Specialist lender Octopus Property and Acuitus Finance have together launched the UK’s first bridging loan for commercial property auction acquisitions.
They have developed a pre-approved, non-regulated bridging loan product for investors who buy at Acuitus auctions.
The product is designed to address the mismatch that currently exists between the amount of time required for an investor to complete an auction purchase and the time taken for a traditional loan to be approved.
Ludo Mackenzie, head of commercial property at Octopus Property, said: “Market access to readily available and competitively priced financing remains difficult, as lenders are unwilling or unable to structure loan deals that sit outside the traditional parameters.
“With this product we are again demonstrating a new way of approaching real estate finance, providing borrowers with a simple yet comprehensive bridging solution.”
Octopus Property will provide a 50% loan-to-value bridging loan based upon the price paid at auction, for properties that sell for £500,000 or more. No further valuation will be required, saving borrowers c. £3,000-£5,000 valuation costs.
Mackenzie added: “Acuitus has built a market-leading reputation as a trusted professional seller of quality commercial property assets, to established national and international high net worth investers, that truly understand the market and we are pleased to have the opportunity to partner with them to deliver this product, which will support buyers and sellers alike.”
The legal process has also been simplified to remove the requirement for a full report on title. Octopus Property will instead procure title indemnity insurance, for which special terms have been agreed with Titlesolv.
The collaboration represents the first time that a major auction house and leading real estate lender have partnered in the UK in this way.
Stuart Buchanan of Acuitus Finance said: “This loan product is a major step forward in terms of streamlining the auction buying process for investors.
“Once an auction purchase is complete, Acuitus Finance can then advise on the best options available to refinance an asset on a long-term investment loan.
“To complement the new bridging product, Octopus Property has also introduced a new interest-only, long-term investment loan which can refinance the bridging loan at a reduced fee.”
Octopus Property pre-approved auction loan terms include a minimum loan of £250,000 and a maximum LTV of 50% or up to 65% with further normal underwriting.
There is interest rate of 0.9% per month, a 1% arrangement fee, no exit fee, a term of six months and a minimum interest period of a month.