locutus
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Post by locutus on Dec 8, 2016 13:32:30 GMT
I'm far from convinced on the valuation for this one. I found the following: Link removed as it identifies the property£23k annual rents for an £800k valuation doesn't compute. This works out at a 2.8% yield for any purchaser which is way too low for this kind of property with these kind of tenants. Unless the rents are artificially low, I can't see how this would ever fetch anywhere near £800k on the open market. Edit: fundingsecure please can you explain the discrepancy between the rents on the auction site and those in the VR. |
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bernard
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Post by bernard on Dec 8, 2016 16:01:46 GMT
Well found locutus, the info on the auction site is quite detailed and makes interesting reading. Recent, too (July this year). We certainly deserve an explanation from fundingsecure regarding the discrepancy. |
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Post by mrclondon on Dec 8, 2016 18:52:23 GMT
Whilst I accept that locutus is referring in part to some additional research he has undertaken, the VR provides the following figures for the annual rents No 75-77 = £24,500 No 1 = £25,000 No 73 = £13,500 No 1a = £14,950 8 x Flats = £800 (ground rent only) which total to £78,750 pa or an investment yield of 9.8% against a valuation of £800,000 EDIT: The link that locutus refererred to, and was removed by a mod because it could be used to identify the borrower a little too easily, was to a July 2016 auction listing, and detailed the following rents, ostensibly annual (but with a confusing footnote with respective to monthly payments, which may be a possible explanation) No 75-77 = £6,000 No 1 = £9,000 No 73 = £3,840 No 1a = £4,740 8 x Flats = £pepercorn (ground rent only) which total to £23,580 pa or an investment yield of 2.9% against a valuation of £800,000 EDIT 2: Very approximately the ratio of each of the two sets of rental figures, corresponds to the length (in years) of the current rental agreement. Probably just co-incidence. |
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mikes1531
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Post by mikes1531 on Dec 8, 2016 20:31:13 GMT
The link that locutus refererred to, and was removed by a mod because it identified the borrower, was to a July 2016 auction listing, and detailed the following rents, ostensibly annual (but with a confusing footnote with respective to monthly payments, which may be a possible explanation) No 75-77 = £6,000 No 1 = £9,000 No 73 = £3,840 No 1a = £4,740 8 x Flats = £pepercorn (ground rent only) Firstly, I followed the link before it was removed, and I don't think it identified the FS borrower -- the property was being sold by LPA receivers and they'd have no reason to borrow from FS. But it did identify the property, so I suppose it did need removing. Anyone who already knows the address of the property should be able to use Google to find the auction house's website. FS have indicated their borrower already owns the property and "The client is raising funds to repay existing borrowing against the" property. Might the FS borrower be the original owner of the property still trying to rescue it before the receivers find a buyer? Or is it more likely that the FS borrower bought the property from the receivers using short-term finance that they need to repay quickly? Is it possible that they've 'bought' the property but not yet paid for it, and need the FS loan to complete their purchase? As for the footnote that mrclondon found confusing, I didn't find it so but perhaps I'm missing something. The numbers quoted above were in a column headed "Rent p.a.x" and the footnote on the entries for No 1 and No 1a said "The tenant pays the rent monthly." I took that to mean that the tenant was paying 1/12th of the amount shown monthly. Is there another possible interpretation? (I didn't think the possibility of the No 1 lessee paying £9k/month was realistic.) I have sent an email to FS asking if they could respond to this thread, in case they weren't already aware of it. Having sent that email, I went back to the missing link and found this in the addendum to the auction catalogue... So the No 73 lessees say they are paying about a third of the rent specified in their lease! Could a similar situation exist for the other shops and leases? The FS valuation is based partly on leases emailed to the valuer and partly on verbal information confirmed by email -- all supplied via a bridging loan broker? -- and the valuer has protected themselves when referring to the lease rental rates by saying "We are advised and assume...". Based on the evidence I've seen so far, it looks to me like the actual rents being paid may not match what is specified in the leases, so the valuer may have been led to base their valuation on erroneous data. FS need to see evidence of payments actually received, including gathering info directly from the shopkeepers. Until fundingsecure can verify that the actual rents being paid do match the ones used to determine the property value, I'd classify this loan as 'extra long barge pole required'. If they determine that the actual rents don't match the leases supplied by the owner/borrower/broker, then it looks an awful lot like something dishonest is going on. But that's JMHO.
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bernard
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Post by bernard on Dec 9, 2016 14:37:16 GMT
Nice post mikes1531. Would be good to know whether this property was actually sold in the July 16 auction (and for how much), and if so whether any renegotiation of rents/leases has been undertaken since then. fundingsecure? |
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Post by fundingsecure on Dec 9, 2016 15:28:00 GMT
As with all of our loans, as part of the due diligence, we verify the details provided to us by the borrower / broker when the loan is initiated. This includes details relating to titles, leases, searches, bankruptcy etc..
In this case we had been provided with copies of the leases with values that matched the figures used by the surveyor in preparing the valuation. However we were aware of the apparent discrepancies in some of the figures and have been seeking clarification from the borrower, through his solicitor.
Unfortunately they have so far been unable to provide a satisfactory explanation. In addition, other aspects of the due diligence have also shown some inconsistencies.
We have therefore decided to cancel the loan, returning all capital to investors, FundingSecure paying interest to the investors for the period to date.
FundingSecure
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