PBLXXX W**** H*** Hotel, L********* - Was PBL195 (Repaid)

So basically another loan at 100% loan to value ratio because the definition of market value is what a willing seller and willing buyer will trade at given an arm's length transaction etc.

I hope LY aren't just going to flood the pipeline with a load of dross loans to bump up their bank balances before, perhaps, their business fails.

The odd thing is that whenever I have bought or tried to buy a property, I have never come across a seller that is prepared to sell below market value. However, they pop up all the time offering these riches to P2P borrowers.

Seems like c. 100% LTV to me

Maybe the loan description should read :

”The hotel is being purchased at a price considerably lower than the RICS valuation thus further demonstrating the frequency of optimistic valuation not grounded in transactional reality”

I looked into this a little. There are a few issues I noticed,

1. The second mortgage on the buyers property is mentioned but there is no detail I can find. A second mortgage on a cheap, low equity flat in that area may be good for very little. Unless Lendy post that detail I dont see how a lender can make any judgement that it has any value.

2. The Hotel is listed on Rightmove for sale at 475k, which is a reduction from the estate agents brochure figure of 535k. It indicates to me it has been on sale a while, has seen a price drop, and still wouldnt sell. I really think LTV is more like >103%.

3. Rightmove listing shows the latest turnover figures dated mid-2017 which are 622k. Down from the previous year and all things equal indicates the business does not make a profit. It only made 3k on 656k during the previous financial year.

4. The listing also indicates one of the flats is tenanted at 500pcm. We really need to know the terms of this tenancy in case it impacts value. I have had some bad experiences with properties that turn out to have a tenant in them on peculiar terms.

I will be giving this one a miss unless there is more clarification from Lendy.

PS. How does selling a property deliberately undervalued even work from a legal / tax perspective? Stamp duty, CGT, corporation tax. I may be wrong but it seems to me something that might cause problems.

Oddly, the sentence relating to a 2nd charge on the beneficial owner's jointly-owned private residence has been changed to "The beneficial owner of the borrower company is also giving an equitable charge over a jointly owned private residence as additional security." And still no indication as to how much equity there may be in the property...

I have a hotel and this is a good time of year to undertake refurbishment. It is quiet and you can successfully take 1 or 2 rooms out of circulatation until complete. It is a bit more major to do the kitchen but a function room can double as a restaurant for a period whilst work progresses.

If it is clear that investment is going in, the public like to try out somewhere that has had effort spent on it so trade can increase afterwards. Key is to prioritise the public areas and not the less visible.

Perfectly possible to undertake work as described.

Valuation of the business is interesting as it is usually 5-10 times the ERBIDA for a hotel and not necessarily the value of the bricks and mortar.

Some local knowledge-i lived a few miles away up to 8 years ago
Its a fantastic location in the main shopping area of a busy market town. I had lunch in there a few years back, and it was ok, but i thought the place should be doing better than it was. 
So an experienced operator should be able to do something with this place. The last time i was in town there really was no decent competition. 
Price looks ok to me for the size and location. I share concerns about the timescale for refinance, but if it runs over a bit its our gain. A longer overrun is more concerning as at the interest rate they are paying it could eat up the equity, but at least i cant see a big loss on this one.

There's mention of tenant/s in the VR regarding valuation. Point 9. Can't see any confirmation a about this being empty, in terms of sale if required... Is that simply a factor of length of time to sell?