A London residential bridging loan has achieved full interest coverage for the first time in more than a decade, signalling a shift in rental yields and deal dynamics for brokers and investors.
Institutional lender Fiduciam confirmed it has completed a £28m acquisition facility on a 43-unit apartment block in Camden, where rental income fully covers interest payments.
The deal reflects a significant change in the London market. For much of the past 10 years, rental income has typically fallen short of servicing bridging interest, limiting the viability of income-backed short-term strategies.
The scheme delivers a current rental income of £2.25m, equating to an 8% yield and pushing the interest coverage ratio above 1.0x. The loan was structured at 70% loan-to-value over a three-year term.
INCOME-LED BRIDGING
The transaction points to a potential reopening of income-led bridging opportunities in London, particularly where yields have strengthened and pricing has softened.
The borrower, an overseas-based investor, plans to reposition the asset through a hybrid co-living model targeting young professionals, corporate tenants and international students. The strategy is expected to lift rental income by more than 10%, pushing yield beyond 9%.
Additional income will be generated through the building’s 44-space car park, which will be leased to a national operator. The exit strategy is to refinance onto longer-term bank debt once income is stabilised.
The deal also highlights continued appetite for complex transactions, with the lender navigating cross-border structuring requirements and delivering within a tight acquisition timeline.
STRONG FUNDAMENTALS
Marc Morris, head of underwriting (UK & Germany) at Fiduciam, says: “Fiduciam’s latest transaction reflects our continued confidence in the London market, underpinned yield growth and resilient fundamentals.
“The loan benefits from an expected interest coverage ratio above 1.0x, an initial rental yield of approximately 8% on purchase price, and scope for enhanced returns by utilising the sponsor’s experience in the corporate letting and international student markets. The facility was structured with a disciplined approach to risk, with leverage assessed against the asset’s break-up value to ensure strong downside protection.”
And Johan Groothaert (main picture), CEO of Fiduciam, adds: “This deal highlights Fiduciam’s ability to move quickly and execute complex transactions.
“We continue to see strong opportunities in London, particularly where experienced sponsors are acquiring and repositioning assets to meet evolving demand.”
