Large Property Finance
Finance for substantial UK property acquisitions, investment assets, developments, refinancing and transactions requiring between £10m and £50m of debt.
At this level, lender selection follows a proper assessment of the property, borrower, cash flow, leverage, proposed use of the debt and route to repayment.
Large property finance starts with the transaction, not the loan amount.
A £25m loan against a well-let commercial investment with a strong sponsor may be relatively straightforward. A smaller facility against an asset with substantial works, uncertain income or a difficult exit may require considerably more thought.
The borrowing requirement therefore tells only part of the story. Before considering lenders, we need to understand the property, what is being done with it, how the debt will be serviced, the amount of equity involved and how the lender will ultimately be repaid.
There may be several lenders prepared to consider a £30m transaction. The important work is deciding how much debt the transaction should carry, how the facility should be structured and which lenders are a genuine fit for the risk.
That becomes particularly important where a transaction sits between conventional bank lending and more flexible specialist or private-credit capital.
£10m–£50m requirements arise for very different reasons.
The appropriate finance depends on what the borrower intends to do during the life of the facility, rather than simply the value of the security.
Investment acquisition
Purchase of stabilised or substantially income-producing commercial, residential or mixed-use property.
Development
Ground-up construction, large conversion or substantial repositioning where debt is drawn progressively as work proceeds.
Transitional property
Assets requiring works, leasing, planning or another identifiable change before conventional longer-term finance becomes appropriate.
Refinancing
Replacement of existing borrowing where the current asset value, income and business plan support a new facility.
Development exit
Refinancing a completed or substantially completed development while units are sold or a longer-term facility is arranged.
Capital restructuring
Raising or reorganising debt against an existing property or portfolio for a clearly defined commercial purpose.
At larger loan sizes, the lender will look well beyond the property.
Security remains important, but a lender committing £20m, £30m or £40m will normally want a clear picture of the people and organisations responsible for the transaction.
That includes previous experience, the current portfolio, existing borrowings, financial resources and the borrower’s ability to deal with a business plan that does not run exactly as forecast.
Development transactions require particular attention to delivery experience. Investment cases place greater emphasis on asset management, tenant and lease risk, operating cash flow and the sponsor’s ability to manage the property over the term.
Information likely to matter
- Ownership and group structure
- Relevant completed transactions
- Current property portfolio
- Existing secured and unsecured debt
- Financial statements and current management information
- Available liquidity
- Source and timing of equity
- Joint-venture or investor arrangements
- Management capability
- Existing banking and lender relationships
A large property loan needs more than an LTV calculation.
The model should show where the money comes from, where it goes, how the borrowing changes through time and what happens if important assumptions prove wrong.
Sources and uses
Acquisition, works, professional costs, finance costs, fees and borrower equity should reconcile to the total transaction requirement.
Debt profile
Opening debt, later drawdowns, rolled or serviced interest, peak borrowing, amortisation and repayment should be visible.
Property income
Rent, voids, incentives, operating costs and material lease events need to be reflected where the property is income producing.
Development costs
Development cases require a detailed cost plan, contingency, programme, drawdown profile and reliable cost-to-complete position.
Value and leverage
LTV, LTC, LTGDV and income-cover measures are useful, but need to be read alongside the assumptions producing them.
Sensitivity
Values, yields, rent, costs, construction timing, sales rates and interest costs should be tested where they could materially change repayment.
On a £30m facility, the opening leverage is only one point in the analysis. Of greater interest may be peak debt, interest during the term, the amount of additional equity available and the position if repayment takes six months longer than originally expected.
Large property finance can sit across several parts of the lending market.
Major banks remain important at these loan sizes, but they are not the only source of capital. Specialist banks and private lenders can be relevant where the transaction requires a different level of leverage, flexibility or execution.
| Type of lender | Transactions that may fit | Points likely to influence the decision |
|---|---|---|
| Major banks | Established investment property, larger corporate borrowers, development and transactions where a wider banking relationship may be relevant. | Sustainable income, sponsor strength, asset quality, leverage, sector exposure, banking relationship and overall return on capital. |
| Specialist banks | Investment, development and more bespoke transactions where the borrower or asset does not fit neatly into a large-bank lending model. | Property type, sponsor experience, leverage, cash flow, business plan, exit and the institution’s current appetite. |
| Private property lenders | Bridging, acquisition, transitional property, development exit and transactions where timing or structural flexibility is particularly important. | Asset value, downside protection, leverage, sponsor, business plan, term and clarity of exit. |
| Layered structures | Selected transactions where senior borrowing is combined with another form of capital and the additional complexity can be commercially justified. | Total cost, priority of claims, intercreditor arrangements, control rights and the effect of the structure on sponsor returns. |
The margin is not the whole comparison.
A cheaper headline rate can be offset by lower leverage, amortisation, restrictive release provisions, minimum-interest requirements, extension costs, hedging, exit fees or a structure that leaves more borrower equity tied up for longer. The terms need to be considered together.
The detail of the facility can materially affect the transaction.
On a substantial loan, the commercial terms extend well beyond loan amount, margin and maturity.
For example, a development facility may need sensible drawdown mechanics and unit-release provisions. An investment loan may involve amortisation, cash sweeps, income covenants or hedging. A transitional facility may depend heavily on extension rights and the lender’s treatment of further capital expenditure.
These provisions affect liquidity and flexibility throughout the term and should be considered before a headline offer is judged attractive.
Terms that may require particular attention
- Amount and initial advance
- Future drawdowns
- Interest servicing or roll-up
- Amortisation
- Financial covenants
- Cash sweeps
- Interest-rate hedging
- Prepayment provisions
- Minimum-interest periods
- Extension options
- Asset and unit-release provisions
- Guarantees and other security
- Valuation requirements
- Events of default and cure provisions
A £10m–£50m proposal should arrive as a coherent credit case.
Large transactions generate a considerable amount of information. The difficulty is not producing more documents. It is making the relevant information easy to understand.
The lender should be able to establish what is being financed, who is behind it, how much equity is involved, how the debt will behave and how it is expected to be repaid without reconstructing the transaction from separate emails and spreadsheets.
Weaknesses should also be dealt with directly. A lender will identify them during underwriting in any event, so there is little value in leaving obvious questions unanswered.
Agreement on terms is only part of completing a large loan.
The number of parties involved tends to increase with transaction size. Valuation, legal, technical, KYC and funding requirements can therefore become material parts of the timetable.
Valuation
The basis of value, leases, business plan and any assumptions relied upon by the valuer need to be consistent with the proposed facility.
Technical review
Developments and substantial capex cases may require monitoring-surveyor, environmental, structural or other specialist work.
Legal work
Title, leases, planning, guarantees, debentures, share security and intercreditor arrangements can all affect completion.
Funding
KYC, source of funds, equity evidence, hedging, conditions precedent and completion funds flow need to be dealt with before drawdown.
Two lenders can look at the same property and reach different conclusions.
Credit appetite is not determined solely by the merits of an individual transaction. A bank will also have its own limits by property type, geography, borrower, sector and concentration, together with wider balance-sheet and capital considerations.
This is one reason why a proposal can fit one institution well while receiving little interest from another.
The Prudential Regulation Authority’s credit-risk framework includes specific treatment of commercial real-estate exposures and real-estate collateral. Further information is available from the Bank of England Prudential Regulation Authority .
For the borrower, the practical point is simpler.
A lender declining a transaction does not necessarily establish that the property is unfinanceable. It may reflect that lender’s current exposure, sector limits, required return, credit policy or view of a particular part of the market.
That makes targeted lender selection more useful than circulating a substantial proposal widely.
A lender being prepared to advance the money does not settle how much should be borrowed.
Debt can improve the return on equity when the transaction performs as expected. It also reduces the room available when values, costs, income or timing move against the borrower.
Little room for valuation movement
A structure close to its maximum leverage can become uncomfortable quickly if the valuation or eventual sale price is lower than expected.
Refinance depends on everything going right
An exit requiring optimistic rent, value or yield assumptions deserves particular scrutiny before short-term debt is taken on.
Finance cost changes the economics
Additional leverage may appear attractive until interest, fees and a longer holding period are reflected in the project return.
Capital is being released too early
The existence of valuation headroom does not necessarily mean that extracting all available equity is sensible while material transaction risk remains.
A bridge is only buying time
Extra time is useful where there is a credible route to improvement or repayment. It is less useful where the underlying problem remains unchanged.
Sponsor liquidity is too tight
A large lender commitment does not remove the need for the borrower to meet costs or timing pressures that fall outside the facility.
Large property finance requires more preparation before lenders are approached.
We first establish the property, borrower, purpose of the borrowing, cash flow, existing debt, equity position and repayment route. From there we can consider how much debt appears reasonable and the type of facility the transaction requires.
The proposal can then be prepared for a smaller group of lenders whose criteria and appetite are relevant to the case.
Understand
Establish the borrower, property, business plan, existing debt, equity requirement and proposed repayment route.
Test
Review cash flow, leverage, valuation, cost, liquidity, facility duration and downside cases.
Prepare
Put the financial model, transaction summary and supporting information into a coherent lender presentation.
Present
Approach lenders whose mandate fits the transaction and manage the case through credit, due diligence and completion.
The amount required does not determine the finance product.
A £15m transaction may be development finance, a commercial investment mortgage, a bridge or development exit finance. The underlying purpose and repayment strategy remain the starting point.
Large property finance questions
What do you mean by large property finance?
For this page, we mean UK property transactions requiring approximately £10m to £50m of borrowing. The underlying facility may be investment finance, development finance, bridging, refinancing or another property-backed structure.
Which lenders consider £10m to £50m property transactions?
The market can include major banks, specialist banks and private property lenders. Which lenders are relevant depends on the property, borrower, leverage, cash flow, purpose, term and repayment route.
Is bank finance always the cheapest option?
Not necessarily when the facility is considered as a whole. Margin is important, but so are leverage, fees, amortisation, drawdown terms, hedging, extension rights, release provisions and the amount of equity required.
What information is required for a £10m–£50m finance proposal?
The lender will normally require detailed information on the borrower or sponsor, property, existing debt, financial position, business plan, equity, valuation, income or development costs and the proposed repayment strategy.
Can large property finance be used for development?
Yes. Larger borrowing requirements can arise from ground-up development, conversion and substantial refurbishment as well as investment acquisition, refinancing and bridging.
Why use a broker or adviser for a large transaction?
The useful work is not simply identifying institutions that lend at the required level. It is assessing the proposal, deciding how it should be presented, identifying suitable lenders and helping manage the finance process through to completion.
Discuss a substantial property finance requirement.
Send us the property, borrower or sponsor, amount required, purpose of the borrowing, existing debt, equity position and proposed repayment route.
We can then consider the transaction before deciding which part of the lender market is appropriate.
This page provides general information about commercial and property finance and does not constitute personal financial advice or a commitment to lend. EAS Finance is a trading name of Elite Admin Services Ltd (FRN 1044838), an appointed representative of White Rose Finance Group Ltd (FRN 630772), authorised and regulated by the Financial Conduct Authority. EAS Finance is a credit broker, not a lender. Lending appetite, structure, pricing and terms depend on the individual transaction and lender.