B&B Refinance from Residential to Commercial Mortgage

The Old Mill, Bere Regis

David & Lorna have, very successfully, owned and operated, The Old Mill B&B in the lovely Dorset village of Bere Regis. They originally purchased the property as a residential property and the B&B evolved over time, however, over the last couple of years they became aware that instead of a residential mortgage they should have had a commercial mortgage as they were trading as a B&B.

David & Lorna spent some time looking at their options and eventually decided to engage Stewart Hindley & Partners to look at the finance options available to them and to arrange the refinance. Luckily the business had a good level of turnover and the net profit was sufficient to support the required debt service cover. This is not always the case when people trade on a residential mortgage and the consequences can be serious. If you would like to know more about this check out our article on “Are you Risking your B&B

The location of The Old Mill was also a bonus in that it is close to the Jurassic Coast, Monkey World and The Tank Museum which are all popular Dorset visitor attractions.

Needless to say we have successfully remortgaged the property and have given David & Lorna the security of knowing that they are not breaching any mortgage covenants and have the best possible deal available to them.

Check out the website for The Old Mill

What David & Lorna say about working with Stewart Hindley & Partners….

With our circumstances having changed since we originally purchased our property it was clear that we would have to make the transition from a residential mortgage to a commercial mortgage.

We approached a few brokers to undertake the job of finding us a suitable lender that would work with us and our B&B business. In the end it was a simple decision to instruct Stewart Hindley & Partners.

They took on the task of compiling sound evidence that our business was a profitable and sound concern before approaching potential lenders.

This was all completed in a timely and uncomplicated fashion and would highly recommend Stewart Hindley & Partners to anyone thinking of financing a B&B operation either as a start up or a going concern.

 Many Thanks indeed

 David & Lorna Ventham – The Old Mill

Scottish Commercial property finance case study

The Objective

John Noonan a self employed hospitality consultant and his business partner John Galloway, a Regional Manager with a leading pub and restaurant company decided to pool their respective skill sets and capital to purchase the Eskdale Hotel, Langholm, Dumfriesshire.

Due to a retirement sale, this property offered them tremendous scope for revenue development and capital growth whilst affording them a true life-style business opportunity complementing their invaluable experience in the hospitality sector.

The Solution

Given the trade was in decline due to the vendor’s ill health and pending retirement, the accounts did not reflect the true commercial potential of the property which is located in Langholm, a historic town nestling amidst the rolling hills of the Scottish Borders and Dumfries & Galloway.

Stewart Hindley & Partners undertook the whole debt raising process and prepared adjusted accounts based on industry norms. These were underpinned by comparable financial data of similarly profiled concerns, for the purpose of commercial property lenders debt servicing requirements.

Given that the Eskdale Hotel’s trade was predominately “wet led” we worked with our clients to develop a viable business plan. This was based on a mix of revenues focusing on food and accommodation and repositioned the concern as a destination venue; so fulfilling the lenders criteria for the sector and debt servicing.

The Result

The hotel loan offered, over a term of 20 years, enabled our clients to purchase the Eskdale Hotel at a price that allowed them to invest the balance of their capital for refurbishment. This, in turn, enabled them to improve revenues and reposition the Eskdale as a destination venue for visitors and locals alike.

Comments

Stewart Hindley & Partners proposed an elegant solution debt which met our and the hotel lending criteria, which allowed us to reduced the deposit required which resulted and allowed for additional capital to be invested into the business.

We were able focus on our plans for the Eskdale Hotel without the pressure of raising debt which had been subsequently declined by other lenders. From the outset Stewart Hindley & Partners gave us the confidence that they could make this happen for us. We can’t thank them enough for their efforts.

John Noonan & John Galloway
Eskdale Hotel, Langholm

Commercial mortgage case study – Inn@West End

The Objective

  • Gerry Price, the landlord of the Inn @ West End, a very successful destination pub and dining establishment, wished to purchase the freehold of the concern from Enterprise Inns. Gerry had been an Enterprise tenant for over 10 years and had developed the trade substantially over the years and a consequence the monthly rent was in his own words more than a commercial mortgage.
  • Gerry had the choice of buying a freehold concern elsewhere, or consolidating on the trade he had developed by approaching Enterprise to purchase the freehold. Enterprise were receptive to the latter approach, providing the deal could be finalised and completed within 6 weeks prior to Enterprise’s year end.

The Solution

  • Given the strength of the Inn @ West End’s trading performance and given his proven operator status, debt was offered by several commercial property lenders on varying terms and incentives.
  • Additional facilities were also sought to provide for the development of the trade within the principle facility offered; with limited conditions and covenants.

The Result

The debt offered enabled Gerry to make an offer (which was subsequently accepted) for the freehold on exceptionally favorable terms, with the added benefit of the “cash back” incentive under the Government’s Funding for Lending Scheme.

Comments

Given the general attitude of many High Street lenders I was despondent that we could raise debt in our own right, even with a proven and successful track record. We contacted Stewart Hindley & Partners who steered us through the complexities of commercial property finance in the pub a sector where lenders are risk adverse with limited funds available.

The key to securing the right level of debt was to establish the market value from Enterprise’s and our own prospective, As Stewart Hindley are know to al the lenders panel valuers a desk top opinion was quickly sort which provided the base line for our negotiations and debt requirement which could be serviced from the exiting trade.

Without this invaluable advice we would have either paid a premium over market value for the freehold which would have resulted in a higher deposit requirement leaving us dependant on additional borrowings from other sources to meet the balance required to purchase the freehold.

Stewart Hindley & Partners cut to the chase without cutting corners to secure the debt within the timescales required.

Gerry Price
Inn @ West End
http://www.the-inn.co.uk

Commercial property lending case study – Rivenhall

The Objective

Mark Venkatasami a proven health-care operator, wished to diversify into the hotel sector to provide additional health-care related services and conference facilities rather than hiring these facilities from nearby hotels and conference venues, he decided that a hotel would offer synergy with his existing business interests.

Mark offered on the Rivenhall Hotel and Spa which was accepted by the joint administrators, subject to hotel finance.

The Solution

  • As the concern was in administration, no accounts or warranties could be offered. As a consequence, securing hotel lending would be on a closed value (bricks & mortar), rather than off open market value, which would have required a high deposit.
  • As the disparity between open and closed values was substantial, the commercial property lenders agreed to take a charge over other assets to secure the debt quantum required to proceed with purchase, without the need for personal guarantees.

The Result

The hotel finance deal offered enabled Mark to purchase Rivenhall at a competitive price over a term of 20 years with an initial 5 year fix to provide certainty in regard to debt service. The deal went forward on the fixed rate for the initial term, thereafter reverting to a standard variable rate.

Given the administration process and the declining revenue, standard debt servicing criteria would not have been met. Stewart Hindley & Partners proposed an elegant solution that met the lenders criteria and reduced the deposit required.

This allowed for additional capital to be invested into the business, rather than making weight with bank debt.

Stewart Hindley & Partners:

  • undertook the whole debt raising process and
  • prepared forensic accounting services to substantiate the trade undertaken at Rivenhall for the purpose of the lenders debt servicing requirements
  • carrying this out on their standard “no win no fee” terms, despite the substantial up-front professional fees incurred in their debt submission to the lenders. Other brokers had demanded up-front fees given the difficulty of securing the quantum of debt required.

Comments

All in all a successful outcome from a professional team of industry experienced accountants and brokers with real “hands on” operational experience. Stewart Hindley & Partners provided a high degree of confidence to all parties concerned in this challenging transaction.

Mark Venkatasami
Rivenhall Hotel & Spa
http://www.rivenhallhotel.com/

Commercial property lenders case study – Highfield Hall Hotel

The Objective

  • Lorraine and Richard Earl had family connections to the hospitality industry and after an established career as an accountant; Lorraine persuaded her husband Richard, who had been in the automotive industry, to follow their family into the trade. After many months of research, they identified Highfield Hall near Chester as their ideal business opportunity.
  • Highfield Hall Hotel represented tremendous value, but traded well below its potential as a result of the vendors low key approach to the trade over several years pending retirement. It would therefore represent a challenge to most uk commercial lenders debt criteria.

The Solution

  • After meeting with various commercial property lenders it became evident that debt could only be offered if supported by an additional source of income. This would be until such time as the business could service the debt (when stress tested) in its own right.
  • A lender was ultimately sourced that offered to accept a personal guarantee in favor of debt servicing. This would make additional funds available in support of debt service, if it became an operational necessity to do so.

The Result

The commercial mortgage offered:

  • was ultimately secured by Stewart Hindley & Partners without the need for any personal guarantees and at very competitive market rates, given the unique nature of trade given the pending retirement of the owners.
  • enabled the Earls to purchase Highfield Hall at a competitive price on a viable interest rate, over a term of 20 year
  • allowed for the business to service the debt within the commercial lenders criteria, without duress to cash flow.
  • meant the Earls could focus on developing and managing their trade, rather than worrying about meeting day to day cash flow requirements.

Comments

With Stewart Hindley & Partners working for us, we felt totally assured and confident that the debt would be offered within our and the vendor’s timescales. Without their support its doubtful today that we’d be the proud owners of Highfield Hall.

Lorraine & Richard Earl
Highfield Hall Hotel
http://www.highfieldhallhotel.co.uk

Stewart Hindley & Partners have a team of brokers who are qualified accountants and who really understand the hospitality sector. We are in a perfect position to secure you the best commercial mortgage deal for you, from a choice of commercial property lenders. Contact us now for further details.