oldgrumpy
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Post by oldgrumpy on Oct 29, 2015 13:21:37 GMT
I shall stick with my small part in the "first charge" loan. The second charge should make this one at least 1% higher!
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mikes1531
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Post by mikes1531 on Oct 29, 2015 14:55:36 GMT
Have we been told what is the current status of the 11 rooms that hadn't been sold to investors at the time of the first loan? If they still haven't been sold, then why not? And if they haven't been sold then the borrower probably will be unable to repay the first loan when it comes due in mid-Dec. So might this second loan be being taken out in order to raise the funds needed to renew the first loan? (Effectively rolling up the interest due.) Perhaps oldgrumpy has the right idea. Stick with my investment in the first loan and pass on this new loan. With FS holding both the loans, they have a huge incentive to make sure the first loan holders don't have a loss -- because if the first loan holders have any loss at all it means the second loan holders would lose everything they invested, and that would be a real disaster for FS as a business. Then again, if the borrower does sell some of the remaining rooms and pays off the first loan, wouldn't the second loan then become a first charge loan and have brilliant security? On a related subject, I'm somewhat confused about the value of the property. If all the rooms are owned by investors on long leases, is there any value left to the hotel business other than the catering side of the operation? How easy would it be to find a hotelier willing to take on the property on that basis? And could the building be sold on a 'bricks and mortar' basis? What would happen to the people who have invested in the rooms? Would they lose everything? Would any new owner of the property have to take them on, sort of like a purchaser of a block of flats would take on sitting tenants? If all the flats in a block have been sold on long leases, then is there much value in the freehold? Is this hotel a similar situation? |
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ablender
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Post by ablender on Oct 29, 2015 15:01:44 GMT
Hi mikes . . Why do you say "if the first loan holders have any loss at all it means the second loan holders would lose everything they invested." The overall LTV is about 60%. Can you please explain as I was thinking of putting some money (not much) into this.
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arbster
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Post by arbster on Oct 29, 2015 15:12:03 GMT
Hi mikes . . Why do you say "if the first loan holders have any loss at all it means the second loan holders would lose everything they invested." The overall LTV is about 60%. Can you please explain as I was thinking of putting some money (not much) into this. Because FS has said that this second loan is secondary to the first loan. Thus, if in the event of default there's not enough to fully pay the lenders of the first loan, there definitely won't be enough to pay the lenders of the second loan.
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ablender
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Post by ablender on Oct 29, 2015 15:15:23 GMT
So is it (reasonably) "safe" at 13%.
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ramblin rose
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“Some people grumble that roses have thorns; I am grateful that thorns have roses.” — Alphonse Karr
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Post by ramblin rose on Oct 29, 2015 16:34:33 GMT
So is it (reasonably) "safe" at 13%. Nobody can really answer that for you. To some it will be, to some it won't. Depends to a large extent on your attitude to, and tolerance of, risk. If you aren't confident in assessing the risks involved in property lending and are usure about how the different types of charges affect things, then might it be an idea to steer clear of such loans until you gain more knowledge? Things do go wrong sometimes, and that feels fine to me when I go in with a clear understanding of the risks I'm running (well, fine-ish  ), but if I'd gone in without a clear understanding, a bit of hope and a say-so from a handful of other lenders then I'd feel a right plonker at that point. I don't involve myself with the property loans on FS, but if I did I'd probably be paying a lot of attention to the wise words of some of the very experienced lenders who've posted above - it isn't sounding to me like it's 'clearly' safe at all, although I've read nothing about it, so I may have the wrong end of the stick.
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Post by mrclondon on Oct 29, 2015 16:40:41 GMT
So is it (reasonably) "safe" at 13%. Unless you, or someone you know and trust, are able to form a view of the value of the security in a firesale (i.e. an auction with very low or no reserve) given the very complicated arrangement of ground floor retail with most bedrooms on separate leases to third party owners, then the answer to your question is "toss a coin" (suggest you re-read the final paragraph of mikes1531's post above). I bumped this thread earlier deliberately as this loan (and the first one) is for those without specialist knowledge of this security something of a leap of faith. EDIT: cross posted with ramblin rose
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ablender
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Post by ablender on Oct 29, 2015 17:19:18 GMT
I think I got it. Thanks Rambling Rose, arbster and mrclondon.
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stevio
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Post by stevio on Oct 29, 2015 17:56:55 GMT
Have we been told what is the current status of the 11 rooms that hadn't been sold to investors at the time of the first loan? If they still haven't been sold, then why not? And if they haven't been sold then the borrower probably will be unable to repay the first loan when it comes due in mid-Dec. So might this second loan be being taken out in order to raise the funds needed to renew the first loan? (Effectively rolling up the interest due.) Perhaps oldgrumpy has the right idea. Stick with my investment in the first loan and pass on this new loan. With FS holding both the loans, they have a huge incentive to make sure the first loan holders don't have a loss -- because if the first loan holders have any loss at all it means the second loan holders would lose everything they invested, and that would be a real disaster for FS as a business. Then again, if the borrower does sell some of the remaining rooms and pays off the first loan, wouldn't the second loan then become a first charge loan and have brilliant security? On a related subject, I'm somewhat confused about the value of the property. If all the rooms are owned by investors on long leases, is there any value left to the hotel business other than the catering side of the operation? How easy would it be to find a hotelier willing to take on the property on that basis? And could the building be sold on a 'bricks and mortar' basis? What would happen to the people who have invested in the rooms? Would they lose everything? Would any new owner of the property have to take them on, sort of like a purchaser of a block of flats would take on sitting tenants? If all the flats in a block have been sold on long leases, then is there much value in the freehold? Is this hotel a similar situation? Thanks for your wise assessment - it definitely gives food for thought Some of us won't have the original investment, so will be evaluating this based on this 2nd charge loan Not necessarily relevant seeing as this loan is to renovate, but had to laugh, most of the comments on TripAdvisor are it's dated rooms and 7th out of 7 hotels in Lancaster and topped by a Premier Inn, 2x Travel Lodges and a Holiday Inn! Either Lancaster is dire or....
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mikes1531
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Post by mikes1531 on Oct 29, 2015 21:09:46 GMT
So might this second loan be being taken out in order to raise the funds needed to renew the first loan? Not necessarily relevant seeing as this loan is to renovate... The first loan, taken back in June, was to renovate. Most of that work should have been completed by now -- one would hope, anyway. It would've been nice if the loan details for the new loan had provided an update regarding the progress made with the first £260k. IMHO, it'll be a bit late if that info isn't released until the loan goes live, forcing FS investors to choose between reading that info and investing in the loan. But perhaps this loan won't be so popular as to fill instantly, and potential lenders will have an opportunity to read the info first and still have time to invest. Let's hope so. In the meantime... In the absence of info from fundingsecure to the contrary, I'm going to stick to the suggestion I made above, which is to say that I suspect that the bulk of the new loan proceeds will be used to renew the first loan.
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ablender
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Post by ablender on Oct 29, 2015 21:16:05 GMT
A "Full Red Book Valuation". It bears the date "Valuation Date – 14th May 2015".
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Post by mrclondon on Oct 29, 2015 21:54:16 GMT
The first loan, taken back in June, was to renovate. Most of that work should have been completed by now -- one would hope, anyway. It would've been nice if the loan details for the new loan had provided an update regarding the progress made with the first £260k. IMHO, it'll be a bit late if that info isn't released until the loan goes live, forcing FS investors to choose between reading that info and investing in the loan. Both the email notification earlier today and the loan preview (now live) state "Funds from the original loan have been used to upgrade the kitchen, bar / dining room and function rooms - photos attached. Although this has increased the overall value of the property we will continue to use the initial valuation."
A "Full Red Book Valuation". It bears the date "Valuation Date – 14th May 2015". Which was shortly before the first loan. Worth noting the comment on page 15: " We consider the remainder of the accommodation and communal rooms will meet with somewhat unquantifiable demand and we suspect a more restricted market place and this factor has been reflected within our valuations. We consider greater demand will be shown after the refurbishment works have been satisfactorily completed."
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mikes1531
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Post by mikes1531 on Oct 29, 2015 22:34:00 GMT
The first loan, taken back in June, was to renovate. Most of that work should have been completed by now -- one would hope, anyway. It would've been nice if the loan details for the new loan had provided an update regarding the progress made with the first £260k. IMHO, it'll be a bit late if that info isn't released until the loan goes live, forcing FS investors to choose between reading that info and investing in the loan. Both the email notification earlier today and the loan preview (now live) state "Funds from the original loan have been used to upgrade the kitchen, bar / dining room and function rooms - photos attached. Although this has increased the overall value of the property we will continue to use the initial valuation."
The description of the first loan said... ... and ... From that, it would appear that the first loan should have covered all the renovation work planned. The recent comments quoted above don't mention the room renovations, so I'm left wondering whether or not those happened and whether or not the planned work is taking longer and costing more than originally expected. The 'attached' photos are tiny and appear to show the bar and restaurant, so what happened to the room renovations?
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stevio
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Post by stevio on Oct 29, 2015 23:09:23 GMT
with the recent comments on TripAdvisor, maybe they didn't renovate the rooms?
or maybe they haven't done this YET and the suspected renewal maybe to cover the room renovation?
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Post by fundingsecure on Oct 29, 2015 23:13:41 GMT
Hopefully I can add a little clarification.
Have any of the remaining rooms been sold?
No, as the decision was made to wait until refurbishments had been made. As these are almost complete the marketing of the remaining rooms was once again started in October. One firm reservation and one prliminary have been booked and general interest has been high. It is expected that the first sale will happen in December.
Value of the hotel without direct ownership of some (or even all) of the rooms.
It is a common practice with several hotels, and some chains, to sell off individual rooms, to release capital. The hotel still provides services to the room owners (laundry, cleaning etc) for which a charge is made. In addition proceeds from the restaurant, bar, function rooms etc are all retained by the hotel.
In the event of a sale the "sold" rooms would remain with the owners, who have title to them registered with the land registry. The valuation of the hotel (and bar, restaurant, unsold rooms etc) took this into account, being based only on those parts where the title belongs to the hotel.
Refurbishment
The pictures show a section of the refurbished kitchen to support the bar / restaurant, together with the restaurant itself. Additional work continues on the function rooms, due to be completed shortly.
Hopefully the above helps to clarify some of the points - together with the additional details on the loan itself.
FundingSecure
NOTE: All available details, including the valuation, have been visible since this morning using the preview option that was introduced a couple of months ago - so noone should be forced to choose between reading the info and investing in the loan, regardless of how quickly the loan fills.
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), but if I'd gone in without a clear understanding, a bit of hope and a say-so from a handful of other lenders then I'd feel a right plonker at that point. I don't involve myself with the property loans on FS, but if I did I'd probably be paying a lot of attention to the wise words of some of the very experienced lenders who've posted above - it isn't sounding to me like it's 'clearly' safe at all, although I've read nothing about it, so I may have the wrong end of the stick.
