Market Financial Solutions completes complex bridging loan for shopping centre acquisition

By Bridging Loan Directory 23rd July 2021

Market Financial Solutions (MFS) has completed a large bridging loan to enable a returning client to complete a complex shopping centre purchase.

MFS had originally provided a £3.8 million loan to the client to purchase a different shopping centre in March.

At the time, several other lenders had rejected the commercial asset due to its empty units caused by businesses exiting leases early due to the pandemic.

But based on the client’s assets, as well as their commercial background and business experience, MFS agreed to provide the loan.

In June, this client returned to MFS requiring finance to purchase a second shopping centre in the South of England. They were to sell the original commercial asset, which had increased in value since the purchase, but were waiting for the deal to be completed.

The second shopping centre had been bought at a commercial property auction, with the auction house having issued a ten-day notice to complete. Again, the asset had several units that were empty, but MFS was still able to provide finance within the timeframe.

MFS was quick to instruct a member of its valuation panel, but two issues were uncovered that MFS’ underwriter then had to resolve.

The first was that the shopping centre had replaced a petrol station in the late 2000s, raising potential contamination issues.

MFS’ underwriter worked closely with the valuers and solicitors, establishing that the previous planning permission granted by the local authority when the shopping centre was built had required evidence of no contamination issues, thereby satisfying this concern.

The second issue was that there was a standstill agreement regarding a small area of stonework. MFS’ underwriter had to uncover the greatest potential cost of this issue with the solicitors and determine if this would affect the property’s value.

In turn, it was established that the projected income of the asset covered the potential cost of rectifying the agreement. Combined with the age of the property, the value also remained high and unaffected, allowing MFS to proceed.

MFS issued a £1,755,000 bridging loan at an LTV of 65% and with a 12-month term. The loan was arranged within just 10 days to meet the auction deadline.

Paresh Raja, pictured, CEO of MFS, said:

“Large commercial units like shopping centres will often present unique challenges for lenders, but we were delighted to be able to assist our returning client by delivering a large loan in a matter of days.

It is a great example of MFS’ speed and flexibility in handling all manner of enquiries.

In this case, the fact the asset was being purchased at auction and a tight deadline was imposed, coupled with the issues flagged by the valuer, made matters particularly complex.

We applied our experience and expertise to quickly overcome the challenges though.

Moreover, as with the original loan we provided to the client, we were also able to see the bigger picture – knowing their business nous and the other assets they held, we knew we could proceed with confidence.”