MIXED RESIDENTIAL INVESTMENT PORTFOLIO - £70M
Over a 5 year period, Southern's client, an offshore investment group under UK management, has assembled a mixed residential portfolio of hostels, HMO's and AST's with a market value in excess of £100m.
Following completion of a refurbishment and letting programme the properties were revalued allowing capital to be released to fund furthur purchases and the ongoing growth of the portfolio.
Southern worked with a UK Clearing Bank and a Building Society typically obtaining 15-25 year loans of 70-75% of purchase price with interest only being paid at LIBOR +1.75% until the investment was established. Thereafter the property was revalued, the loan increased and interest reduced to 1.5% over LIBOR.
In view of the ultimate strong cash flow, interest has been on a variable basis allowing the borrower to benefit from low interest rates and flexible amortisation.

PETROL FILLING STATION PORTFOLIO - £41M
As part of a corporate acquisition, 63 freehold and long leasehold petrol filling stations were acquired and financed in a single purpose vehicle (SPV).
Southern devised a 'PropCo/OpCo' structure whereby a synthetic lease at market rent was entered into between the property owning subsidiary and its sister operating company. This allowed the assets to be treated as a property investment with debt service financed from the rental cashflow. Headline terms provided for interest at 125 Bps over LIBOR Swap and partial amortisation over 15 years.
Southern reviewed the opportunity with four lenders and selected a UK Clearing Bank based on their commitment to the acquisition, their ability to expedite the transaction and to meet the terms that Southern had outlined to the client.

RESIDENTIAL GROUND RENT PORTFOLIO - £40M
Southern's client, a UK investment group, owned a portfolio of over 80,000 residential ground rents generating long-term predictable secure income. Using modern actuarial valuation techniques, each element of the cashflow was carefully analysed and the resultant valuation supported substantially more debt than would otherwise have been achieved.
Heads of Terms were agreed with a UK clearing bank and the Loan-to-Value covenant established at 75%. The lender acknowledged that the assets would increase in value as the term of the leases reduced and therfore agreed to a modest amortisation programme.
A loan period of 15 years was agreed with the interest calculated at 125 Bps over the LIBOR swap. After repayment of existing borrowing, meaningful funds were released enabling the investors to acquire further assets utilising the equity released.

MARKET TOWN RETAIL PORTFOLIO - £20M
The client, an off-shore private investor, who first came to Southern in 1993 with four retail properties, has now assembled a retail portfolio valued in excess of £25m which generates a rental income of £1.6m per annum.
Selective purchasing in good UK market towns underwritten by strong retail tenants such as Boots, Currys and Orange has led to consistent rental growth and increase in capital values. Consequently, periodic asset revaluation has allowed equity to be released for similar new purchases.
A strong, on-going relationship with one UK lender has been established resulting in the borrower benefiting from a low-interest margin of 110 Bps over the LIBOR Swap. The amortisation has been minimised, so that on expiry of occupational leases, the residual debt is 60-65% of vacant possession value. Accordingly the borrower has been able to achieve loans of 80-85% of market value.