British national, Monaco resident looking to partially refinance property portfolio

THE SCENARIO

Monaco has for sometime been a very popular destination for ultrahigh net worth and high net worth individuals. This is an area which hosts some of the most expensive properties in the world. It will therefore be no surprise to learn that we have a very strong presence in the Monaco region, and the rest of France. As a consequence our experience and knowledge of the worldwide mortgage market makes us the first point of call for many multi-million pound refinancing exercises. We tend to find that many Monaco residents have properties spread across the globe with London featuring prominently.

This case study involved a high net worth individual looking to secure over £37 million via a partial refinancing of their existing property portfolio. The fact that the client was a British national, even though they were a Monaco resident, did assist us in the fundraising but there were still an array of issues to overcome. The finances of high net worth individuals can be complex and challenging and often involve an array of different income streams from around the world.

Client scenario

Over the years we have seen a number of changes regarding the taxation of overseas residents with property in the UK. This is an area in which we specialise, refinancing property portfolios in the most tax efficient manner on the most competitive terms. It was fairly obvious from an early stage that this case study was best suited to a private bank/niche lender as opposed to a more traditional high street bank. As we have access to more than 300 different lenders in the mortgage market we were confident of being able to introduce a degree of competition amongst lenders to secure extremely competitive terms.

So, we had a British national worth in excess of £50 million, resident in Monaco and looking to refinance a group of properties worth £66.8 million. In total they were looking to raise £37.26 million which equates to an LTV of just over 55% based on a mixture of income and assets. As you will be aware from some of our previous case studies, many private banks/niche lenders prefer to incorporate a degree of assets under management when dealing with ultrahigh and high net worth individuals. This opens the door to expand the lender/client relationship further down the line and can often encourage a very competitive mortgage rate as an inducement.

The basic scenario was as follows:-

Client: British national
Resident: Monaco resident
Net worth: In excess of £50 million
Combined property value: £66.8 million
Funding required: £37.26 million
Proposed LTV ratio: 55%
AUM arrangement: Optional

The key to refinancing multi-million pound property portfolios on extremely competitive terms is the ability to utilise both income streams and assets/investments. The additional security offered by an AUM arrangement not only extends the initial relationship with the client but offers a degree of insurance for the lender. This also allows the client to fully utilise all funding/assets at their disposal to secure the most competitive terms available.

Issues to address

There are very few cases involving ultrahigh and high net worth individuals where the client’s finances can be described as “traditional”. As we touched on above, this type of client tends to have income streams, business interests and assets spread across the world. Therefore, the vast majority of these scenarios fall into the realms of private banks/niche lenders who tend to focus on the client’s assets as opposed to just their basic income. It was obviously very helpful in this situation that the client was a British national, with a strong UK footprint, even though they were resident in Monaco. Very often we come across ultrahigh and high net worth individuals looking to the London property market but having no financial footprint in the UK. In this case the client was refinancing a group of three properties but this was only part of their overall property portfolio.

In summary the issues to address were fairly simple:-

Client: Resident in Monaco
Income: Asset/investment rich
LTV ratio: 55%
Assets to refinance: Group of London properties

Over the years, the value of London luxury property has increased dramatically even taking into account the recent slowdown as a consequence of Brexit concerns. This has allowed many property investors to refinance their assets thereby releasing equity for other investments/business opportunities. If we had approached a traditional bank with this particular case study there would have been a limited degree of flexibility compared to private banks/niche lenders. So, how did we manage to secure more than £37 million funding on an LTV ratio of 55%?

The solution

In the aftermath of the 2008/9 worldwide financial crisis it was the luxury property market which bounced back quicker than any other area of real estate. As a consequence, utilising historically low base rates to secure funding for investment/business purposes has become a very competitive area of the mortgage market. Key to this case study was the ability to offer a £10 million AUM arrangement with a private bank lender. We knew this would encourage favourable terms on the initial refinancing as any lender would look to expand the client relationship going forward.

The exact details of the funding solution were as follows:-

Combine property value: £66.8 million
Funding secured: £37.26 million
LTV ratio: 55%
Interest rate: 1.4% +3 month LIBOR
Refinancing term: Five years
AUM arrangement: £10 million

Interestingly, the £10 million AUM figure is slightly below the traditional 30% loan value which was obviously favourable to the client. When negotiating terms for this refinancing the private banking in question was actually open to an LTV ratio of between 70% and 75% if required. This would have pushed the potential refinancing to just over £50 million. As it happened, the original 55% LTV ratio fitted perfectly with the client’s requirements at the time but there was the option there.

What can Enness do for you?

We have an extremely strong presence in Monaco which is home to an array of ultrahigh net worth individuals. As London is a leading luxury property market we are often asked to secure refinancing on London properties for British nationals living in Monaco. This can sometimes be challenging where clients are asset rich with limited regular income which effectively rules out traditional banks. Private banks and niche lenders will take into account a client’s income but will also take a more rounded approach to their assets and financial status. There is also the question of AUM arrangements which are very popular with private banks as a means of securing additional income and expanding their relationship with the client. Many will be surprised to learn that while this client was looking to raise funds on an LTV ratio of 55% we were actually able to offer funding up to a 75% LTV ratio. In this case the additional funds were not required but this is yet another reflection of the high liquidity towards the ultrahigh/high net worth individual end of the market.

There has been speculation that UK base rates will soften in the short term which will encourage more refinancing of multi-million pound property portfolios. While this case study revolves around a group of London properties, we operate in all major markets and have extensive local knowledge. If you find yourself in a similar situation to this case study, we would welcome the opportunity to discuss your requirements in more detail. We are experts in putting together bespoke financial structures which will incorporate income streams and assets to secure the best possible terms. We can also provide you with real-time market rates which allow you to compare and contrast cash flow and short, medium and long-term financial liabilities. Rest assured, while maximising your income and assets to raise funds on the most competitive terms, this is done in a controlled manner which ensures your finances are not overstretched.

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