to acquire the first floor apartment immediately above. The proposal was to redevelop the two floors with the benefit of a large garden, into one large with a duplex apartment.
In addition to enhancing the value of the property by completing the development works, the borrower also added additional material value through the acquisition of the freehold reversion. The project was successfully completed with the property sold on at a high profit margin! A good example of the flexible benefits of utilising short term funding.
Carl Graham is national corporate account manager at Bridgebank Capital
