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Post by mrclondon on Aug 12, 2019 18:09:29 GMT
As was promised in this morning's general update on the site, the loan listing is in a new clearer format. A general thumbs up from me MoneyThing , esp. the pdf version of the text. As a pedantic (and mainly for future reference) it would be beneficial if the LR title numbers are quoted - it can sometimes be hard to locate the records for blocks of land based on the address alone. It might also be helpful if the planning application details (i.e reference and council area) were stated explicitly rather than having to dig them out of the VR.
At this point, I have of course only had time for a quick skim through the documents (and may have missed some relevant detail). One immediate area that I'm struggling with is the valuation basis.
From VR para 13.1.28 "In valuing the subject property, we have adopted the market approach of valuation that provides an indication of value by comparing the subject asset with identical or similar assets for which price information is available and have adjusted these to reflect differences in age, size, condition, location etc."
Hmm .... my initial thoughts leave me unconvinced, as the 'similar assets' would be derelict office buildings. I assume its meant to be a residual value valuation, but its really not clear - there are a lot of words in paras 13.1.9 to 13.1.27 that imply it is.
My concern, as with any residual value valuation, is what is the firesale value of the site if the loan has to be defaulted. What will someone actually pay for a derelict office block with planning for a hotel to take it off the receiver's hands ?
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Post by mrclondon on Aug 12, 2019 19:06:42 GMT
Questions for consideration for a prospective FAQ:
a) Does the company incorporated earlier this month (SIC 55100 - Hotels and similar accommodation ) by the borrower using the 'M' version of his name have any relevance to this Oxfordshire project ?
b) On drawdown of this loan, how much 'skin in the game' will the borrower have ? i.e. what % does the MT loan represent of the total expenditure on the project to date (purchase price + VAT + design + planning)
c) The most recent filed accounts are y/e Dec 2017 and show shareholder funds are negative. Has MT had sight of management accounts for y/e Dec 2018 (due for filing in next 6 weeks or so), and if so what is the bottom line shareholder funds ?
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KoR_Wraith
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Post by KoR_Wraith on Aug 12, 2019 19:21:47 GMT
The site was bought for £1 million, then planning permission was granted, the site is now supposedly worth £5.5-£6 million. I'm struggling to believe the massive uplift in value; surely this would only be the case if planning permission was unlikely to be granted, which given the site's derelict state I wouldn't believe to be the case. As mrclondon points out, it looks like the valuation may be a residual value valuation as the comparables from which it is derived are all functioning hotels with yield calculations in full force. In terms of a prospective FAQ, is the valuer able to give any examples of comparable brownfield land with hotel development planning, as opposed to operating hotels?
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baldpate
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Post by baldpate on Aug 12, 2019 19:44:01 GMT
I came here to see if anyone had doubts which echoed my own about the valuation report, and about the valuer's methodology ... to find that mrclondon had already nailed it .
Essentially, the valuer offers us a current valuation of £6M, with a development cost (in his estimation) of 13.8M. This implies a completed value for the projected developmentof £19.8M, although I don't see anywhere in the report where the valuer actually cites this precise figure - the nearest I found the range £18.75M - £26.25M quoted in 13.1.17 (appropriately quaified with the phrase "it should be noted these are hope valuations" - there's an understatement, if ever I heard one!!). This value range is justified on the basis of some trading projections supplied by the borrower, and a selection of 'comparable' yields & sales values for recent sales of recognisisable-brand hotels sold as going concerns.
This is as shaky a valuation edifice as I have read for some while.
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sarahcount
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Post by sarahcount on Aug 12, 2019 19:59:38 GMT
What a shame. I've got funds on MT ready to spend and like the idea of 9% for first charge low LTV.
But residual value is not for me. For P2P loans we need comfort that the security can sell in a firesale if the project stalls part way through.
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mary
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Post by mary on Aug 12, 2019 20:01:45 GMT
The site was bought for £1 million, then planning permission was granted, the site is now supposedly worth £5.5-£6 million. I'm struggling to believe the massive uplift in value; surely this would only be the case if planning permission was unlikely to be granted, which given the site's derelict state I wouldn't believe to be the case. As mrclondon points out, it looks like the valuation may be a residual value valuation as the comparables from which it is derived are all functioning hotels with yield calculations in full force. In terms of a prospective FAQ, is the valuer able to give any examples of comparable brownfield land with hotel development planning, as opposed to operating hotels? I’m sure the, superficially, astonishingly attractive, LTV %’s will entice borrowers less willing to do proper DD to invest. If these LTV’s were realistic, obviously the Borrower would be able to find finance at more attractive rates? That said, the 9% ranking tranche may be worth a punt at ~100% to real LTV, assuming a sell out well before term, but can MT attract enough investors to fully fund both tranches? A big test of MT? Staring Brexit in the face, I’m probably going to sit out a little longer to see how it all plays out.
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KoR_Wraith
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Post by KoR_Wraith on Aug 12, 2019 20:36:48 GMT
To be clear MoneyThing , I'm by no means writing this loan off but I'd be happier investing on eg. a solid £2.5-3 million valuation with evidenced comparables, than on a potentially inflated valuation based on residual value.
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Post by mrclondon on Aug 12, 2019 20:52:59 GMT
That said, the 9% ranking tranche may be worth a punt at ~100% to real LTV, assuming a sell out well before term, but can MT attract enough investors to fully fund both tranches? Not sure that strategy is worthwhile .... 9% pa implies a 6% return after 8 months, less 20% tax is 4.8%. Given the size of loan, I'd expect a discount will be needed ... if the discount is in the range of the 3% to 5% seen for say Liverpool or Scottish holiday park, then you're left with little or no return. (And only marginally better for non taxpayers / IFISAs)
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liso
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Post by liso on Aug 12, 2019 21:15:43 GMT
A concern for me are the very large tin sheds immediately adjacent to the site, clearly visible in the photos accompanying the loan documents, and clearly visible from the proposed development. The VR identifies the sheds as a large online retailer's national distribution hub, and a quick look at google maps shows them covering an area at least as large as the development.
An unattractive location IMO for a luxury spa, a hotel, or a centre for leisure activities.
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keystone
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Post by keystone on Aug 12, 2019 22:49:59 GMT
I am willing to throw all my existing MT funds into this as long as they come out of default before midday Wednesday as all my existing funds are tied up in defaults or are waiting for listing on some exchange. No new funds will be going into this.
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Post by mrclondon on Aug 12, 2019 23:21:46 GMT
A concern for me are the very large tin sheds immediately adjacent to the site, clearly visible in the photos accompanying the loan documents, and clearly visible from the proposed development. The VR identifies the sheds as a large online retailer's national distribution hub, and a quick look at google maps shows them covering an area at least as large as the development. An unattractive location IMO for a luxury spa, a hotel, or a centre for leisure activities. A massive understatement .... it strikes me the sort of place that is going to have 24 hr background noise So the square plot with a derelict office block at the LH end of the bottom left tin shed is worth £6m. Really ? Is a reputable high end brand going to be interested in that site ? Its perhaps worth remembering the COL Chesterfield loan and the Travelodge head of terms document which was very prescriptive about the exact number of rooms, room layout, number of floors etc ... i.e. such chains demand a very exact build spec that isn't suited to a conversion project such as this.
That 2018 COL loan was £1.46m against a residual value valuation of £2.1m for 98 hotel rooms + 28 residential apartments walking distance to central Chesterfield (cleared land). Another sense check, the 2019 FS Glasgow loan of c. £1.4m against a residual value valuation of £2m for 156 room aparthotel walking distance to central Glasgow (partially demolished office building). Not very scientific comparisons, but two sort of comparable hotel development site bridges at a similiar stage of development This project is for a 90 room hotel, so slightly smaller, in a light industrial setting with a £1.55m loan. The difference is of course that this is a conversion, so some of the costs associated with the building frame is avoided.
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amwinv
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Post by amwinv on Aug 13, 2019 1:28:52 GMT
This property was bought for £1million. No building works have been done to it as far as we can see from the valuation. Therefore, this property is worth £1 million. Maybe a little more with two years general increases, and the planning permission.
This 6 million figure seems like it was just plucked out of the air. Utter madness.
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invester
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Post by invester on Aug 13, 2019 7:00:40 GMT
This loan seems decidedly Lendy-like. Was there not a derelict building near Oxford that ended up not being drawn down due to lack of investor appetite?
I do think the level of detail given is fairly commendable, but I don't get why this sort of loan is being pushed given Moneything's purported change of strategy? Seemingly they have manufactured a lower LTV by getting a higher valuation based on a myriad of assumptions. An unsigned sale order seems a bit of a lazy way of going about it, what if a 'friend' offered £10m?
I don't think these type of loan returns adequately reflect the risks. The biggest risk of all seems to be counterparty risk, in that the platform might end up in trouble before the loan can be called in. If there are delays (which there invariably is) the platform has no real power over this because repossession risks losing all the paper gains.
Given the difficulties MT had on funding a loan of size before I find it quite bemusing to see this on the table. I don't believe it will fill.
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hazellend
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Post by hazellend on Aug 13, 2019 7:35:36 GMT
Am I being stupid.
Why would the borrower not just sell now and bank his very easy 5 million profit for almost no effort?
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Post by spareapennyor2 on Aug 13, 2019 8:05:36 GMT
i read this as a bridge to sale on / sale agreement in two months of drawdown? win/win/win much like wandsworth look how that`s turned out
LTV market value worthless as its based on a finished developments? should be as is LTV already looking 100%+ if no sale limited buyers? / than development option?
had looked like a punt / then a token / not for me
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