Real estate finance specialist SHC Capital has arranged a multi-stage bridging loan to fund the acquisition and refurbishment of four office freeholds in the City of London, in a transaction with a gross development value of £23m.
The facility supports a private investment group that aims to double its £100m office portfolio within two years. The off-market transaction, completed with legal support from Glovers LLP, involved assets forming part of a larger estate and required completion within a compressed timeline.
Deal structure
The bridging facility was structured to evolve through multiple stages. It initially supports the acquisition of the four office freeholds, then adapts to cover a refurbishment phase before transitioning into a stabilisation facility as the project matures.
The investment group is part of a wider property company with a mixed-use portfolio. Its remit is to expand its office holdings, with this City of London scheme central to that strategy.
Tony Tadros, director at SHC Capital, said: “This transaction presented a number of complexities; the assets formed part of a much larger estate, the timeframe was compressed and we had to structure a facility that would evolve with the project’s redevelopment.”
Darren Smith, partner at Glovers LLP, said: “This was a complex transaction that required a swift, solution-focused approach to meet a demanding timeline.”
City of London office market
Demand for well-located office space in central London has remained resilient despite structural shifts in working patterns following the pandemic. The City of London has seen consistent demand from financial services, legal, and professional services firms.
Vacancy rates for well-specified offices remain relatively low compared with secondary stock, which has encouraged investors to target refurbishment projects that can reposition older assets for current occupier requirements. Similar commercial property transactions have demonstrated sustained investor appetite for London workspace.
Multi-stage bridging finance
Bridging finance is a short-term lending product typically used when speed and flexibility are required. A multi-stage facility is designed to evolve alongside the project rather than providing a single lump sum at completion.
An initial tranche funds the acquisition, further funds are released during the refurbishment phase against agreed milestones, and the facility then transitions into a stabilisation loan as the asset moves toward refinance onto a commercial mortgage or sale.
This structure suits redevelopment projects where the asset’s value and income profile will change significantly over time. Lenders assess the loan against the projected end value rather than the day-one purchase price, which can allow borrowers to access more capital than a straightforward acquisition loan would provide.
The loan-to-value ratio, loan term, and draw-down schedule are typically agreed upfront, with some flexibility built in for project contingencies. For investors targeting portfolio growth, structuring finance to evolve with a project can reduce the need for refinancing mid-way through a redevelopment.
Conclusion
The transaction demonstrates continued investor appetite for City of London office assets, particularly those suitable for refurbishment. Multi-stage bridging facilities allow investors to move quickly on off-market deals while matching finance to a project’s development phases.
