Cold storage finance

How much can you borrow against a cold storage warehouse?

Borrowing on a cold storage warehouse is usually more conservative than on a standard shed because the building is specialist and less liquid. We typically arrange a commercial mortgage up to around 65 percent loan to value (LTV) on a let cold store, with the figure shaped by the operator covenant, the lease length and the condition and remaining life of the refrigeration plant.

The high embedded cost of the plant is central to value, but lenders take a cautious view on how much of that cost they would recover if the facility had to be re-equipped for another operator. We size the loan against the operator and lease for an investor landlord, or against the trading business for an owner-occupier, so the loan to value reflects both the income and the specialist nature of the asset.

Because the lender pool is narrower than for a generic shed, matching the deal to a funder comfortable with temperature-controlled assets is part of the work. The right lender will look past the headline specialist risk to the strength of the operator and the lease, which often makes the difference between a conservative loan to value and one that genuinely reflects the income the cold store produces.

What makes cold storage harder to underwrite?

Cold stores carry heavy specialist fit-out, including refrigeration plant, insulation, racking and resilient power, and they are usually tied to one experienced operator. A building fitted for one occupier may need significant reconfiguration for another, which makes these assets less liquid than a generic industrial unit and narrows the group of lenders comfortable with them.

Underwriting weighs the operator covenant and track record heavily, alongside the condition and remaining life of the plant and the lease. Because residual value is harder to rely on, lenders set a more conservative loan to value and look closely at the operator's technical capability to run a continuous, temperature-controlled facility. We present the operator, the lease and the plant condition so lenders can underwrite the income with confidence.

Power resilience is a particular focus. A cold store has to hold temperature continuously, so the standby power, the insulation and the refrigeration capacity all feed into how a lender views the building and its income. A facility with modern, well maintained plant and resilient power reads more favourably than one approaching the end of its plant life, which can shape both the loan to value and the term offered.

What deposit and term can you expect on a cold store?

With investment commercial mortgages on let cold stores commonly sized up to around 65 percent loan to value, the working assumption is a deposit of around 35 percent of value, higher than on a generic shed. Development is more conservative still, often up to around 60 percent loan to cost, with the facility covering both the building and the refrigeration fit-out as plant is commissioned in stages.

Leases to specialist operators tend to be long, which supports the income lenders underwrite. Investment terms commonly run five to ten years, often with a fixed rate for cost certainty over the hold. We map the deposit or equity requirement and the staged drawdown for development at the outset so clients understand the cash profile.

Amortisation tends to feature more on cold storage than on a generic shed, because lenders want the loan to value to fall over the term as the plant ages. That keeps the cash cost a little higher than an interest-only structure but builds in a margin of safety against the specialist, less liquid nature of the asset. We weigh the rate, the term and the amortisation together so the structure suits the operator and the hold.

For an owner-occupier running the cold store as part of its own logistics business, the term is often shaped around the trading company as much as the building, with repayments serviced from the operation rather than a tenant's rent. We set out the deposit, the term and the cash cost at the outset so a specialist operator can plan around the commitment before committing to the facility.

Can you refinance or remortgage a cold storage facility?

Yes. We refinance let cold stores onto a new investment commercial mortgage or term loan once the operator income is settled, commonly to release equity, fix a rate or replace a maturing facility. The loan to value is set against the current rent, the operator covenant and the condition of the plant at the point of refinance.

Where a facility is being re-equipped or repositioned between operators we can arrange bridging to cover the gap, then move clients onto a term commercial mortgage once a new operator is in place and the income is proven. Because lenders weigh plant condition heavily, timing a refinance after re-equipping or a plant overhaul can improve the loan to value available.

Matching the refinance to the right lender matters as much as the timing. The narrower pool of funders comfortable with temperature-controlled assets will read a well maintained cold store on a sound operator covenant more favourably than a generalist would, which is often what allows a refinance to reach a loan to value that genuinely reflects the income rather than the specialist risk alone.

Is cold storage better held as an investment or owner-occupied?

Both routes are common, and the right one depends on the client. A specialist operator may choose to own the facility it trades from, holding the cold store as a long-term asset and servicing an owner-occupier commercial mortgage out of trading cash flow. This gives control over a building that is purpose-fitted to its process, which matters when the refrigeration plant and layout are integral to how the business runs.

For a landlord, a let cold store is an investment sized on the operator covenant and the lease, with rental income covering the debt. Because the building is tied so closely to one operator, lenders look at the same fundamentals either way, weighing the operator's technical capability and the condition of the plant alongside the loan to value.

Cold storage has no standalone published rent or yield series, so we underwrite each asset on its operator, lease and plant rather than headline logistics benchmarks. We arrange owner-occupier mortgages for operators buying their own facility and investment mortgages for landlords holding let stock, structuring each so the loan to value and term suit the way the asset is held.