merlin
Minor shareholder in Assetz and many other companies.
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Post by merlin on Jun 6, 2015 21:23:42 GMT
I guess many of you will have been digging away doing DD on this offering. I must admit from the limited look that I have had I am wondering what this place is all about. Book store on the Ground floor and 44 bedrooms owned by another business and now possible being used as student accommodation. To my mind this is really a bit weird and possibly a bit of a gamble. However what do others think about this?
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sqh
Member of DD Central
Before P2P, savers put a guinea in a piggy bank, now they smash the banks to become guinea pigs.
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Post by sqh on Jun 6, 2015 22:31:38 GMT
I guess many of you will have been digging away doing DD on this offering. I must admit from the limited look that I have had I am wondering what this place is all about. Book store on the Ground floor and 44 bedrooms owned by another business and now possible being used as student accommodation. To my mind this is really a bit weird. However what do others think about this. It is certainly unusual, and tricky to value. I hope FS get the following, from the VR, legally confirmed before drawdown. "At the time of underwriting we would advise the leasehold interest be verified and whether or not there are any onerous obligations under the terms of the lease for exclusive maintenance, repair and management."
"It is assumed for the purposes of this report that all the issues stated above are shared on a room basis and under the terms of the sub leases, guaranteed yields/return are factored into the agreement for a 24/36 month period."At 52% LTV it should be safe. It does have a substantial Director Guarantee, but can that be relied upon? My view is the DG was requested, because the valuation was fairly subjective. Lenders seem fairly cautious, plenty of lenders but no bids over 5k yet, which is unusual for a property loan. Might get a bonus rate for large bids next week.
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SteveT
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Post by SteveT on Jun 7, 2015 7:15:34 GMT
I asked some Q's of FS via their live chat and was told:
a) planned exit route is to repay loan by selling further sub-leases to investors for the remaining 11 bedrooms, once refurbished (at approx £60-70k per room)
b) that the hotel retains responsibility for general maintenance throughout the hotel and provides a guaranteed return (10-12%) for the first 12-24 months of the sub-lease. I guess these are negotiable depending on level of investor interest
It's a slightly odd one but give the reasonable LTV, the (hopefully) straightforward exit route and the DG, I'm in a for a modest sum.
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Post by mrclondon on Jun 7, 2015 10:10:31 GMT
I asked some Q's of FS via their live chat and was told: a) planned exit route is to repay loan by selling further sub-leases to investors for the remaining 11 bedrooms, once refurbished (at approx £60-70k per room) b) that the hotel retains responsibility for general maintenance throughout the hotel and provides a guaranteed return (10-12%) for the first 12-24 months of the sub-lease. I guess these are negotiable depending on level of investor interest It's a slightly odd one but give the reasonable LTV, the (hopefully) straightforward exit route and the DG, I'm in a for a modest sum. I wonder what the actual investment yield is on a per night let of a hotel bedroom. Taking the worse case guaranteed return of 12% on a £70k investment implies £8,400 return. If I recall correctly it was said the hotel runs at c. 80% occupancy, so the room should be let for c. 292 days a year, which equates to a c. £29 per occupied night investment yield. Which feels on the high side given our borrower retains responsibility for servicing and maintaining the bedrooms and common areas, providing reception services, booking agency commission fees etc etc and will be expecting a decent margin themselves. Presumably by the time the refurbished rooms are ready for sub-lease, the earlier sub-leased rooms will be beyond their guaranteed return period. What happens if the original investors realise they've been sold a dog, and significant numbers of the original rooms are offered on the open market undercutting the newly refurbished rooms. Whilst the low LTV is a plus, on the downside, our legal share of this proposition could take a awful long time to sell should disposal become necessary. Not for me (full stop) but in any case it seeems inadequately priced at 12% so bonuses for large investments are very likely IMO.
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sqh
Member of DD Central
Before P2P, savers put a guinea in a piggy bank, now they smash the banks to become guinea pigs.
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Post by sqh on Jun 7, 2015 11:38:25 GMT
I asked some Q's of FS via their live chat and was told: a) planned exit route is to repay loan by selling further sub-leases to investors for the remaining 11 bedrooms, once refurbished (at approx £60-70k per room) b) that the hotel retains responsibility for general maintenance throughout the hotel and provides a guaranteed return (10-12%) for the first 12-24 months of the sub-lease. I guess these are negotiable depending on level of investor interest Very interesting. I wonder if this information has been provided to the valuer. My inference of the VR assumed the valuation was based on maintenance costs shared amongst all owners. EDIT: We have seen the advice of the valuer ignored on another P2P platform resulting in a very significant de-valuation when the loan defaulted.
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Post by Deleted on Jun 8, 2015 7:55:16 GMT
My concern is that the hotel's Tripadvisor comments are pretty lousy 6th out of 7 hotels in the town, the key issue is not with the common rooms but with the bedrooms (shabby and tired), this then drives down the average prices charged. While high utilisation of any hotel bedrooms is good (75% is normally enough to make a profit). The real trick is to get high occupancy at an attractive price, right now the hotel is not able to achieve an attractive price. I see that rooms are allocated between the companies randomly so there is no merit in improving these rooms over those of the other company. Since the hotel is split into two businesses but the "brand" is seen as one hotel any improvements in the 11 bedrooms to raise the image will be wrecked if the other 44 bedrooms are left shabby. If you had to have a recipe for disaster this would be it. Normally I would panic if these errors were added to by the names "Brittania or Best Western" but luckily Brittania is not involved and BW has left the scene.
However, on the plus side, if the two companies are competent and work in tandem it could work. I could find nothing about this concept in the documentation, did anyone else?
I'n my life I have stayed in two hotels with split ownership of this type, both made Basil F look like a star hotel owner. In one I had to walk through the dark rooms of one company to get to my bedroom (the first had failed to pay its electricity bill) while in the other I was lead by the waiter through a large dance hall (empty) to the wine cellar where I could choose my own wine "because we don't know what is in here but don't worry the charge will be Euro15" as you can imagine the Chateau Talbot was especially fine that night.
I think a very small punt would be fine
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Post by fundingsecure on Jun 8, 2015 9:49:18 GMT
I thought it might be helpful to clarify a couple of points.
The hotel is owned by one company only. 44 of the rooms have been sold to individual investors - who each have a 125 year lease. For their investment they receive a return, guaranteed to be a minimum of 10% for the first 1-2 years, although the actual yields have been higher.
The owners still have full responsibility for everything relating to the hotel - including maintenance and updating of the rooms.
Part of the loan is to be used to refurbish all of the rooms that need it. (Some have already been done)
The balance of the loan will be used to refurbish two function rooms and other general areas, plus adding a bar and restaurant on the ground floor.
They continue to follow the same model as before - finding private investors for the remaining 11 rooms. They are not waiting for the rooms to be refurbished, it is an ongoing process, with further potential investors already in discussion.
We have verified the details of the leases and are confident with the level of security offered by the first charge, secured against a valuation of £495k, giving a low LTV.
I hope this helps to clarify the position.
FundingSecure
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jjc
Member of DD Central
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Post by jjc on Jun 8, 2015 10:24:55 GMT
If not misread p14 of the VR suggests the hotel was recently sold (to the existing owners?) for £850k (which if for all 55 rooms = 15k/room). I'm surprised the VR hasn't mentioned the values obtained for the other 44 rooms (£39.950-58.950 averaging at 50k presumably relates to the Travelodges)? fundingsecure perhaps you could clarify |
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ilmoro
Member of DD Central
'Wondering which of the bu***rs to blame, and watching for pigs on the wing.' - Pink Floyd
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Post by ilmoro on Jun 8, 2015 10:50:50 GMT
I thought it might be helpful to clarify a couple of points. The hotel is owned by one company only. 44 of the rooms have been sold to individual investors - who each have a 125 year lease. For their investment they receive a return, guaranteed to be a minimum of 10% for the first 1-2 years, although the actual yields have been higher. The owners still have full responsibility for everything relating to the hotel - including maintenance and updating of the rooms. Part of the loan is to be used to refurbish all of the rooms that need it. (Some have already been done) The balance of the loan will be used to refurbish two function rooms and other general areas, plus adding a bar and restaurant on the ground floor. They continue to follow the same model as before - finding private investors for the remaining 11 rooms. They are not waiting for the rooms to be refurbished, it is an ongoing process, with further potential investors already in discussion. We have verified the details of the leases and are confident with the level of security offered by the first charge, secured against a valuation of £495k, giving a low LTV. I hope this helps to clarify the position. FundingSecure Thanks. Do you think that this information should be made avaliable on the loan page itself rather than lenders having to wade through the VR themselves? Seems to be a lot of confusion on this loan which could have been avoiding by the provision of this short synopsis of the key points, more detailed than that currently provided which makes no mention of the split room ownership, and this probably goes for most loans in general where the info given is pretty cursory. On a related point, there was an update on the speedboat loan in the recent newsletter but this does not seem to have been added to the koan page. Perhaps it needs to be?
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Post by fundingsecure on Jun 8, 2015 11:43:54 GMT
il moro
Thank you for the suggestions, now actioned.
FundingSecure
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warn
Member of DD Central
Curmudgeon
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Post by warn on Jun 9, 2015 7:24:53 GMT
... this does not seem to have been added to the koan page. I'd love to believe that wasn't a typo 
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Post by fundingsecure on Jun 9, 2015 19:21:12 GMT
If not misread p14 of the VR suggests the hotel was recently sold (to the existing owners?) for £850k (which if for all 55 rooms = 15k/room). I'm surprised the VR hasn't mentioned the values obtained for the other 44 rooms (£39.950-58.950 averaging at 50k presumably relates to the Travelodges)? fundingsecure perhaps you could clarify jjc, apologies - I actualy missed the main part of your question. The £39,950-£58,950, averaging £50k relates to the rooms that have been sold in the Hotel - not to the Travelodge. Having re-read that section I see that the valuer's wording did not make that clear - but I can confirm that the prices did relate to the Hotel. The remaining rooms will be sold for similar prices - slightly increased inline with the market. Hope this answers the question a little better than before. FundingSecure
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Post by fundingsecure on Jun 10, 2015 21:24:38 GMT
UPDATE: BONUSES NOW ADDED
In order to accelerate the funding of the hotel loan, due to be drawdown on Friday 12th June, the borrower has agreed to pay additional interest,
The standard interest on the loan is 12% pa.
Bonuses on offer:
Investment of £5,000 or more +1% = 13%pa
Investment of £10,000 or more + 2% = 14%pa
Investment of £25,000 or more +3% = 15%pa
Once activated the interest will track at 12% - the bonuses will be paid separately when the loan completes.
Bonuses will apply to existing bids as well as new bids
FundingSecure
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Post by mitosan on Jun 11, 2015 8:46:42 GMT
What will happen if it doesn't fill up by tomorrow?
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Post by mrclondon on Oct 29, 2015 13:15:48 GMT
Back tomorrow for a second loan, first one's due date is 17th December. I'm no keener on it now than I was back in June.
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