When a repeat borrower came to us with plans to convert a Grade II listed office building into a 7-bed HMO, the deal looked straightforward on paper. Planning was approved. Listed building consent was in place. The exit strategy via BTL was solid, with a strong rental yield potential of £37,800 per annum.
But there was a catch. The borrower needed to complete on the same valuation report used for their original planning bridge. This is due to it’s fixed validity period before the report expires, and for this loan that meant completing within a hard deadline of 36 days.
The property, located in central Gateshead just south of Newcastle city centre, offered strong potential. The area serves young professionals and university students, and the site sits outside Newcastle's Article 4 direction, making HMO conversion viable without needing planning permission.
Key Challenges and Solutions
Hard Deadline Tied to Valuation Expiry
The borrower wanted to proceed on their existing valuation report rather than instructing a new one. This created a fast-approaching deadline before the valuation expired. We worked with the valuer to agree the original valuation could still be relied upon, ensuring the borrower could complete without delay or additional cost.
Listed Building with Historic Breach
Before the borrower purchased the property, there had been a breach of listed building consent on the property. This created uncertainty around the condition of historic elements. We provided additional contingency within the development tranche specifically for remedial works to the listed elements, protecting both the borrower and the project.
Complex Conversion Requiring Specialist Assessment
Converting a Class E commercial property to a 7-bed HMO required careful assessment of the works schedule as it involved significant structural changes, layout reconfiguration, and regulatory requirements. We completed the day after receiving the monitoring surveyor's report, demonstrating our ability to move decisively once due diligence was satisfied.
The Outcome
The borrower secured £224k to refinance their existing bridge and fully fund the conversion works. With a GDV of £345k and strong rental yield potential of £37,800 per annum, the exit via BTL refinance is well supported.
