High-profile client buying a luxury property in Ibiza
Summary
We were approached by a high-profile client seeking to purchase a luxury property in Ibiza. As often happens in these types of transactions, we worked on a solution with them over a few years. We studied the financial implications of several property types; self-build projects, luxury properties soon to be completed, older properties, each with different legal requirements to satisfy. We guided the client and their advisers, through a range of solutions that included self-build finance, high value mortgages with traditional lenders and bespoke solutions with international private banks.
The client soon found their dream home, a nearly completed, “key-ready”, luxury villa in Ibiza. Financing a new build meant we potentially had a wide range of products to consider so we needed to assess the client’s priorities. In this case, their main objectives were (1) a high LTV with (2) excellent borrowing conditions and (3) the longest possible term, whilst also considering (4) the potential future banking relationship the lender would be able to offer.
Challenges
The most challenging aspect was the client’s profile. For high-profile people working in industries such as sport, music, entertainment etc, lenders can be concerned about the longevity of the client’s career and their long-term income stream. Some more conservative lenders in Spain might limit the loan term to 10 years and require a low LTV (usually 50-60%) which often don’t meet client’s requirements, due to high monthly repayments and tax implications.
With these challenges in mind, we submitted considered and detailed applications to key members in our network of trusted lenders and were pleased to obtain several very good approvals for the client from both national and international lenders. However, only one met all the objectives we had set out to achieve.
The favoured approval was a complex, bespoke product, not widely available in Spain that involved local and international companies which we were also able to advise the client on. It consisted of a mortgage on the property itself plus a pledge to the lender over an investment portfolio. Private banks, usually located outside of Spain, often require between 40- 50% of the loan value be to held as ‘Assets Under Management’ (AUM). In this instance, we were able to reduce the AUM to a much lower level (24%), but it was a level that both the lender, and more importantly, the client, were comfortable with to start the relationship. The client’s anticipated future liquidity events were also taken into consideration. This enabled us to apply for a much lower level of AUM from the start but one the client intended to develop in the future.
The approval
We negotiated a part amortising, part interest-only mortgage over a 15-year term, which allowed us to further reduce the client’s monthly repayments. We were able to satisfy affordability requirements using different income streams, including rental income from the property itself and retained company profits, neither of which are usually considered by traditional Spanish lenders.
Summary of the transaction
- Borrower: Spanish S.L.
- Acquisition Price: €6,850,000
- Financing: €5,795,000
- Term: 15 years
- AUM: €1,400,000
- Product: Part amortising; part interest only
- Interest rate: IRS (Interest Rate Swap) + 1.55%
Our client’s positive feedback and seeing the joy on their face as we left the notary together was priceless, and we look forward to sharing the same experience with many more clients.
At MD Premier, we always strive to deliver a professional, transparent and confidential service, with the client at the heart of everything we do. In doing so, we build long term relationships with clients often far beyond the purchase of the property itself.
Complete my private wealth assessment form