cooling_dude
Bye Bye's for the PPI
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Post by cooling_dude on Mar 7, 2016 15:52:25 GMT
I'm starting this separate thread ahead of what looks to be SS very first DFL (Development Finance Loan); The Exeter Quayside Development. Just to clarify; This is NOT a thread to discuss The Exeter Quayside Development (I think it best to keep that separate) I think it's important that every investor does their DD on individual loans, but with these DFL we are in an unknown territory which makes it hard to do any DD (in DFLs). As such there are many questions & answers that savingstream should answer before we can invest in any DFL loans > Below is a list of questions/ requests which will be added to as members ask them, along with answers that are answered by Saving Stream
1. How will the DLF loan tranches be released (i.e. will every DFL loan tranche be available for pre-funding or will they just be dumped on the SM)?
SS will create a new £500k tranche in the pipeline a week or two before it is required to control allocation fairly and to allow the to gauge funding availability. When they launch a new tranche, all investors in that particular tranche will be ‘blended’ into the loan and secured on a pari paru basis.
2. What method will be used to decide how much of the total loan is released at each stage?
Each tranche will amount to £500,000 and will be payable to the developer on receipt of a satisfactory QS report. SS will release this to investors for review before drawing down upon it.3. It has been suggested that DFLs will reduce in value during development; how will the LTV be represented during these periods, and will updated valuations be provided during the redevelopment?
SS will release updated valuations as they receive them. It is doubtful except if there is a macro market event, that we will amend the LTV downwards through the build. SS indicate that they are in it for the duration and will push it through to the GDV figure.
4. Because DFLs require due diligence from us investors other than just the LTV (and GDV), will we have further details in regards to the company behind the development, their track record of completing developments and further details of their strategy (i.e. Term of the project, estimated costs, etc.)?
At the moment, Lendy Ltd is making the underwriting decision for each loan i.e the developers capability, track record etc and SS hope that their investors will trust them enough to only provide the platform with high-quality loans.
In the future, SS will consider providing much more detailed analysis for us.5. If the company behind the development suddenly went bust, would the development site be sold "as is" or would SS look to have the site developed further to regain more of the loan value?
At the height of the last market collapse, many banks immediately called in all of their loans and refused to build out their projects to completion. In hindsight, most people now believe the fallout would have been much less if they had provided the funds to build out the schemes and would have had completed units to sell rather than half built sites. It SS intention to step in wherever necessary to complete these schemes to maximise the value at all stages subject to available funds.
6. Is the interest retained up front (the same as PBLs), and if so; is it retained up front on the entire loan or each tranche?
SS will take the interest for the land element at day 1 to cover SS investors for the entire period. For the build cost tranches, SS will take interest out of the tranche specifically for that tranche i.e £500k tranche 12 months @ c1% per month is £60k, the borrower gets £440k to use for construction for e.g. Each consecutive tranche we will take 12 months worth and thus build a pot for any overruns.
7. Will interest still be paid monthly?
Yes |
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ilmoro
Member of DD Central
'Wondering which of the bu***rs to blame, and watching for pigs on the wing.' - Pink Floyd
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Post by ilmoro on Mar 7, 2016 15:56:52 GMT
I'm starting this separate thread ahead of what looks to be SS very first DFL; The Exeter Quayside Development. Just to clarify; This is NOT a thread to discuss The Exeter Quayside Development (I think it best to keep that separate or the issue could get complicated) I think it's important that every investor does their DD on individual loans, but with these DFL we are in an unknown territory which makes it hard to do any DD (in DFLs). As such there are many questions & answers that savingstream should answer before we can invest in any DFL loans Below is a list of questions/ requests which will be added to as investors ask them, along with answers that are either 1. answered by other users or (preferably) 2. answered by savingstream
1. How will a DLF loan be released and what method will be used to decide how much of the total loan is released at each stage
2. It has been suggested that DFL loans will reduce in value during development; how will the LTV be calculated during these periods, and will updated valuations be provided during the redevelopment.
3. If the company behind the development suddenly went bust, would the development site be sold "as is" or would SS look to have the site developed further to regain more of the loan.I think one of your e's in the thread title seems questionable and probably needs to be answerable for its location 
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cooling_dude
Bye Bye's for the PPI
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Post by cooling_dude on Mar 7, 2016 16:00:15 GMT
I think one of your e's in the thread title seems questionable and probably needs to be answerable for its location Damn it.... Sorted Now Grammarly doesn't work as it should in the subject bar, and shows me up as the stupid person I really am.... 
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adrianc
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Post by adrianc on Mar 7, 2016 16:28:11 GMT
So is there any chance that with these DFLs, SS are going to offer a higher interest rate? Safe to say that'll be a big fat "No". On FC, no - they're typically 8%, some up to 10% if they were high LTV, perhaps with 1-2% cashback. Before FC went completely fixed-rate, that was probably lower than you could have got on a similar-risk auction.
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ilmoro
Member of DD Central
'Wondering which of the bu***rs to blame, and watching for pigs on the wing.' - Pink Floyd
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Post by ilmoro on Mar 7, 2016 16:37:46 GMT
I've got a question I'm no expert, and I be honest; most of the loans I invest in on here is mainly from advice from dude & others (don't slate me... I'm a working mum ). However, from the discussion I have been following on the pipeline and from my untrained eye, these DFLs are going to be a lot risker than SS traditional PBL loans. So is there any chance that with these DFLs, SS are going to offer a higher interest rate? I'm pretty happy with SS, so haven't (yet) invested in other platform. Do other platforms offer generly offer more than 12% for these type loans? No, 12% is pretty well in-line with most of SS competitors. MT 10-12% FS 12% maybe the odd 13%, AC 10-13% Are they riskier, in most cases probably not, its just that we dont really understand how SS are going to structure and manage them. SS have sort of being doing development loans, in that they have been lending for people to do development projects, PBL60, 59, 72, 61, 25, the two care homes, all spring to mind, its just that this is the first proper DFL where the security is valued against the GDV rather than the initial asset. This first one looks to be tight on the margins, when we actualy get round to looking at the other Exeter & the student palace the value of DFLs might become clearer plus we will ahve a better idea of how they will work. One thing that generally is the case is they tend to overrun. On AC quite a few are on prolonged extensions or a replacement loan to enable refinance. On FS they regularly renew for a further 6months or more. (New for MT so life cycle unclear)
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Post by meledor on Mar 7, 2016 16:48:10 GMT
I'm pretty happy with SS, so haven't (yet) invested in other platform. Do other platforms offer generly offer more than 12% for these type loans?
On Thin Cats I would generally receive 13% to 14% for a development loan, though sometimes for these loans interest is not paid until the end of the loan along with the repayment of capital, meaning a comparable rate for those would be closer to Saving Stream's 12%.
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mikes1531
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Post by mikes1531 on Mar 7, 2016 17:39:14 GMT
SS have sort of being doing development loans, in that they have been lending for people to do development projects, PBL60, 59, 72, 61, 25, the two care homes, all spring to mind, its just that this is the first proper DFL where the security is valued against the GDV rather than the initial asset. I haven't looked at all the projects mentioned, but I would say the one I did look at (PBL082) isn't really a development loan. The stated value is based on the existing site with its planning permission, and is the sort of loan that normally would be made to allow the developer to purchase the property in the first place. What usually would happen next is that the developer draws up the detailed plans for the project and works out how much money they need to borrow to complete it, and then they arrange a DFL to provide the needed funding. In this particular case, the borrower seems to have used their own funds to purchase the property, so by taking out PBL082 they've raised £845k that they can use towards the redevelopment. We haven't been given any clue whether or not that's an adequate amount to complete the redevelopment. If not, then the borrower/developer would need either to provide more of their own funds, or to replace the PBL with a DFL part way through the development. A critical question is... What will be the value of the SS security immediately after the demolition of the existing buildings on the site? Hopefully, since the valuer knew the demolition was part of the project, the valuation is based on the value of the land with the associated PP, and the building was irrelevant. In that case, the value of the property might actually be enhanced by the completion of the demolition work.
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mikes1531
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Post by mikes1531 on Mar 7, 2016 17:59:36 GMT
4. If the company behind the development suddenly went bust, would the development site be sold "as is" or would SS look to have the site developed further to regain more of the loan value. AFAIK, the standard response if the borrower/developer goes bust is to call in the receivers, who are supposed to be the experts in such situations. ISTM that SS probably don't have the expertise or the inclination to complete the development themselves, so the logical thing to do would be to sell the part-complete project to another developer. The big question is... What would be the value of the part-complete project? If it's 99% complete, then it should have a lot of value. If it's less complete the value could vary widely. Potential buyers will look at the plans and declare they would have done things differently -- so they need to undo things and start again. Or they will look at the work done, and declare it wasn't done well/properly -- so they need to undo things and start again. And they obviously have a huge incentive to point out all the things they claim should have been done differently so as to justify their low offer to take the project off SS's hands. So whereas there will be Monitoring Surveyors' reports detailing the value of work done, that won't necessarily translate into value added. As others have pointed out, those MS reports are meaningful only as long as the original developer continues working on the project all the way to completion. In short, a part-complete project could have no value other than the original value of the land with PP less the cost of removing the work done to far. Usual disclaimer applies... I'm not expert in these matters, I'm not qualified to give an opinion, etc., etc.
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mikes1531
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Post by mikes1531 on Mar 7, 2016 18:19:12 GMT
Here's a proposed addition to the list of questions in the OP...
5. How/when will the interest be paid?
With PBLs, SSs standard policy is to retain the interest payable over the full term of the loan at drawdown. That isn't as easy for a DFL with a longer term than 12 months -- the amount retained becomes considerable, and the APR to the borrower increases substantially. And unlike a commercial loan, where the property supporting the loan probably is generating income to cover the payments, a DFL doesn't generate income during the development. If interest isn't retained in advance, where would it come from? The borrower might have another source of income from which they could pay the interest. Or, as appears to be common for DFLs, the interest could be rolled up and paid out when the project is complete and the borrower either sells the project or arranges longer-term financing for the property.
Have SS said whether they intend to continue their current policy of paying interest monthly? If so, how will it be financed?
If interest won't be paid monthly, how will accrued interest be dealt with when parts are sold on the SM? And how will accrued interest be ranked if the loan is not repaid on time, the property needs to be sold, and the resulting proceeds are insufficient to cover all the outstanding capital/interest/costs/fees etc.?
More food for thought!
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cooling_dude
Bye Bye's for the PPI
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Post by cooling_dude on Mar 7, 2016 19:13:36 GMT
mikes1531 Added two questions in relation to your post; please tell me if you think they address your issues....
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mikes1531
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Post by mikes1531 on Mar 7, 2016 19:22:35 GMT
mikes1531 Added two questions in relation to your post; please tell me if you think they address your issues.... : That's fine. I expect that the answer to Q6 will be obvious once Q5 is answered, but it doesn't hurt to have it answered directly.
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cooling_dude
Bye Bye's for the PPI
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Post by cooling_dude on Mar 7, 2016 20:07:21 GMT
Q3.5 could be "What is the name of the company behind the development and what is their track record of completing developments including project address, purchase price, total costs, final sale price, profit and term. Added. (Number 4)
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Post by pepperpot on Mar 7, 2016 20:41:16 GMT
DFLs need more checking up on than pebbles, so; Will we get to see monitoring surveyor reports during the build process? Presumably reports will be instructed as further funds are required, it would be good to be kept in the loop with them being uploaded in a similar way to valuation docs currently, i.e. 48hrs before the next 'call for funds'. edit, just re-read 3. so I guess it's just an expansion of the existing question. savingstream if you haven't already signed up to FC and AC, I'd recommend doing so to see the level of detail investors get in the Investor Reports / Credit Reports respectively. |
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ablender
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Post by ablender on Mar 7, 2016 21:01:15 GMT
DFLs need more checking up on than pebbles, so; Will we get to see monitoring surveyor reports during the build process? Presumably reports will be instructed as further funds are required, it would be good to be kept in the loop with them being uploaded in a similar way to valuation docs currently, i.e. 48hrs before the next 'call for funds'. And presumably such reports will not be worded in such a way as to exclude us from even seeing them.
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Post by pepperpot on Mar 7, 2016 21:15:25 GMT
DFLs need more checking up on than pebbles, so; Will we get to see monitoring surveyor reports during the build process? Presumably reports will be instructed as further funds are required, it would be good to be kept in the loop with them being uploaded in a similar way to valuation docs currently, i.e. 48hrs before the next 'call for funds'. And presumably such reports will not be worded in such a way as to exclude us from even seeing them. Go on, live dangerously, read one of them, I dare you!
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