InterBay has completed a £3.8m commercial refinancing deal in central London, allowing a borrower to release capital from a commercial building to fund the construction of two new residential rental properties.
The specialist commercial lender, part of OSB Group, said the transaction was secured against a four-storey building with three tenants and involved a number of legal and structural complications.
The property had originally been held in a family trust set up by the client’s parents. That trust was later annulled, requiring the asset to be transferred into the client’s sole name. A second property within the trust was also allocated to another family member, adding further complexity to the case and creating exceptions to standard lending policy.
The borrower wanted to use equity from the commercial asset to help finance the build costs of two residential units on land they already owned, with planning permission already in place.
Rather than arranging a development finance facility, InterBay provided an interest-only loan over a 120-month term. The lender said this gave the client access to funds without the additional layers of cost and administration often associated with development borrowing.
The newly built homes will be retained as rental properties within the client’s portfolio.
Marc Callaghan, head of commercial lending at InterBay, says: “Transferring property out of a trust structure can be highly complex and must meet specific legal and taxation conditions.
“Considerations around Inheritance Tax (IHT), Capital Gains Tax (CGT) and other liabilities all come into play. Our specialist finance account manager, Simon Ward, worked closely with Mark Jerman at Watts Commercial to identify the most effective route to funding the client’s development ambitions.”
Mark Jerman, senior commercial manager at Watts Commercial Finance, adds: “The client needed to raise capital to support the build costs for two new residential properties.
“While a traditional development facility was an option, it would have introduced additional professional layers, fees and complexity. Instead, we agreed a simpler, more cost-effective solution: securing a term loan against unencumbered assets within the client’s portfolio, with full funds released at the outset.
“InterBay demonstrated exceptional expertise and flexibility throughout, and the collaborative approach between our teams resulted in an excellent outcome for the client.”
