Finance Solutions Credentials
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Case study: Interest rate savings from debt advisory
A client came to seek advice regarding its existing debt facility secured against a CBD office building. Since acquiring the property, the owners had sold a second property that was previously used as security. The debt had been reduced, and over a period of years, the property's value had increased significantly.
The bank extended the debt facility from time to time, but the client had not actively renegotiated the debt facility in the past.
Following an engagement with our Debt Advisory team, we recommended that the client get a new building valuation based on improved market fundamentals. We recommended using this valuation in our negotiations with lenders.
We reviewed the existing facility from the incumbent lender and advised we believed the pricing of the facility at 2.45% above the base rate was well outside market norms for the risks associated.
We devised a strategy to assist the client in seeking indicative offers from other financiers and negotiating with the incumbent lender concurrently to secure cheaper facilities.
We engaged with three other lenders and secured indicative offers at improved pricing compared to the existing lender. Through a series of negotiations, we were able to secure pricing of only 1.60% above the base rate for a new facility.
Based on debt facilities of $20m, this pricing benefit of 0.85% per annum generated savings of $170,000 each year over a three-year term.
Within only eight weeks, we have significantly improved our clients' annual rate of return on their property investment.
It’s essential to review your existing debt facilities and to consider your cash flow and security to ensure you’re getting the best facilities available. If you would like to discuss your situation, please contact our Debt Advisory team.