registerme
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Post by registerme on Nov 18, 2016 16:24:02 GMT
Thanks guys. I guess two other pertinent facts are that the rate is 14% rather than the 12% offered by SS, and there's an additional layer of security (though it's hard to assess the value of it in a crunch).
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oldgrumpy
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Post by oldgrumpy on Nov 18, 2016 16:34:24 GMT
Thanks guys. I guess two other pertinent facts are that the rate is 14% rather than the 12% offered by SS, and there's an additional layer of security (though it's hard to assess the value of it in a crunch). I am also trying to assess/understand just what this "additional layer of security" ABL has referred to on some loans actually amounts to. ".... Ablrate Lenders will be assigned the security on the transaction as well as APF taking all of the credit risk ..."
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stevio
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Post by stevio on Nov 18, 2016 16:58:03 GMT
Does anybody know / can anybody remember whether it is the same valuation doc / same valuer as used in the SS proposal? The new valuation is dated 14 September 2016. The SS one loan proposal was earlier in the summer. SS's valuer "reaffirmed" the valuation in July. Further down it does state that the property was only visited on 26JULY2015 and 25MARCH2016, further down in section 4.3 it states "we have assumed vacant possession will be available on completion of the purchase", suggesting it was done prior to a purchase - I think it might be a rehash of the original valuation with just a new date stamped on the first page However, the Ablrate valuation is for a finished development, not its current condition. Therefore the valuation, 90 and 180 day sale values are pointless, unless the funds are released in tranches during development with a maximum LTV throughout the project. The reinstatement value 1.7m+VAT (approx 2m) might be a better indication of current sale value, however this might take a long time to sell, given the 5yr previous sale period, so a 90 day valuation might be more realistic at maybe 1.5m (we are left to guess as the valuer hasn't given a value in its current condition).
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stevio
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Post by stevio on Nov 18, 2016 17:02:41 GMT
Thanks guys. I guess two other pertinent facts are that the rate is 14% rather than the 12% offered by SS, and there's an additional layer of security (though it's hard to assess the value of it in a crunch). I am also trying to assess/understand just what this "additional layer of security" ABL has referred to on some loans actually amounts to. ".... Ablrate Lenders will be assigned the security on the transaction as well as APF taking all of the credit risk ..."Your lending to APF, rather than their borrower. Its insinuating APF are more secure a borrower than their clients, therefore "less risk" (ie if their borrower defaults, we could call on the security or APF to continue to service the loan). I think the idea is lenders possibly have more faith in APF than their borrowers.
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oldgrumpy
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Post by oldgrumpy on Nov 18, 2016 17:04:39 GMT
"Further down it does state that the property was only visited on 26JULY2015 and 25MARCH2016, further down in section 4.3 it states "we have assumed vacant possession will be available on completion of the purchase", suggesting it was done prior to a purchase - I think it might be a rehash of the original valuation with just a new date stamped on the first page." Oh dear! ABL should have done better than that.
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Post by ablrate on Nov 18, 2016 17:25:21 GMT
Thank you guys, great feedabck, thats why its a scheduled loan. I will have answers from the borrower on this for all.
Regards Ablrate
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hazellend
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Post by hazellend on Nov 18, 2016 17:30:44 GMT
Hey look at us making the ablrate forum all savingstreamy! Great discussion.
At the moment I definitely am not keen to lend at GDV.
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Post by westcountry on Nov 18, 2016 18:16:02 GMT
I am also trying to assess/understand just what this "additional layer of security" ABL has referred to on some loans actually amounts to. ".... Ablrate Lenders will be assigned the security on the transaction as well as APF taking all of the credit risk ..."Your lending to APF, rather than their borrower. Its insinuating APF are more secure a borrower than their clients, therefore "less risk" (ie if their borrower defaults, we could call on the security or APF to continue to service the loan). I think the idea is lenders possibly have more faith in APF than their borrowers. I'm personally not full of confidence in APF at the moment, given that they are marketing this loan as secured on a £4.15m property...............
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Post by westcountry on Nov 18, 2016 19:11:30 GMT
ablrate , from reading the valuation document, part of the problem with the seems to be that in section 9.25 on page 17 it is stated "As there is a lack of direct evidence for this type of development we have also relied on the residual method of valuation taking into account the gross development value and deducted by anticipated costs". So the valuation is nothing to do with the current market value of the site, it is calculated as GDV less estimated development costs. It doesn't give me much confidence that the security could be sold for this amount if the borrower defaulted. If possible, please could you avoid residual method valuations on property in future? For use as security for a loan, it's the current market value that matters, as if the loan defaulted that's roughly how much could be raised by selling the security.
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james
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Post by james on Nov 19, 2016 3:27:00 GMT
"APF taking all of the credit risk" is particularly significant for this and the other APF loans. Among other things it means that the ability of APF to repay the difference between no development and partly developed project and 90 or 180 day valuation today has to be evaluated. This also means that using GDV for some purposes can make some sense because it can give an idea of the viability of the ultimate exit plan. Just not the intermediate default consequence.
Which means for Ablrate a few requests come to mind:
1. GDV has uses but it's not the actual security value. GDV and rapid sale 90 and 180 day valuations with none of the work done and a prepared site - so possibly some value loss - are really necessary to evaluate the security on development deals. With an apparent history of trying to sell for five years the short term disposal valuation seems far lower than might normally be anticipated. 2. Difference between the current short term market value would be borne by APF so writing about APF's capacity to absorb the debt is also needed. 3. Knowing whether the plan is to do it all as one big chunk or piecemeal is of value because piecemeal means that at various times there will be more value in the project.
But there is a big issue with this loan:
Is the borrower borrowing more money than the value of their asset and what happens if they default? Do they - meaning the individuals - get to just walk away from it leaving say a limited liability company to become insolvent while they walk away? SavingStream's PBL020 is instructive in this regard.
That point worries me. Yes, APF will get to deal with the mess if it happens and if they have the resources, but why lend a borrower more money than the value of their assets? That's inviting trouble if development plans don't work out.
Deals like that with the sort of project in mind for this call more for gradual advancing of funds as work is completed on stages of the project, so that the security value also increases. And so the borrower never has a large amount of money in excess of the value of their assets that could vanish into fees and wages and purchase from related parties and such. Not that I've any reason to think that will happen in this one, it's about risk in general.
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registerme
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Post by registerme on Nov 19, 2016 6:12:51 GMT
2. Difference between the current short term market value would be borne by APF so writing about APF's capacity to absorb the debt is also needed. Particularly because they are in effect underwriting the credit risks of other loans too.
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kermie
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Post by kermie on Nov 19, 2016 8:48:54 GMT
Do APF ring-fence their loans in SPVs? Or does the prospect of one loan going bad put APF itself at risk?
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Post by ablrate on Nov 21, 2016 17:24:24 GMT
Hi All
Some answers from the borrower. (these have also gone into the Admin Secion)
Registerme:
I've only skimmed the proposals, but so far I quite like the look of it in spite of the fact that it's in Scotland. One concern I have is that the existing business clearly doesn't generate enough cash to service the loan.
Thoughts?
Stevio: 100k/yr generated and looking at probably 400k/yr in interest payments or over the 2yrs, 200k vs 800k.
Answer: A*****s will be retaining a portion of the interest from the draw down to cover the initial period. There is £100k from current rentals and the directors are investing £250k of cash in year 1 to cover interest shortfall and establishment costs. The projected sales of lodges will build up during the first 12 months making the project self sufficient by year two.
Snowdrop800:
Ablrate - could you just clarify the real estate security is for the whole 100+acre site please? I ask as at times the 'development site' is mentioned, and so I wanted to be clear if it was the whole site including farmhouse, courtyard complex, and existing lodges, or just the 444 plot development site.
Answer: The whole site including buildings are all part of the security
Stevio: ablrate why pledges this time? When will we need the funds available (loan says draw down 10JAN17, 2 months away)?
hazellend: Also, don't like the pledge system. I prefer instant returns bring it back please!
Answer: We are working on making the pledge system better. It was designed for use by a small number of people, but we have expanded to all users. We will be making reference to it on the dashboard and making pledges viewable by lenders. The reason it is a pledge this time is to give time for feedback. As soon as we agree to make it live, instant returns will start. At the moment this is set for tomorrow (Tuesday 22nd) but we will be a=extending until the 23rd in order that people can review the answers here and in admin and make further inquiries. The docs will then be updated.
MONEY: In short:- Saving Stream have already attempted to float this proposal on their platform in Jul 2016. Due to investor's due diligence, it sank. The borrower has unsuccessfully been attempting to sell since 2011 for £2.1m. The previously advertised sale included more land and one further property than is being offered here as security at the alleged value of £4.150m.
Answer: The sale documents in 2012 were incorrect as it never had planning permission. It was just deemed suitable for planning permission. There is slightly less land than in the original sales particulars but the land in question wasn't usable for the proposed development. The valuation gives the value for the land that does form part of the security.
hazellend: I would be happy to lend on this loan at a LTV based on its market value, which is generously 2.1 mill if it took 5 years to sell at that price. Why does the valuer not seem to take the sale price and time on market into account? Bit disappointed in this loan to be honest
Answer: The land was sold to the borrowers who achieved planning permissions hence the increased valuation.
magenta14: Here's a wee thought, clearly this prospective Borrower is pretty desperate to find a way out, this arguably places ourselves at an advantage, is it possible therefor for we the Investors/lenders and Ablrate to negotiate more favourable terms with respect to the size of the loan we'd be prepared to offer And the LTV we'd be willing to accept in return for an agreed interest rate? If it's been on the market for yonks and yonks then perhaps just maybe we could wring out a far better deal for ourselves, would anyone have any thoughts as to the merits of such an Ablrate (David) Brokering type exercise (something he's 'quite' good at)
Stevio: Further down it does state that the property was only visited on 26JULY2015 and 25MARCH2016, further down in section 4.3 it states "we have assumed vacant possession will be available on completion of the purchase", suggesting it was done prior to a purchase - I think it might be a rehash of the original valuation with just a new date stamped on the first page
Answer: It is a re-date of the original valuation. The valuer revisited it to update the valuation, which is standard practice.
However, the Ablrate valuation is for a finished development, not its current condition. Therefore the valuation, 90 and 180 day sale values are pointless, unless the funds are released in tranches during development with a maximum LTV throughout the project. The reinstatement value 1.7m+VAT (approx 2m) might be a better indication of current sale value, however this might take a long time to sell, given the 5yr previous sale period, so a 90 day valuation might be more realistic at maybe 1.5m (we are left to guess as the valuer hasn't given a value in its current condition).
Answer: The property was put on the market in 2012 without planning permission. It was a site deemed suitable for development of the 400+ lodges but did not have planning at this stage. Planning was granted on 29th September 2014. The underlying borrower was the one who took up the option on the property in 2012/2013 and paid for the planning permission (which was a 6 figure excercise). Having been involved in other similar leisure sites I can state that the valuation uplift on similar sites for planning gain on lodges, the formula of between £5k and £15k, depending on location, is common, hence valuer has used the LOWER figure of £5k on 444 lodges, effectively giving the uplift from £2.1m pre planning (sales particulars in 2012) to £4.15m as per current valuation. The valuers have been used by multiple other funders on other similar leisure sites/developments and have a great and respected track record in the sector.
MONEY: I've rotated the overhead plan included in Ablrate's VR for comparison. The £2.1m sales particulars from 2012 was for 147 acres of land. The Ablrate proposal lists 119 acres of land, so as you can see, the Valuation Report's plan is incorrect - it not only displays a further, smaller, segregated plot of land in the top-right area, but the full 147 acres advertised for sale in 2011-2016, excluding a couple of small corners being removed. At least one of the properties that isn't included in the proposal's security sits on it's own plot in the bottom-left corner, so that area should have been removed also - at a guesstimate, that plot alone is c.30 acres.
Answer: The valuation is for the security that is on offer. Whilst the valuation report could have been clearer, it does state in Clause 2.3 that the smaller parcel of land isn't included in the valuation.
ablrate , from reading the valuation document, part of the problem with the seems to be that in section 9.25 on page 17 it is stated "As there is a lack of direct evidence for this type of development we have also relied on the residual method of valuation taking into account the gross development value and deducted by anticipated costs".
So the valuation is nothing to do with the current market value of the site, it is calculated as GDV less estimated development costs. It doesn't give me much confidence that the security could be sold for this amount if the borrower defaulted.
If possible, please could you avoid residual method valuations on property in future? For use as security for a loan, it's the current market value that matters, as if the loan defaulted that's roughly how much could be raised by selling the security.
Answer: It hasn't been calculated on GDV. The valuation is for the land with planning permission, less the cost of the enabling works (electricity and water). The value is for what the property could be sold for in its current form.
"APF taking all of the credit risk" is particularly significant for this and the other APF loans. Among other things it means that the ability of APF to repay the difference between no development and partly developed project and 90 or 180 day valuation today has to be evaluated. This also means that using GDV for some purposes can make some sense because it can give an idea of the viability of the ultimate exit plan. Just not the intermediate default consequence.
Which means for Ablrate a few requests come to mind:
1. GDV has uses but it's not the actual security value. GDV and rapid sale 90 and 180 day valuations with none of the work done and a prepared site - so possibly some value loss - are really necessary to evaluate the security on development deals. With an apparent history of trying to sell for five years the short term disposal valuation seems far lower than might normally be anticipated.
2. Difference between the current short term market value would be borne by APF so writing about APF's capacity to absorb the debt is also needed.
3. Knowing whether the plan is to do it all as one big chunk or piecemeal is of value because piecemeal means that at various times there will be more value in the project.
But there is a big issue with this loan:
Is the borrower borrowing more money than the value of their asset and what happens if they default? Do they - meaning the individuals - get to just walk away from it leaving say a limited liability company to become insolvent while they walk away? SavingStream's PBL020 is instructive in this regard.
Answer: The borrowers are not borrowing more than the value of the of the asset (as detailed above). Also, stated in the borrowing proposal is that the directors of the borrowers have personal guarantees in place so could not just walk away from the transaction without severe financial penalties.
That point worries me. Yes, APF will get to deal with the mess if it happens and if they have the resources, but why lend a borrower more money than the value of their assets? That's inviting trouble if development plans don't work out.
Answer: as above.
Deals like that with the sort of project in mind for this call more for gradual advancing of funds as work is completed on stages of the project, so that the security value also increases. And so the borrower never has a large amount of money in excess of the value of their assets that could vanish into fees and wages and purchase from related parties and such. Not that I've any reason to think that will happen in this one, it's about risk in general.
Kermie: Do APF ring-fence their loans in SPVs? Or does the prospect of one loan going bad put APF itself at risk?
Answer: The loans are not ring fenced. Each loan is 100% asset backed, so if the borrower didn't repay A*****s would foreclose and sell the security. If there was a material shortfall A*****s we sue the valuer. Ablrate investors need to decide if they are happy with the underlying loan. All A****s do is strengthen the proposition.
Further Information: The 2 directors / owners of the borrower are very experienced in leisure park development / operation and have been responsible for both achieving planning and developing these type of sites out. They also have their personal guarantees in this transaction.
Answer: In relation to the previous crowdlending raise, they had done virtually everything re DD, lawyers etc, lawyers had even filed some of their security documents and where ready to complete. When Brexit came along they just backed out of deal with no warning. Even the solicitors couldn't believe the deal was pulled as deal was done in their opinion. The lawyers have contacted us since and said they would happily act for a new funder.
-Ablrate- In order to show their commitment to this loan, ACF have agreed to inject £220,000 into the transaction and to be pari passu with Ablrate Lenders.
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Post by westcountry on Nov 21, 2016 17:53:18 GMT
ablrate, thank you for a very comprehensive response! I've just got a few further queries: 1) Please could you upload the 2014 planning permission document to the Loan documents on the ABLRate website? Rightmove marketing the property in 2012 for £2.1m with PP is a bit puzzling, although they do say "with the benefit of Planning Permission for Change of Use to 444 Holiday Lodges and Leisure Complex" which may not be the same as PP to actually build the lodges & leisure complex. Being able to see the 2014 PP document would be a great help with understanding this! 2) If the loan collapsed and the property only sold for say £1m, would ABLRate be able to sue the valuer (as you mention) to recover the difference between the sale price and his valuation, please? 3) ACF injecting £220k into the loan at pari passu - does that mean it has an equal claim on the loan to ABLRate investors, please? Not on a first-loss basis as in some MT loans?
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SteveT
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Post by SteveT on Nov 21, 2016 18:06:38 GMT
1) Please could you upload the 2014 planning permission document to the Loan documents on the ABLRate website? Rightmove marketing the property in 2012 for £2.1m with PP is a bit puzzling, although they do say "with the benefit of Planning Permission for Change of Use to 444 Holiday Lodges and Leisure Complex" which may not be the same as PP to actually build the lodges & leisure complex. Being able to see the 2014 PP document would be a great help with understanding this! It's already there I think. See page 31 onwards in the VR.
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