Arc & Co has arranged a £1.2m refinance of a five-property buy-to-let portfolio involving overseas shareholders and a multi-layered corporate structure.
The transaction was arranged by Dieter Kerschbaumer, asset finance adviser at Arc & Co., and involved five residential apartments held across two UK special purpose vehicles within a wider group structure.
The client’s ownership profile presented a number of challenges. More than 75% of the shareholding was held by South African nationals, while two of the properties sat in a UK SPV with ultimate ownership traced to a Mauritian company.
This combination significantly reduced the pool of available lenders and introduced enhanced know-your-customer requirements.
The refinance required careful restructuring at SPV level to ensure the transaction remained viable. In particular, the limited availability of foreign national buy-to-let funding, with most lenders capping leverage at 65% LTV, constrained initial options.
In addition, South Africa is classified as a high-risk jurisdiction by many lenders, while overseas shareholders are often required to execute loan documentation in person, creating the potential for delays.
Through its funding network, Arc & Co identified a lender willing to support the transaction subject to changes in the group structure.
The two assets held by the SPV owned by the Mauritian company were transferred into the UK-held SPV, removing the need for enhanced due diligence linked to overseas ultimate ownership.
Ownership of the SPV was then restructured, with the holding company taking a 96% shareholding and two UK directors holding 2% each. This adjustment reduced the South African shareholders’ interest from 25% to 24%, allowing the lender to accept minority shareholder waiver agreements rather than requiring full loan documentation to be signed overseas.
The lender also agreed to Lightfoots acting as dual representative on the legal documentation. Having previously acted for the client on another transaction, the firm already held the necessary client information, helping to streamline the legal process.
The completed refinance comprised a £1.2m facility on a five-year fixed rate at 5.89% from a challenger bank.
The structure enabled leverage that would not typically be available to foreign national investors, without requiring the South African shareholders to sign loan documents.
Kerschbaumer (pictured) said: “It was great to structure a solution with the borrowers that enabled a smooth transaction and unlocked leverage that wouldn’t otherwise be available in a limited market for foreign nationals.
“The borrower’s proficiency and bank’s commercial approach were key to the successful end result.”
