£2,000,000 Commercial Mortgage to buy a nightclub
Large-scale finance – backed by troubleshooting expertise
If you have clients in the nightclub sector, you will know the figures involved. Some of the major dance-music superclubs attract international DJs and coach parties from across the UK. Some of these clubs can accommodate thousands of customers over a single weekend. The most popular clubs of all can take £100,000 plus per night on Fridays and Saturdays - leading to very attractive profits for their owners.
This means that really successful nightclubs rarely change hands - but when they do, very large sums will be involved.
At Rangewell, we recently provided £2,000,000 funding as a Bridging Loan to support a club owner who needed to act fast to secure a deal to buy a second venue. But we did not just work to find a lender who could offer the scale of funding required - we used our expertise to help avoid some major pitfalls, which would have made his purchase even more expensive than he had bargained for.
The client's challenge
"Our client was a club owner operating a major London venue. When another club based in an Essex commuter town came up for sale, he jumped at the chance to buy it."
He looked at the figures with his advisor and saw that the club had additional space that his London venue could not offer, providing excellent prospects for further growth and sharing in the megaclub trend.
“The club my client wanted has been open for more than 20 years and brings in customers, not just from the local areas but coach parties from as far away as Manchester. We saw that kind of reputation is worth millions to an experienced operator like him.”
The seller felt that the time had come to concentrate on his other business interests - but knew just what the club was worth.
His valuation of the business was £3,200,000 – and he had already found a buyer prepared to offer the asking price.
“When my client heard about the deal, he was happy to make a higher offer, so we approached the vendor - and we discovered that the buyer he had lined up was having difficulty raising the funding required.
I advised him to offer another £100,000 to secure the club”
The vendor wanted a quick sale - he needed to put additional finance into a major property development that he was working on. So he was receptive to the higher offer - if the new potential buyer could move quickly.
“My client was cash-rich and could put down a substantial cash sum. He put down £100,000 as a holding deposit - but we knew it was a gamble. To secure the deal and to avoid losing the deposit, we needed to secure £2 million in additional funding in a matter of days
I advised my client to speak to Rangewell.”
The Rangewell team looked carefully at the deal.
The advisor's client had already spoken to his bank and they were happy to lend on the property, providing a Commercial Mortgage at a highly competitive rate. But it had to work to its own guidelines, and all the necessary paperwork would take three weeks to process.
“The bank would provide the funds required, but only in around a month's time – and the owner was in a hurry - and happy to sell to the first buyer with the funds.”
We saw the solution would be to provide a Bridging Loan.
Bridging Loans are short-term loans secured on property. They can deal with urgent needs or to take advantage of opportunities as they come up, and when it is essential that you can have the loan agreed and the funds you want in the shortest possible time. They can be arranged within a matter of days, and funds released in as little as 72 hours, under certain conditions..
We were able to use our network of contacts to find a private lender who was able to advance the necessary funds as a Bridging Loan secured on the nightclub premises – with the confidence of having a loan in principle agreed by a high street bank as an exit strategy. Costs were relatively high but, with our support, the lender was able to conduct the necessary due diligence in a matter of days – and successfully securing the deal.
But we didn’t stop there. When we started a due diligence process and looked closely at the accounts, we discovered some serious issues. There were some liabilities which had not been exposed - with a pending HR case and asbestos present in the building.
By identifying these points, we were able to help our client make the necessary provision - helping him avoid major extra costs.
“My client secured the business he wanted because Rangewell can act fast. Then we helped him avoid some major liabilities because of their professionalism. If you are an advisor, Rangewell are the kind of funding partner you need.”