Commercial Mortgage Restructuring Yields Significant Savings for Healthcare Business

In the competitive healthcare sector, efficient financial management can make a significant difference to a company's bottom line and growth potential.

When approached for a seemingly straightforward commercial mortgage, our team identified an opportunity to restructure our client's entire property portfolio financing, leading to substantial long-term savings.

The Scenario

Our client, a thriving healthcare business with multiple sites across the UK, approached us seeking a £400,000 commercial mortgage to purchase their Bristol office, which they were currently leasing. They already owned properties in London and Birmingham.

Initially, they had received high-interest rate quotes due to the relatively small loan size, and approached us for a bespoke comparison of their options.

However, after initial dicussions, our team recognised that this presented an opportunity to review and optimise their overall property finance strategy.

The Solution

After a comprehensive analysis of their property portfolio and existing debt, we proposed a strategic restructuring of their commercial mortgage finance:

• Consolidate all existing debt into a single commercial mortgage, secured against the London property, which had the highest value.
• Release equity from the London property to purchase the Bristol office outright.
• And also clear their existing charge on the Birmingham office.

This approach would result in:

• Two unencumbered assets (Birmingham and Bristol offices)
• A single commercial mortgage secured against the London property
• A lower overall loan-to-value ratio thanks to the high value of the London property, making them eligible for lower interest rates

The final terms were:

• Total loan amount: £2 million
• Term: 15 years
• Type: Owner-occupied commercial mortgage (as the company operates from the property). Note: owner-occupied commercial mortgages generally have more lenient loan-to-value requirements than standard commercial mortgages.

We also knew our client’s requirement was attractive to lenders, thanks to the large loan size and relatively low loan-to-value, so we were able to pitch the best offers from each lender against each other.

The entire refinancing marked close to a 2.5% reduction in the interest rate they’d be paying on their debts over the 15-year term; a saving that itself would cover the entire monetary cost of purchasing the Bristol office.

By taking a holistic view of our client's property finance needs, rather than simply fulfilling their initial request, we were able to deliver a solution that not only met their immediate needs but also:

• Simplified their debt structure
• Reduced their overall interest payments
• Freed up capital for future investments
• Strengthened their balance sheet with two unencumbered properties