This article featured in React News on 5 May 2020

Lambert Smith Hampton has launched a new gap financing product for property owners that are struggling with servicing their debt as a result of COVID-19, React News can reveal.

The property adviser has gained backing from a private equity firm to put in place “tailored funding solutions” for companies as well as consulting on how to best smooth cash flow and dramatically cut costs.

Investments of a minimum of £5m will be made with no upper limit through liquidity injections in real estate companies as well as traditional whole or mezzanine loans. Terms are expected to typically range from six to 18 months.

It will look to work with investors that own income-producing properties across all areas of the commercial and residential markets but have short-term liquidity issues and make decisions quickly in order to “provide much needed financial relief and get property businesses back on their feet”. 

LSH says that “time after time a recurring theme has emerged” with clients and that “there is a financial hole that needs filling, particularly as it is unclear how long the economy will take to recover”.

Its broader advice for real estate owners has included:

• Skimming the service provision back to serve lower occupancy levels in buildings, aside from essential services.
• Deferring large scale project works and reducing capex budgets.
• Assessing actual service charge spend vs budget for the current year with variance analysis. (If actual spend is running below budget – and is likely to remain so with the reduced scope of services being provided – there may be flexibility to reduce or stop occupier service charge contributions).

The company has also been issuing advice to occupiers on areas including:  

• Moving from quarterly to monthly payments.
• Deferring or reducing rent and service charge payments (with agreed payback clauses).
• Moving from ‘quarterly in advance’ to ‘quarterly in arrears’ rental payments.
• Agreed rent deposit draw-downs.
• Rent concessions or holidays.

Ezra Nahome, chief executive at Lambert Smith Hampton, said: “The COVID-19 crisis has put enormous pressure on landlords and property owners through this difficult time. In need of working capital to cover operating shortfalls or to complete your projects? There is a minimum draw down of £5m but no upper limit.

“Liquidity injections in real estate companies, as well as traditional credit investments, whole loan or mezzanine can be provided. Pick up the phone and give us a call. We will get you moving, just like the fourth emergency service.”