Funding pub re-development for residential use

There are 29 pubs closing every week in the UK figures compiled by the Campaign for Real Ale (CAMRA) have shown. Despite canvassing its members to nominate their locals as Assets of Community Value (ACV), closures continue.

Pub estate companies, brewers and private landlords who own the freehold of pub buildings seek to create a yield on their property investments following the closure of the building as a public house.

This will most commonly result in a planning application to turn the building into a domestic residence, because continued commercial use is unviable.

Although pubs have flexible planning as drinking establishments (category A4 planning), potential investors may apply for planning to convert the building into residential property.

Planning would typically take two to three months for consent and for a complete change of use but raising a conventional mortgage would not be possible. You would have to look at development finance, bridging or other forms of private finance.

Many closed pubs are sold freehold with vacant possession while others may have short leases where the freehold can be eventually purchased. These are typical known as ‘cold investments’ where there is a potential for redevelopment later.

The current planning system allows pubs to be sold off, demolished or converted to many other uses without planning permission. Listing the pub as an asset of community value will stop this. The building would receive planning protection making it more difficult for potential developers to purchase and convert or demolish the pub.

To move quickly, smaller developers will require funding to finance their purchase and development of the building.

There several ways to do this. If you are retaining the building for business purposes, then a commercial mortgage would be an ideal option. It provides the most flexible and affordable finance solution. With commercial mortgages the lender has a legal claim over the property until the loan has been repaid in full.

Commercial mortgage loans can be split into two distinctive categories – 'owner occupier' where the borrower is purchasing a business premises and 'commercial investment' where the borrower is purchasing property as an asset to rent.

Buying commercial premises can be a good investment. Owning a property gives your business stability. The property itself can become a significant asset. You may even be buying a business that is tied into the property such as a hotel, public house or café. Commercial mortgages can be used for:

  • Constructing a new building.
  • Moving to new premises.
  • Expanding facilities.
  • Modifying your existing accommodation.
  • Purchasing an office building in conjunction with your Self Invested Pension Plan (SIPP) or Small Self-Administered Scheme (SSAS).

Commercial bridging finance is a short-term loan which enables businesses to seek longer term finance solutions for their commercial property.

You can use commercial bridging finance to:

  • To raise capital for development projects or commercial property refurbishment.
  • Refinance a commercial property to raise capital.
  • Purchase a commercial property at auction with a completion deadline.
  • Purchase or refinance a commercial property that requires renovations or cannot be mortgaged in its current physical state.

Speak to our expert Pegasus Funding Resources consultants who can advise you on the best, tailored borrowing terms for your business. If you have already taken out a loan or mortgage secured against your commercial property, we can help you to acquire further financing.

To find out more please contact Richard Olsen on 0203 327 0567 or email info@pegasusfunding.co.uk.

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