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Post by alexp2p on Oct 30, 2019 13:18:02 GMT
Rental income is guaranteed, assuming the continued commercial success of the major main tenant, until December 2023. Our loan is due
to mature in 2022. Minor tenant to opt to exercise their next tenant break, the overall rental income will decrease, but still good interest cover ratio.
However, <the major tenant> could try to lower the rent
<link removed by mod>
Any (further) comments?
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Post by mrclondon on Oct 30, 2019 13:32:09 GMT
I've just edited the thread title to make it clearer to forum readers, but have redacted the name and link to the details of the tenant from the OP.
Repeating what I've said on other PL threads recently, the forum rules stipulate that borrowers and their assets are not to be identified on the forum. Naming the tenant / linking to info concerning them is identifying the asset.
PL loan titles are in general generic, and do not identify borrowers or their asset, and can if forum member wish be quoted in full. Redacting loan titles in the thread title is simply making it harder other forum members to read them.
Quite apart from the forum rules, the confidentialty warnings that PL make on their loans should be noted.
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eeyore
Member of DD Central
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Post by eeyore on Oct 30, 2019 15:40:58 GMT
Rental income is guaranteed, assuming the continued commercial success of the major main tenant, until December 2023. Our loan is due to mature in 2022. Minor tenant to opt to exercise their next tenant break, the overall rental income will decrease, but still good interest cover ratio. However, <the major tenant> could try to lower the rent Any (further) comments? I certainly agree with the comment in the documentation that failure of the major tenant has to be a "moderate risk"! So many chain retailers are obliging their landlords to accept lower rents, especially in this case where the valuer suggests the current rent is already above the market rate. The valuation report has as an appendix the structural survey of the building carried out in January - the details of the defects are hair-raising: the upper floors are essentially derelict and putting the basic structure (reinforced concrete frame) at risk without urgent attention - has this been done in the nine months since the survey? The cellar contains redundant asbestos-lagged heating boilers and a large oil tank - I was surprised by the surveyor's solution: brick-up the cellar! The borrower's plan appears to be to obtain planning permission to convert the upper floors to residential and then sell a long lease on those floors to a developer for £1.5million to repay this loan. Since the developer would have to effectively gut the upper floors back to the concrete frame and rebuild from there, is £1.5million a realistic valuation?
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rs
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Post by rs on Oct 30, 2019 16:38:33 GMT
Rental income is guaranteed, assuming the continued commercial success of the major main tenant, until December 2023. Our loan is due to mature in 2022. Minor tenant to opt to exercise their next tenant break, the overall rental income will decrease, but still good interest cover ratio. However, <the major tenant> could try to lower the rent Any (further) comments? I certainly agree with the comment in the documentation that failure of the major tenant has to be a "moderate risk"! So many chain retailers are obliging their landlords to accept lower rents, especially in this case where the valuer suggests the current rent is already above the market rate. The valuation report has as an appendix the structural survey of the building carried out in January - the details of the defects are hair-raising: the upper floors are essentially derelict and putting the basic structure (reinforced concrete frame) at risk without urgent attention - has this been done in the nine months since the survey? The cellar contains redundant asbestos-lagged heating boilers and a large oil tank - I was surprised by the surveyor's solution: brick-up the cellar! The borrower's plan appears to be to obtain planning permission to convert the upper floors to residential and then sell a long lease on those floors to a developer for £1.5million to repay this loan. Since the developer would have to effectively gut the upper floors back to the concrete frame and rebuild from there, is £1.5million a realistic valuation? Yes agree with you. But I think you also need to consider the amount paid for the property and the loan amount as well.
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liso
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Post by liso on Oct 30, 2019 20:23:50 GMT
IMV the return being offered to lenders does not adequately reflect the risk.
The security for this loan is a part derelict building, upper floors described as being in poor condition and in need of urgent repair. Without substantial repair (which is extremely unlikely given the cost) the building will continue to deteriorate throughout the loan term.
And what happens if the borrowers exit plans fail? I do not see any realistic fallback.
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p2pfan
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Full-Time Investor
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Post by p2pfan on Oct 30, 2019 22:31:14 GMT
IMV the return being offered to lenders does not adequately reflect the risk. The security for this loan is a part derelict building, upper floors described as being in poor condition and in need of urgent repair. Without substantial repair (which is extremely unlikely given the cost) the building will continue to deteriorate throughout the loan term. And what happens if the borrowers exit plans fail? I do not see any realistic fallback. Totally agree with this and I'll give it a miss. The return does not seem to justify such a high risk venture in a not particularly affluent area with many vacant commercial buildings. The asbestos which will incur "considerable expense" to remove is worrying. Tenants are not exactly of the very highest calibre either. Google Street View shows <redacted by mod> and then a 99p shop next door to it, followed by a charity shop (though I prefer 99p to pound shops as they're cheaper ;-) ) The valuation report describes many vacant commercial units in the area. Also Maplin across the paved area from this building will have closed down, so vacant space there perhaps.
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