A corporate borrower wished to acquire a vacant 1970’s office block arranged over four stories in a Surrey town which fell within ‘permitted development’ criteria.
In May 2013 planning requirements were relaxed for the conversion of office buildings to residential use as long as they meet certain other criteria including amongst others that they have previously been used as office space (you can’t build a new office block with the intention of immediately converting it to flats) and that the buildings aren’t listed. Although other planning requirements relating to flooding risk and highways etc. still need to be met, permitted development rights have made it significantly easier for developers to take redundant urban office buildings and turn them into profitable and sought after residential units.
The borrower’s plan was to apply for consent to convert the upper floors of the block to 27 selfcontained flats whilst initially retaining the ground floor offices. Our valuer thought that it was highly likely that consent would be granted.
United Trust Bank agreed to provide a bridging loan of just over half of the current value of £2.8m and permitted the borrower to raise an additional mezzanine facility to rank behind the Bank’s senior debt. This enabled the borrower to reduce its capital injection to around 10% of the purchase price and so retain more of its own capital for use elsewhere.
Loan £1.6m – LTV 58%