Very myopic vacant commercial plan | News
Developers already have limited financing options; traditional lenders avoid unconventional loans and home loans often fall into this category, with uncertain exit dates and values.
But in the case of Main Street repurposing, many owners will need to apply for a change of use and/or planning permission, depending on the size of the unit. Many lenders have a general policy of not pre-planning loans, given the uncertainty of outcome and timing.
This leaves developers with the only option of notoriously expensive short-term financing provided by a niche market of specialist lenders who understand the planning process and can repay loans on short notice.
Add a six-month delay to the process, and the threat of a forced auction for a rental tenant further increases the risk profile, meaning lenders who can structure these loans will put much more emphasis on the track record of the tenant. borrower to deliver on short notice, alongside their relationship with and track record of the local council.
Ultimately, underwriting an asset that only has six months of guaranteed vacant possession is going to be difficult.
Focusing on a timescale rather than a set of criteria will only result in undesirable short-term solutions to getting an extension, such as three-month leases on pepper rent. However, if the auction is based on the highest bid, this will also be beyond the control of the developers.
Without answers to these questions, it is impossible to draw definite conclusions, but this is a very short-sighted solution that can hardly accompany the government’s recent extension of permitted development rights to commercial buildings either. , which requires properties to be vacant for three months prior to application.
It appears to pack good intentions into bureaucracy, increase administration for councils that are already struggling to deliver, and leave developers with very limited funding options.
Daniel Austin, Managing Director and Co-Founder, ASK Partners