Commercial Mortgage on warehouse - rates..

D

doberden

Registered User
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Hi,

A friend of mine has a mortgage on a warehouse/office and is currently on a rate of 5.5%. He's about to go in to negotiate with the bank. Is anybody aware of any better rates on offer. His loan to equity is under 70% based on current valuations.

Thanks,
 
That's seems a good rate as it certainly below 2% margin. 3M Euribor was 3.563% on Frday and the rate might be based on the Euribor from a few weeks back.
Things to consider:
Is the warehouse on long term lease with upward only rent reviews?
How many years remain?
Who are the tenants and what sector do they operate in?
Are they a large company and what are the prospects in Ireland for them over the next 10/15 years.
Whats the interest cover?
Where is it located? - Is it in a major urban area or out in the sticks somewhere?
What other assets does your friend have to cover repayments and what is his net worth?
70% LTV is just about acceptable to a bank now. I would not consider this a great LTV and I doubt the bank will either.

If he can negotiate a better deal with the bank he will be doing very well. He could agree to maybe a 0.25% margin reduction based on a covenant that the LTV does not exceed 70%. That's a big risk as commercial space is declining on value due to the slowdown in retail and manufacturing.

The bank could quite easily stick to their margin and be privately delighted if he goes elsewhere.
 
Don't look a gift horse in the mouth !!! Where did your friend get his valuation from ?? Valuations, (especially those used by the Banks) have taken a nosedive recently. He may be asked to provide additional security and /or reduce his LTV. The points mentioned by VOR are real and will be asked. Which Bank is he using ??
 
I really do not think he has grounds to negotiate. The banks are so top heavy with property loans that they might try and off load his business. Obviously it all depends on the location, tenant, terms of lease and the current rent. Let us know how he gets on.
 
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