In the Spring of 2016, United Trust Bank’s (UTB) bridging team was approached to assist with the purchase of redundant office space above a bank in a period building in Kent and to fund the works for its subsequent conversion into two apartments.
A year later and the development by Regents Bay is complete with developer Bhav Patel having created two character apartments in a grand bank building. Regents Bay has a strong track record in property refurbishments and the team were able to show UTB that they were equal to the task by virtue of having successfully completed three similar projects.
Between exchange of contracts and completion, Patel obtained planning permission for the change of use from A2 to C3 which paved the way for the office space to be turned into two 1,250 sq ft apartments.
The purchase price of the office space was £270,000 with the conversion works estimated to cost a further £125,000. The bank’s valuer assessed the Gross Development Value (GDV) of the completed apartments to be in the region of £550,000 and the initial market value to be £250,000. UTB agreed to provide an initial advance of £162,500 representing 65% of the initial market value of £250,000, with interest being rolled up and added to the loan.
UTB also agreed to fund 100% of the works costs in arrears, which the borrower requested to be paid out in four tranches. The total original facility, including the initial advance, loan fees, rolled up interest and works costs totalled £315,000, representing 57% of GDV.
The apartments were successfully completed on time and within budget. Between the inception of the project and the completion of the apartments uncertainty created by the EU referendum and further political turmoil have taken their toll on the local property market with Regents Bay seeing a drop off in buyer activity. With the term of the Residential Property Improvement Loan coming to an end, Regents Bay discussed their options with UTB and decided to commute the facility to an investment loan. This enabled them to release some equity from the development and give them more time to market the homes to achieve their optimum prices. The new facility was offered at a lower interest rate to reflect the decreased risk now that the apartments were finished and being marketed. In addition, Regents Bay are progressing another funding proposal with UTB to convert a 19th century church to provide high-end, bespoke homes.
Bhav Patel, director of Regents Bay, said: “It has been a pleasure to deal with United Trust Bank on this project. Not only was it so much quicker than dealing with a high street bank, both in getting an initial decision and releasing the first tranche of money, but the team at UTB also bring a human side to the relationship which is lacking from many lenders currently. In my experience, enquiries to a large bank for facilities of under £2m are often handed off to a centralised platform where a customer service person will take you through some set vague questions. They don’t fully take the time to understand the project itself and therefore the need.
“When working with the team at UTB it’s very much a partnership. They work hard to find a solution that’s suitable and beneficial to both the customer and the bank. That was apparent when the property market cooled down causing us to make a change of plan with the apartments. They understood our situation, were happy with our suggestions and put together a flexible and competitive solution we were all happy with. When we identified our next project, the church in East Sussex, UTB was my first choice to approach for the funding.”
Gavin Diamond (pictured), commercial director – bridging at United Trust Bank ,said:
“This is an excellent example of how experienced property professionals can use UTB’s residential property improvement loan to complete a project using a relatively small percentage of its own capital. By combining our experience in both bridging and development finance, we created an innovative, flexible and highly competitive product which suits borrowers looking to fund a wide range of projects from straightforward refurbishments to more complex conversions and extensions.
“The Regents Bay team have done a great job on this conversion, creating two high quality and distinctive homes. When Bhav came to us to suggest restructuring the funding rather than rushing to sell the apartments within the original loan term, we were happy to put together a solution which met his and our requirements and we’re looking forward to supporting Regents Bay on their next exciting project.”