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THE SITUATION
Steven Clark, the sole director of Rock Property Investments Scotland Limited, identified a building in Aberdeen that he knew would be ideal for student accommodation in the university city. The seven-unit property with an office unit had previously been a children’s home run by members of a convent before closing in 1973. It was later converted to flats but had then remained vacant for a number of years.
Despite there being some property defects, Steven could see its potential and wanted to restore and enhance the building to create additional value and an income stream. Having discussed his requirements with his financial advisor contact, who working in conjunction with The Lending Channel, approached Redwood to help Steven secure the funds he needed.
Initial thoughts were to pursue bridging finance, that would have proved expensive, but the Bank’s refurbishment product proved to be the answer, as this not only provided acquisition and refurbishment cost assistance, it also ensured a built in exit strategy in placing the completed project onto long-term loan financing, given Steven’s desire to add this investment to his portfolio.
THE SOLUTION
Steven negotiated a purchase price below the actual value and the Bank agreed to assist under its refurbishment product, which allowed for a three-tranche drawdown: tranche one was advanced at 70 per cent of value to undertake the acquisition; tranche two was advanced at 70 per cent of the refurbishment costs; and once the project was completed, around six months after acquisition, tranche three allowed for the equity release based on the enhanced value and confirmed income stream generated at the investment.
The completed project produced a high-end eight-unit HMO facility. Working with well-known local agent, Chris Minchin of Winchester’s Lettings, the requisite licensing and tenant-fill up were concluded in an impressive short timescale.
The total loan value was £825,180 with the property being valued at £1.16m after the work was completed.
The feature of the refurbishment product saw a higher interest rate charged throughout the refurbishment stage, but the terms on the exit were pre-agreed at a competitive rate. This gave Steven the comfort of knowing what his was paying ahead of embarking on the project.
THE EXPERIENCE
Steven said: “This was an exciting development and I am pleased I could add it to my portfolio. It was all made possible by the support from Redwood Bank.”
Murray Ewing, from The Lending Channel, said: “We are delighted that we were able to offer our expertise in this field as finding a lender that could do this was a challenge. However, once the case was assessed by Redwood Bank, they were keen to assist and quickly found a solution that worked well with the client and it’s always great to have positive outcomes for all stakeholders.”