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I am a Newbie
Was wondering if anyone can share a solution for the following scenario.
A company would like to separate a retail business from the property it owns and operates from.
Flats are above the shop that is bringing in a steady income, although the retail business being run in the shop is not making any money and the shop business has a bond of £200k against the property.
The business bought the property in the early 90’s so fear a considerable capital tax bill in the event of selling the property.
Because of the retail business being in the red, and the 200k bond on the property, it may be difficult to find a sympathetic lender.
What would be the best solution to give the business £200K in cash (for the security bond) and freeing up the property to operate independently?
I hope I have explained this well.
What is value split between G/F business and Flats above?
Finally got some figures for you although I’m not sure of the current value of the property, but is in a highly desirable area of a North London - Stoke Newington.
Rental income is:-
1 bed flat £1386
1 room large £750
1 room small (double bed) £440
From shop potentially £25k PA and used by the Landlords business.
Back of shop with separate entrance is approximately £1200PA and currently let.
It is located in Stoke Newington, North London.
I had a similar situation with a failing retail business that owned 6 properties. I kept the properties in the business and “Sold” the retail business to a newco. This avoided CGT & Stamp Duty.
Dont know enough about the £200k bond and will depend on what if any debt you have and rental incomes. You could for instance refinance the property and pay the £200k off.
I like the idea of selling retail business out of the company. It’s raising the funds, that is the question.I believe the bond is effectively a charge against the property.
With regards to remortgaging the property, the owners believe this is not possible because the retail business is losing money and being propped up by the rental income.
Are there any lenders that would lend in these circumstances or would it be best to get a private loan to buy the business outright which would then allow the property to be remortgaged to pay of the private loan?
Jzzen, few further question pls:
1) the Freehold is owned by the business (shop under performing), but is it the Business (and Freehold) owned by a Limited Company or how? Which is the legal entity owning the building?
2) how much do you recon the whole mix commercial/residential freehold is worth? What are the condition? Scope to develop further?
3) what is your relation with the freehold/business owner?
1) a limited company owns the business and the freehold.
2) a conservative estimate of approx £1.5M. The building could do with an upgrade which could possibly command a stronger rental income, although the 1bed self contained has recently had a facelift. The rear office could be converted into residential and possibly extended up 1 or 2 additional levels. Rear entrance is on a Mews.
3) Freehold/Business owner is a very good friend of mine.
Basically he has a Limited Company that 1) run a business 2) and own a Freehold.
Limited company has £ 200K debt, with first charge on the property.
I think that with a good commercial broker he can refinance the £ 200K subject to ceasing the business and running the Limited/Freehold as an investment/BTL renting out also the commercial/shop unit.
Income seems to be £ 60,000 potentially or even more if the office is £ 1,200 per month and not per year, that would justify a commercial loan for £ 200K vs freehold value of £ 1.5 Mio...LTV very low overall.
He need to talk with a Broker and cease the business activity, and refinance the whole as a BTL.
It look feasible to me.