Case Spotlight | What We’re Working On This Week
The Client
A European family office with a substantial portfolio of residential, mixed-use and commercial property assets.
The portfolio is held through a layered structure of property-owning entities ultimately controlled by the family and benefits from a combination of established rental income and longer-term asset-management opportunities.
The Challenge
The client required approximately €120 million of financing, denominated in Swiss francs, to refinance existing property debt and support the portfolio’s longer-term strategy.
The proposed facility required a 30-year term with full amortisation. The client preferred a non-recourse structure but was prepared to consider a limited level of recourse.
The transaction involved more than simply replacing the existing facilities. The proposed debt would be denominated in Swiss francs, while the properties, rental income and valuations were principally euro-denominated. This required careful consideration of currency exposure, long-term affordability and the effect of exchange-rate movements on leverage and debt service.
The portfolio also included a combination of existing contracted income and future rental upside. Several asset-management and leasing initiatives had the potential to improve income materially, but lenders needed to distinguish between current cash flow and income that remained dependent on lease completion, rent-free periods and further expenditure.
The requirement was therefore to identify a lender capable of understanding a substantial European property portfolio, a sophisticated family ownership structure and a long-term Swiss franc financing strategy.
Our Approach
We considered the ownership structure, property portfolio and financing requirement as one combined credit proposition.
This involved reviewing the portfolio on an asset-by-asset basis, including property values, existing debt, occupancy, rental income, lease expiries and planned expenditure.
We also examined the existing debt maturity profile and the implications of replacing multiple facilities with a single long-term financing structure.
Particular attention was given to separating existing income from prospective rental growth. Proposed lettings, lease commencement dates, rent-free periods, tenant strength and security packages were assessed to determine how much income a lender could reasonably recognise.
We tested the affordability of a fully amortising 30-year facility under different interest-rate and cash-flow assumptions. The financial model was reviewed against lender-style debt-service calculations to identify where leverage, amortisation or drawdown terms might need to be adjusted.
The family’s ownership structure, source of wealth, tax residency and proposed recourse position were considered alongside the property analysis.
The Solution
A Swiss franc-denominated refinancing facility of approximately €120 million equivalent is being structured against the European property portfolio.
The proposed structure includes:
- A 30-year term
- A fully amortising repayment profile
- First-ranking security over the financed properties
- Security over the relevant property-owning entities, rental income and bank accounts
- Predominantly non-recourse financing with a limited level of agreed recourse
- Controlled funding for approved leasing and property expenditure
- Financial covenants linked to property values and verified net rental income
- Appropriate protection against the EUR/CHF currency mismatch
Additional funding would be drawn in a controlled manner and only where supported by verified income, valuations and appropriate lender oversight.
The Outcome
The transaction has been developed into a structured financing proposition that clearly separates the portfolio’s current performance from its future rental and asset-management potential.
The review confirmed that the portfolio contains substantial underlying value, but that the leverage and repayment profile must remain aligned with verified net operating income. Prospective lettings may materially strengthen debt service capacity, although lenders will require satisfactory evidence before giving full credit to that income.
The proposed structure is therefore being progressed with an emphasis on appropriate day-one leverage, staged funding, independent valuations and evidence that the portfolio can support full amortisation.
This case demonstrates the additional considerations involved when financing euro-denominated European property assets with Swiss franc debt. Currency exposure, current and prospective income, ownership arrangements, lease execution, capital expenditure and recourse can all materially affect bankability.
By presenting these elements as one coherent financial proposition, the objective is to refinance the existing debt while establishing a sustainable long-term financing structure for the portfolio.
This Case Spotlight is illustrative. Details may have been anonymised, simplified or altered where necessary and should not be taken as describing the complete circumstances of any individual client or transaction.
This content is for general information only and does not constitute personal financial, investment, legal or tax advice. Valuations, lending values, pricing, fees, leverage and security requirements are indicative only and remain subject to lender assessment, independent valuation, asset composition, due diligence, credit approval and market conditions.
