bob76
Posts: 103 
Likes: 22
|
Post by bob76 on Jan 20, 2016 19:49:40 GMT
So you can't raise the general issue with customer service, and find out an official response to that? So sometimes, AC does not want to provide an answer on this forum then (maybe when the question is slightly annoying)? I didn't ask specifically for Chris to answer my question, as he may not be indeed the best person to respond.
|
|
|
|
Post by chris on Jan 20, 2016 20:26:46 GMT
So you can't raise the general issue with customer service, and find out an official response to that? So sometimes, AC does not want to provide an answer on this forum then (maybe when the question is slightly annoying)? I didn't ask specifically for Chris to answer my question, as he may not be indeed the best person to respond. This is not an officially supported communication channel. I post here in my own capacity, choosing to represent AC as best I can. That capacity is limited and sometimes when something is complicated and outside of my area of expertise I have to put my foot down and ask that official communication channels are used. If this is something you feel strongly about and feel that current credit reports are lacking, even though I understand that where relevant either multiple valuations are given or distressed sale values are used, then that should be communicated officially to the business. On some subjects that even helps the lender's cause as there are times where feedback via official channels conflicts with opinions expressed on the forum leaving me in a situation whereby I'm saying one thing and the data the rest of the business has points in another direction. Pushing lenders to official channels on matters where that is likely helps make sure that the opposing views are known and counted.
|
|
daveb4
Member of DD Central
Posts: 220
Likes: 116
|
Post by daveb4 on Jan 20, 2016 20:52:36 GMT
This is a challenge however some rough thoughts.
I recently was a banking manager dealing a little in property so this might help.
Think the 30% rule. 30% land 30% development and 30% profit I know it does not add up to 100% .
To be fair with recent costs it more 35/45/20 now and then on top of that the 45% will be split down over monthly draw downs, If build 10 months will probably draw 10 payments. Unfortunately they will not be evenly spread the middle 6 or 7 will be higher.
Sounds completed but if land £100k they would probably looking to sell at £300k so every month the security would go up approx £20k?
This is totally a rough guide as some developments have tighter costs and obviously North is different to South etc etc re costs but hopefully gives you a very rough guide that my make you more comfortable.
|
|
bob76
Posts: 103
Likes: 22
|
Post by bob76 on Jan 23, 2016 14:50:20 GMT
Let's take a real example.
Loan #218
Loan amount: £375k
Security: £815K
Wording below it: First legal charge over site and asset
Not a mention of the word "GDV" anywhere on the various pages/tabs. Does not say "future asset value"
Opening the valuation document: current market value £395k
LTV displayed on site: 46%
Slight issue/misinformation here I think...
For proper disclosure, I believe the following should be displayed:
LTV against current assets: 95%
First legal charge over site and asset
LTV against GDV: 46%
Unfortunately, quite a few loans like that, where the fact that the LTV displayed is actually against a GDV, and well hidden into some valuation document.
|
|
pikestaff
Member of DD Central
Posts: 2,187
Likes: 1,546
|
Post by pikestaff on Jan 23, 2016 15:23:41 GMT
Nothing is being hidden on 218. GDV is not mentioned because it is a wind turbine, not a property development. The docs make it crystal clear that the valuation is of the completed turbine.
The LTV against "current" assets is not 95%, because the loan is advanced only in stage payments as the installation proceeds. It is 0% until an advance is made and then it will depend on the amount of the advance and the value attributed to the work in progress. If there is a problem with the installation it might be finished late, but there is no reasonable doubt that the installation will be completed. It's not rocket science. The main risks to us are unforeseen costs (from whatever source); late installation leading to a reduction in NIROC income; output being less than forecast; and a reduction in demand for finished wind turbines. These risks are most sensibly assessed against the exit LTV.
I would add that the "current" value of £395k is basically the value of the right to build the turbine. The pure land value will be negligible. If this worries you don't lend on wind turbines.
|
|
bob76
Posts: 103
Likes: 22
|
Post by bob76 on Jan 23, 2016 15:28:00 GMT
Nothing is being hidden on 218. GDV is not mentioned because it is a wind turbine, not a property development. The docs make it crystal clear that the valuation is of the completed turbine. If you read the valuation doc, then yes, it's clear. The point is: many loans (wind turbine and others) are showing a LTV based on future value of assets, and I don't think that's being made as clear as it could be on the various pages/tabs, specifically on the security tab.
|
|
bob76
Posts: 103
Likes: 22
|
Post by bob76 on Jan 23, 2016 15:35:52 GMT
What about the security wording around loan #83 (another Wind Turbine)
"First legal charge over leasehold site where wind turbine will be situated."
Value: £725K
However, valuation report mentions £725K "after the completion of the proposed turbine has been installed"
Does not read the same to me...
|
|
|
|
Post by chris on Jan 23, 2016 15:37:51 GMT
Nothing is being hidden on 218. GDV is not mentioned because it is a wind turbine, not a property development. The docs make it crystal clear that the valuation is of the completed turbine. If you read the valuation doc, then yes, it's clear. The point is: many loans (wind turbine and others) are showing a LTV based on future value of assets, and I don't think that's being made as clear as it could be on the various pages/tabs, specifically on the security tab. But that is why the valuation doc is published, so you can read it! Equally publishing 95% would be utterly misleading as the LTV should never get that high. The payments are staged over time with the asset value increasing at each step. Perhaps a graph showing how the LTV is planned to change over time would correctly represent it but that's adding a lot of complexity for those who aren't as interested in the specifics.
|
|
bob76
Posts: 103
Likes: 22
|
Post by bob76 on Jan 23, 2016 15:47:22 GMT
I think the least AC should do is have some better wording on the security page, mentioning that the LTV is based on the future asset value, once the project is successfully completed.
I understand the funds are progressively released, so there is no issue at the very start or the very end. However, if a project is to stop half-way through (and badly done), then what is the real security available to repay investors back (and is the LVT displayed representative of this)?
|
|
pikestaff
Member of DD Central
Posts: 2,187
Likes: 1,546
|
Post by pikestaff on Jan 23, 2016 15:53:20 GMT
...Perhaps a graph showing how the LTV is planned to change over time would correctly represent it but that's adding a lot of complexity for those who aren't as interested in the specifics. I'd not advocate this for individual loans, but an educational piece might be useful. I'd expect the LTV on a wind farm loan to go up pretty linearly as the construction proceeds and the loan is drawn down. There might be a bit of convexity to the graph, but not too much. Property developments are likely to show more of a mixed picture especially if demolition is involved, with the risk peaking part way through - especially if you value on the basis that someone else has to be brought in to finish the job. That's why the rates are higher.
|
|
|
|
Post by chris on Jan 23, 2016 15:56:50 GMT
...Perhaps a graph showing how the LTV is planned to change over time would correctly represent it but that's adding a lot of complexity for those who aren't as interested in the specifics. I'd not advocate this for individual loans, but an educational piece might be useful. I'd expect the LTV on a wind farm loan to go up pretty linearly as the construction proceeds and the loan is drawn down. There might be a bit of convexity to the graph, but not too much. Property developments are likely to show more of a mixed picture especially if demolition is involved, with the risk peaking part way through - especially if you value on the basis that someone else has to be brought in to finish the job. That's why the rates are higher. I'd tend to agree. Plus I would guess valuing partly completed projects accurately is a lot harder than completed or yet to be started projects.
|
|
jonah
Member of DD Central
Posts: 2,031
Likes: 1,113
|
Post by jonah on Jan 23, 2016 16:51:04 GMT
...Perhaps a graph showing how the LTV is planned to change over time would correctly represent it but that's adding a lot of complexity for those who aren't as interested in the specifics. I'd not advocate this for individual loans, but an educational piece might be useful. I'd expect the LTV on a wind farm loan to go up pretty linearly as the construction proceeds and the loan is drawn down. There might be a bit of convexity to the graph, but not too much. Property developments are likely to show more of a mixed picture especially if demolition is involved, with the risk peaking part way through - especially if you value on the basis that someone else has to be brought in to finish the job. That's why the rates are higher. I agree with the above.... It would be great for the next batch of WTs.... I'm hopeful that such a batch will actually come as they seem a lot rarer now than they used to be. I assume that the reduction / removal of various subsidies from the government is a contributory factor here, but wonder if we have seen the end of this loan type on AC?
|
|
pikestaff
Member of DD Central
Posts: 2,187
Likes: 1,546
|
Post by pikestaff on Jan 23, 2016 17:13:57 GMT
There have recently been a few WTs in Northern Ireland on both TC and AC, but I think the subsidies are being withdrawn in Northern Ireland as well, so that will be the end of it unless/until costs come down enough that turbines are viable without subsidy. Unless anyone knows better? I got a few EIS investments in wind, solar and hydro done before the door closed on them. They are much longer term investments, with the payback over 20 years. They are a bit riskier but could well outlast me.  |
|
