We recently helped an investment banking client to purchase a mixed-use property in a prime central London location. The property was to be an investment and comprised a mix of residential and office space. The client had a strong, liquid net asset value with a similarly strong track record of income from their profession, albeit complex in itself.

The challenge

The complexity in this case lay with the property itself; the previous owner had owned it since the 1960s, with residential units occupying the lower ground, first, second and third floors, and office space on the ground floor. Furthermore, one of the residential units on the second floor was held under a regulated tenancy. 

The buyer intended to convert the office space to residential as well as fully refurbish and re-let all existing units, but although the purchase price looked to be of good value, the yield was considered low, which was in part due to the unusual layout. The other complication was around any potential structural works to convert the office space for residential use, which would require approvals from the lender before being carried out. 

The solution

Working with our client, we were able to structure the mortgage on an interest-only basis over a 10-year term to enable purchase, conversion and refurbishment of the property. 

We saw their intention with the property and coupled with a full picture of their assets and income, we were comfortable that despite the low yield and development risk, repayment would be possible either through the sale of the asset or through liquidation of other assets if required.