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Post by Deleted on Apr 17, 2016 13:49:30 GMT
A short bit of googling reveals that the Llandudno hotel was put on the market by Livability for £575,000 in April 2015. I assume that the increased valuation is down to the favorable reaction to pre-application planning for the conversion into flats.
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Post by mrclondon on Apr 17, 2016 15:11:34 GMT
Hmm. Interesting.
The valuation comparables section is entirely devoted to discussing the completed flats, and there is no discussion of the value of a no longer trading 19 room hotel.
The valuation states
"We have been advised that a planning application has been submitted for conversion of the hotel to provide 9 luxury apartments of varying size and layout. We have been advised that planning within the locality is hard to obtain due to Llandudno being held on a 90% leasehold title held by the Mosston Estates.
This is why there is so little redevelopment of the Hotels to retired Apartment and such demand Mosston do not permit development.
We have however been advised that a favourable pre-app has been lodged and a full planning application has now been submitted."
So although a favourable reaction to the pre-app is being reported, there should be no presumption that full approval will be received.
The report that kai refers to indicates that the £575k asking price of April 2015 is on a "ongoing concern" basis (as a trading hotel catering for disabled visitors). However the hotel is now no longer trading.
Assuming planning is rejected and the hotel is resold with its current planning use, on a 5% investment yield basis the current valuation of £1.5m would need the hotel to generate £75k pa profit, or an average of £3k per week across a 6 month season over and above overheads. Not inconceivable, but would need pretty high occupancy rates IMO to get that £3k down to a sensible "per room night" figure.
On the evidence available, I find it hard to accept that the valuation does not contain planning hope value.
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ben
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Post by ben on Apr 17, 2016 16:42:19 GMT
its all hope , if it gets planning permission then great if it doesnt the real value is probably less then 575 as a hotel as nobody obviously brought it at that
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Post by mrclondon on Apr 17, 2016 18:03:15 GMT
its all hope , if it gets planning permission then great if it doesnt the real value is probably less then 575 as a hotel as nobody obviously brought it at that
... which if true implies that FS are leaving themselves open to complaints of mis-selling when they state on their website "The attached valuation is based on the current value of the property, without any hope value in respect of the proposed planning permission."
I'm seeing valuation reports across the whole of the p2p sector that are potentially being misrepresented, and the use of comparables in those reports that are not really representative is widespread. (As is often said, you can prove anything with statistics).
I'm getting increasingly concerned the direction p2p is going as platforms scale up their volume.
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spyrogyra
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Post by spyrogyra on Apr 17, 2016 18:18:05 GMT
I'd rather start selling hope (value). As evident, many are eagerly buying. It would be more lucrative than risking money into such loans.
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mikes1531
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Post by mikes1531 on Apr 17, 2016 18:53:43 GMT
I would have put in money if interest was due immediately. I wonder why underwriters were not called, I assume the margins were tight and the borrower did not want to pay extra. The above comment related to the recently cancelled care home loan. However... Perhaps it's just because weekends are quiet, but the current hotel -- or former hotel -- loan, the only one FS is trying to fund at the moment, hasn't exactly got off to a rousing start. More than 24 hours after becoming available for funding, it's less than 10% funded. Between that and the fact that it's the fourth largest loan FS have on their track record, I think it's going to need some help to get it to fly. At the very least, FS need to commit to the loan starting to pay interest sometime soon. But I don't think even that will be enough -- I predict that bonuses for larger investments and/or cashback also will be required. I posted the above in the New Loans thread yesterday, but it seems more appropriate for it to be in this thread. its all hope , if it gets planning permission then great if it doesnt the real value is probably less then 575 as a hotel as nobody obviously brought it at that There does seem to be a rather large gap between an inability to sell the property as a going concern for £575k and the current £1.5M valuation. Perhaps fundingsecure would be willing to shed some light on this. I also noted the valuer's comment about the difficulty in getting planning permission and was concerned by it. Even if there isn't any hope value in the £1.5M valuation, if the planning application is turned down, and the property has to be sold, then the valuation made for any potential buyer would be based on it having 'no hope' value -- and that's likely to be even lower. Why would Mosston Estates not want the authorities to grant PP? Would they both prefer a unused building going derelict to flats? Are Mosston selling flats themselves?
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Post by mrclondon on Apr 17, 2016 19:15:31 GMT
Why would Mosston Estates not want the authorities to grant PP? Would they both prefer a unused building going derelict to flats? Are Mosston selling flats themselves? What would we do without google ?
It looks very likely that the RICS surveyor has misspelt the leaseholder's name - "Mostyn Estates" appear to have a retail led vision for the town. Retirement apartments may not be a good fit with that vision.
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mikes1531
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Post by mikes1531 on Apr 17, 2016 20:16:27 GMT
Why would Mosston Estates not want the authorities to grant PP? Would they both prefer a unused building going derelict to flats? Are Mosston selling flats themselves? What would we do without google ?
It looks very likely that the RICS surveyor has misspelt the leaseholder's name - "Mostyn Estates" appear to have a retail led vision for the town. Retirement apartments may not be a good fit with that vision.
A very positive article. Thanks for the link, mrclondon. It's an interesting question of what the area needs. Retirees might not spend as much as holidaymakers, but if they're not seasonal they could keep the place alive during the slow months. OTOH, if the place is short of holiday accommodation then maybe the best use of the property would be as a hotel or holiday lets. Then again, if it couldn't be sold for £575k, ISTM that the recent £1.5M valuation looks rather optimistic.
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Maestro
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Post by Maestro on Apr 17, 2016 20:46:00 GMT
its all hope , if it gets planning permission then great if it doesnt the real value is probably less then 575 as a hotel as nobody obviously brought it at that
... which if true implies that FS are leaving themselves open to complaints of mis-selling when they state on their website "The attached valuation is based on the current value of the property, without any hope value in respect of the proposed planning permission."
I'm seeing valuation reports across the whole of the p2p sector that are potentially being misrepresented, and the use of comparables in those reports that are not really representative is widespread. (As is often said, you can prove anything with statistics).
I'm getting increasingly concerned the direction p2p is going as platforms scale up their volume.
FS have some serious questions to answer. What has made the current valuation to go up from 575K to 1.5M in the last 12 months.
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Post by profunder on Apr 17, 2016 21:14:10 GMT
I'm not understanding the valuation report.
The first section on purpose of valuation says:
"opinion of current Market Value (subject to full planning approval)"
Then under the valuation it says:
"Accordingly, we consider the current Market Value of the reported and assumed Freehold Interest in the subject property, with the benefit of full vacant possession, reflecting current apparent condition, without any hope value in respect of the proposed Planning application and allowing a marketing period of up to 6 months, may be expressed in the order of:-"
The report seems to be prepared on the basis of planning permission when you read it, but how are those statements not contradictory to each other.
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ben
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Post by ben on Apr 18, 2016 6:39:00 GMT
If this loan goes ahead the borrower will be laughing all the way to the bank
I think they need to redo the valuation it went up for sale in April 2015 for £575,000 whilst making some income (obviously not enough to keep it open). So being generous and saying that this is the price that it sold for how can it possible be worth £1.5 million a year later with no work done and currently making no income. I would seriously question the competence of the chartered surveyors.
It quite clearly states that at this time they have only submitted for planning permission, they have stated it is favourable but that has no real value it is a touristy area and the council would probably prefer hotels rather then retirement flats.
In section 12 the report quite clearly state that this value in its current state and no hope value with respect to planning permission.
However reading section 11 it clearly is using apartments to calculate value, which looks acceptable if planning permission is granted but there is no evidence that planning permission has been granted so therefore this is hope value not actual value.
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ben
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Post by ben on Apr 18, 2016 6:41:12 GMT
Why would Mosston Estates not want the authorities to grant PP? Would they both prefer a unused building going derelict to flats? Are Mosston selling flats themselves? What would we do without google ?
It looks very likely that the RICS surveyor has misspelt the leaseholder's name - "Mostyn Estates" appear to have a retail led vision for the town. Retirement apartments may not be a good fit with that vision.
Think a few sites need to use google when doing there research into companies when offering loans
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merlin
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Post by merlin on Apr 18, 2016 9:13:04 GMT
No doubt in my mind that FS should "pull" this loan at the earliest opportunity. Far too many issues have come to light to make this bird fly and even if it does it looks certain to crash with all the unfortunate ramifications a crash brings with it.
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Post by fundingsecure on Apr 18, 2016 16:04:58 GMT
Thank you to everyone that has shown sufficient interest in this loan to carry out significant research. We were aware of the background for this property, but to assist others to better understand the security in this case the following may help.
Mostyn Estates, as mentioned in this thread, own a substantial amount of the freehold in Llandudno, primarily in the central area. Their aim, for the property they own and the town itself, is to continue to expand the retail sector and to improve the overall attractiveness. As can be seen locally they have been very successful in attracting investment interest into the town. In line with their long term aims Mostyn have been directing their tenants away from developments that they perceive to be against their larger plan.
West Shore Hotel is a freehold property, meaning Mostyn have no specific influence on any development, it is also located outside of the central part of the town. With the growth of Llandudno our borrower has identified a sector of the market that has not as yet been filled. The pre-application acceptance has encouraged him to move ahead with his plans to refurbish and convert the hotel into a number of retirement flats.
A sale was attempted last year as a going concern, at a much lower price, but with the purchaser needing to guarantee ongoing support for what was a loss-making business. As a development project with vacant possession, rather than an ongoing business, the value of the property itself is significantly more, as evidenced by the valuation. As always with valuations there is no absolute value, it is an estimate. In this case the LTV is relatively low, leaving sufficient equity in the event of a default, even using the 90 day valuation.
In addition to the first legal charge on the property we also have a personal guarantee supporting the loan with assets and liability net value of £383k.
Hopefully this covers the main points – additional information will be added to the the loan description accordingly.
FundingSecure
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ben
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Post by ben on Apr 18, 2016 16:17:14 GMT
just saying the property is valued more then the 575k as shown in the valuation does not answer the question that the valuation was based around the value of flats in the area, a quick google search finds plenty of other hotels probably nicer then that one at less then 1.5 million. The LTV may be low but it an LTV on something that maybe
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