There’s no question property investors believe there are opportunities around at the moment for improving their portfolio, and are increasingly acting upon them.

One area that has been particularly busy recently has been portfolio transactions. Tuscan has helped a succession of landlords and developers who have looked to refinance or restructure their portfolios of properties, rather than single units.

These cases come in all sorts of different forms. Some have been landlords with large portfolios who want to make use of a bridging loan before securing more long-term finance, while others have been developers who have looked for development exit finance to help them as they push on with finishing the project and selling off the remaining properties.

What unites them is the way that a smartly-arranged bridging loan can put them on the front foot for refinancing down the line.

Getting portfolio transactions right

By their very nature portfolio transactions are more complicated than those involving a single property. That doesn’t have to prove a significant barrier, however — it all comes down to the attitude of the lender.

An important aspect in our experience here has been viewing individual cases on their own merits. It’s crucial to recognise each of these deals will inevitably have their own quirks and intricacies, and so need a bespoke approach.

That extends to the pricing and the terms of any offers — while lenders will have a ‘headline rate’ for such cases, in practice the actual terms provided may be more competitive based on the fundamentals of the portfolio.

What’s also crucial is the exit strategy. That’s true with any bridging loan but takes on even greater emphasis when a portfolio is involved.

When you get into the nitty gritty of a case, it’s common that that loan is effectively written based off that exit strategy — and how viable it is — rather than the current state of the assets involved.

Brokers can really come into their own here, taking the time with the client to get a better feel for the detail of the case and what the long-term strategy is.

By doing that and ensuring there is a really viable exit plan in place, they can ensure the client receives the best possible terms.

•   B&C Awards 2024: The Video
•   Tuscan Capital and Arc & Co complete £6.8m Cheshire luxury property deal
•   Tuscan Capital completes £2.1m mid-term loan for Midlands mixed-use properties

Equally, it’s vital for brokers to familiarise themselves with the lenders who are not only most comfortable handling such cases, but who are able to consistently deliver competitive financials on the deal.

Wait and see

I think it’s also worth reflecting on precisely why we are seeing increasing numbers of landlords looking to refinance their portfolios in this way.

The reality is that right now, the prospect of signing up to a traditional BTL mortgage for their portfolio is far from tempting.

While rates have come down from their peak following the ‘mini budget’, the truth is they remain much higher than landlords are willing to pay for a lengthy period. This reticence to lock into a deal is only exacerbated by the prospect of rate cuts, with the first expected imminently. 

Why would landlords want to sign up for a deal where the rate is locked in at more than they want to pay, when they are confident rates are about to start moving in a more attractive direction?

Instead we are seeing great interest from landlords who recognise the ability to use a bridging loan as a bit of a halfway house, a flexible option for the here and now. Ultimately the rates are not much different from those BTL products, but there are not the same interest coverage ratio tests to worry about.

Similarly, there is a simple exit route - when rates on longer-term products fall to a level the landlord is comfortable with, they can refinance from the bridging loan without worrying about exit fees. That sort of shift simply would not be possible without punitive charges if they moved to a regular buy-to-let product.

Using a bridging loan in this way also offers investors the opportunity to take stock and rebalance their portfolio. They can sell off underperforming assets and reshape their investments, again without the issue of exit fees, so they are better placed when the time eventually comes to sign up for longer-term finance.

Adding value

The flexibility and value offered by bridging loans is becoming ever clearer at the moment, and is only likely to continue.

With loan books already at record highs according to the Bridging and Development Lenders Association, the market is on a real high, so it’s important for brokers to work closely with experienced lenders who can deliver a fast and consistent service to their clients.