PBL199/201 - S*****k Hse, T**** St. Cardiff SUSPENDED

Yes, planning consent which has now successfully been obtained, so the borrower is taking up the pre-negotiated Option to buy the land. Which bit of that don't you get? The current market value, as evidenced by the VR, will inevitably be considerably higher than whatever Option price was negotiated before the borrower started down the road of securing planning.

So how else would you propose to value a piece of land that has just secured a new planning consent?

The purchase price will not be the open market price, it will be a pre-negotiated Option price, subject to the planning consent that the borrower has now secured.

(crossed with locutus )

Let's try a worked example, to see if the penny will finally drop:

Imagine you own a field with no planning, worth £10k if valued purely as farmland but I think there is potential that outline planning for 10 houses MIGHT be secured if I spend £100k on architect drawings, ground investigations, ecology surveys, consultant fees and the planning fee itself.

If such planning were secured, the local RICS valuer reckons each house would be worth £200k (so £2.0m GDV). He also estimates it would cost £1.0m to build them (incl. finance and contingency) so, adding developer profit at 20% of GDV (£400k), reckons the market value of the undeveloped site post-planning to be £600k, being £2.0m less £1.0m less £400k.

We sit down to negotiate the price at which you are willing to agree to sell me the land if and when I manage to get planning consent (ie. an option to purchase, subject to planning). Clearly you want a lot more than £10k for it, and clearly I want a lot less than £500k, since it will cost me £100k to make the planning application and the site will only be worth £600k if I succeed.

We eventually agree on £150k.

You're happy, because it's a no-lose bet; if I succeed in getting outline planning, you've got 15 times more than it's worth as farmland and at zero cost to you. If I don't, you still own the field.

And I'm happy, because I'll be risking my £100k planning expenses but, if I succeed, I'll be buying something worth £600k for £150k (the option price), having spent £100k upfront, and so sitting on a £350k paper profit.

Is the "post-planning market value" £150k, as you argue, or £600k? If I then raise a £300k loan against the land (now that it has consent) to fund the purchase, my expenses to date and some funds to work on the reserved matters (detailed planning), is that 50% LTV or "twice what the land is worth"?!

Going live tomorrow (Wed)

Not a penny more for Lendy until some of the overdue loans have been repaid in full

I've seen it all now...
£10.4m for a plot of land less than an acre ?

But it's a RICS surveyor so what could possibly go wrong ?

Wouldn't take it with 50% cashback as I doubt it would compensate my loss !