Overcoming Short-Term Issues for a Major Conversion Project

Loan Amount:
£2,400,000

Property Value:
£3,600,000

LTV:
70%

Major conversion projects, when done right, can provide property investors with plenty of opportunity. Some office blocks have been left vacant in recent years. But, with some structural changes, the same building could provide multiple flats for a very appreciative local population.

One of our underwriters was recently presented with a similar scenario. A borrower approached us for finance to purchase a commercial property. Planning had been granted to change the use of the building, and turn it into several flats – a common scenario we are seeing right now.

While this plan was solid, we had to address certain challenges before we could issue funding. Shortfall issues emerged during our review, while the property’s vacant condition posed income problems. To find a way forward, our underwriter got to work.

Focusing on the long-term

While the finances for the deal in its existing situation were less-than-ideal, we saw that the investment’s outlook had plenty going for it. The borrower also had a solid exit strategy already in place. This reassured us that finding a long-term solution wouldn’t be a problem for them.

The underwriter also confirmed how the shortfalls involved would be covered. With these issues covered, and the long-term potential of the project, we delivered the finance required.

Utilising existing spaces is key

We need to take action on our empty buildings. Independent research we produced in late 2023 revealed that many believe there has been a rise in the number of empty buildings blighting our high streets, and that investors need to be incentivised to act.

Generally, most want to see legislative encouragement, and the majority would be in favour of turning empty commercial properties into new residential assets.

Fortunately, at Market Financial Solutions, we’re able to accommodate this. Our funding can be used for conversion plans of all kinds, from the straightforward to the extreme. So, if your clients plan to turn an office into modern apartments, or transform a science lab into luxury residential spaces, we’re here for you.

FAQs

Can you support borrowers with large semi‑commercial conversion projects?

Yes, we frequently support semi‑commercial conversions where a commercial property is being turned into residential units or mixed-use schemes. We evaluate the borrower’s financial profile, the refurbishment plan, and ensure profitability through rental demand. In one case, we stepped in for a large conversion that had stalled, offering a bridging solution so the developer could complete the works and prepare for a long-term refinance.

Why did this borrower use bridging finance to purchase a semi-commercial asset?

Buying a semi-commercial property can come with unexpected challenges, such as short lease terms, unusual tenant agreements, or last-minute legal delays. In this case, the borrower needed to act fast before another buyer stepped in. Our bridging loan provided the speed and certainty they needed to complete the purchase on time. By starting underwriting from day one, we were able to review all the details upfront and keep the deal moving smoothly.

How does Market Financial Solutions structure bridging loans for semi-commercial properties?

Every mixed-use property is different. We take the time to understand the balance between residential and commercial elements, assess the security, and tailor the facility to fit the borrower’s plan. In this scenario, our flexible approach allowed us to lend against the open market value and support the client’s strategy for refinancing once the asset was stabilised. This adaptability helps investors make the most of their opportunities instead of being limited by rigid criteria.

Do you lend where the borrower has existing UK credit issues?

Absolutely. We take a solutions-first view on adverse credit. In the case study, the borrower had recent missed payments and a CCJ, but we focused on their current cashflow and conversion strategy. By refinancing their existing charge and supporting the conversion, we helped them stabilise their finances and move toward a successful exit.