EXIT IS THE KEY Most lenders will require you to prove an exit strategy to a bridge, but it is really down to you and your broker to ensure that this exit is realistic. An exit will usually fall into one of two categories - sale or re-finance of the asset. Occasionally, it can be via the sale or refinance of a separate asset. CASE STUDIES Here are two examples where we have used bridging loans in the correct way for our clients. In both of these examples, we worked with Together Money. Working closely with the team, we were able to secure fast, effective funding and ensure an exit was available. COMMERCIAL OFFICES – TIME In this case study our client secured the purchase of a large, multi-tenanted office building, off market, for circa £13m. The seller, a large US fund, required completion within 28 days of exchange for not marketing the property on the open market. We worked closely with the lender to ensure their valuation requirements and legals were in place to allow completion to occur on time. The client was then able to make some small adjustments to the lease profile in terms of break clauses. We were then able to refinance the property onto a term facility.
RESIDENTIAL PLANNING ACQUISITION
A second example relates to a significant residential scheme in York. Our client entered a bidding process, via CBRE, to acquire a brownfield city centre site that while, zoned for residential in the local plan did not have planning permission in place. Many bridging companies are cautious of sites without planning but Marc and Rob worked closely with us, and a combination of the quality of the site, their confidence in the client and in us, along with their understanding of the planning process allowed us to secure funding for the client to acquire the site on a 24 month basis. Over the 24 months, the client was able to secure planning for over 600 units on the site. This obviously increased the value significantly and we were then able to secure finance via Octopus to repay the bridging facility and move forward with the development of the site. WHEN SHOULD I NOT BRIDGE? You should not use a bridge because you cannot secure term finance at all or where a bridge provides a higher loan amount than term finance (unless of course one of the above added values applies). You should not use a bridge to raise finance for other purposes, unless you are certain of being able to repay. Essentially, you should not use a bridge in any circumstance when you do not have an exit.
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