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articles > Refurbishing Commercial Property
Article > Refurbishing Commercial Property


Article kindly supplied by John Paul
Suite 1, Easington Business Centre,
Seaside Lane, Easington, Durham, SR8 3LJ



The old RAFA club was a derelict and disused working mans club in Easington. It had stood empty for about 12 years and was a well known congregation point for the local chavs and a bone of contention for the local residents, which happen to be mostly of retirement age in the immediate area.

The local residents had been trying for years to get something done about it, it was tired looking to say the least and causing a real headache for the council.

There had been many potential ideas as what to do with the building over the years such as flats, a spar shop, flatten and build residential, but nothing viable could ever be made of it.

As our lettings company grew and we took on more and more properties in the immediate area, it made sense to have an office right in the middle of our properties. At first I was looking at something smaller but decided, after carefully working out the figures, that this project would definitely work. I also decided to put a first floor in the building so that we could let out the top floor so that it produced rental income.

The Refurb
I bought the property for 110k, which looking back on it, I think I should of negotiated a bit harder since no one else was interested, it was initially up for 150k, but hindsight is a great thing. I had been talking with my architect throughout the whole purchase, so when it came to me actually owning the building, we already had draft plans drawn up.

We decided to build high specification offices, which Castledene would take half and we would rent the other out to business start ups. There are two other local business centres much bigger and in better locations than us, so in order to compete with them we had to make the finish much better and offer them something the others didn’t.

The plans flew through the planning process with no objection at all, the locals just wanted something doing about this unsightly building, which was quite a relief

The initial clearing out and structural work took 2 months, we had a few disagreements with the building inspector but these got ironed out. We then had to put over 20 tonnes of steel in as supports for the 1st floor, this was a big job and took good old fashioned man power as we couldn’t get cranes into the building.

From then on the building flew up and within 4 months it was complete. It did help that we had people on site from 6am to 10am so the site was always busy and work progressed very quickly.


As I mentioned earlier, the standard of the finish had to be excellent in order to attract new tenants. All the woodwork was oak finished, aluminium window frames, good quality kitchens and the toilets so I have been told, look something out of a Mal Maison.

We had also put kitchens and toilets on both floors, something which we found was unusual, when we did market research on our competitors. I found that in all business centres there were large number of offices using a tiny kitchen or a small toilet.



We sacrificed office space in order to make a lounge for the tenants, that has free Wi-Fi, we also built a conference room that the tenants and local business can hire. Basically we made the building as comfortable as we could for the tenants and since we will be working from there, it had to be impressive and make a statement as to the type of company Castledene is.

The refurb cost came in at £170,000, which was about £8,000 over budget, as we had a few unexpected surprises and the planning dept changing their minds on a few things mid build didn’t help, but overall, and for the finish of the building I was very pleased.

Finding Tenants
Now I must admit building a business centre is a little new to me so finding business start ups and expanding business’s was a little daunting. We had a lot of publicity from the local council, were in all the local press, radio stations etc so that helped immensely.

I also contacted a Carl Hopkins who had appeared on the “Secret Millionaire”. Carl spent a few weeks in Easington back in April 2009 and has kept in touch with the four causes that he donated money too. I found him to be very approachable and a genuinely nice guy who cared for the area. The press loved the fact he was coming back, and also how it had changed so we had some great exposure from that. Three of our current tenants came as a result of this marketing, who previously had not known about the project.

The remortgage
As this is not your typical remortgage I went down the commercial route. Now as in my last article on HMO, the rent has a major impact as to the valuation of a building.

In this instance when fully let the Business centre will produce annual rental income of £65,000 when considering my annual mortgage on the property currently stands at £7,200 it wouldn’t be that bad if I left my money in. Obviously I want to release some money i spent on the project and hopefully a bit more to finance other projects

After talking to a few commercial lenders as to their LTV, fees, Interest rates etc I decided to go with my bank. Its very important to way up all options as a project of this size could go dramatically wrong if you pick the wrong lender.

Initial purchase price - £110,000

Refurb costs - £170,000

Annual rent - £65,000

Commercial Valuation - £650,000

Less 10% for costs - £585,000

65% LTV - £380,000

Profit (minus 5k costs) - £95,000

Mortgage (Repayment over 20 years) – £3,400

Monthly rental income £5,400

I chose 65% loan to Value (even though 70% was available) for two reasons. Firstly I was offered a much better rate. Secondly I didn’t want to gear the property up to its maximum, I wanted to leave some real equity in the building. I can hear all the property investors saying “Have you gone mad?” “Leverage is the key to property investing” “Gearing is the way forward”.

Well my answer to that is that’s what got a lot of investors into this mess in the first place. Gearing up their properties to the max and living the millionaires lifestyle, not only is it very bad business sense its irresponsible and gave rational and sensible property investors a bad name.

I cant complain, i’ve made a decent profit in under a year and positive cash flows £2,000 per month I want to be able to sleep at night when the interest rate rises (even though I got a 5 year fixed rate).


Overall it was a great project, I’ve made money from refinancing and also monthly cash flow, got an appreciating asset, provided a superb building for my companies to operate from and helped get a derelict building back into use.

It did have its ups and downs like every project but that’s the beauty of property investing, no two days are the same, if they were I think I would get bored. As always, if you have the drive, determination and vision go for it, don’t sit on the fence.



“The way to get started is to quit talking and begin doing” Walt Disney




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