Our customer carried out a part refurbishment part new build development of flats in an excellent provincial city-centre location. The development produced 12 apartments (a mix of studios, one bed and two beds) and a commercial area with planning for restaurant use.
Unfortunately, by the time the development was exposed to the market, demand for apartments was much reduced. We have worked with the customer to get all of the residential units let on shorthold tenancies so that there is now rental income to defray interest costs. The rents are generating a yield of 6% on the debt.
At the start of 2009 we are working with the customer to enable the refinance of our debt into medium term mortgages and are considering some sales. We have found that, by adopting a flexible approach to the current market difficulties, we are able to work with our customers and achieve a mutually satisfactory outcome.
Loan: £1.35 million
Loan to value: 6% pa