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Post by mrclondon on Apr 7, 2016 23:50:00 GMT
So we have a solid looking building (mid terrace) in a busy shopping street with national brands close by (Wetherspoons is mentioned in the valuation report and Lidl is visible in one of the photos) in a reasonably prosperous part of England.
The valuation report was written in December 2015, and has been re-addressed for FS's purposes last month (possibly with the additional markup stating the previous ground floor occupant has now vacated the building)
The ground floor is vacant, currently fitted out as a retail bank, and is claimed to have been sold on a long lease. The borrower retains the freehold, so presumably will receive ground rent (of undisclosed amount) from the ground floor lease.
The first and second floors are meant to be 2 self contained flats but from the photos they are pretty much derelict shells. The valuation report (page 14 para 16.5) values these in their present state as £85k each so £170k in total.
The valuation report (page 17) values the entire building including freehold at £350k (OMV) / £325k (180 day marketing) / £315k (90 day marketing)
The FS description indicates the valuation takes account of the sale of the ground floor lease, although I find no mention of this in the valuation report, and FS use the £350k figure as the basis of the LTV calc.
I've been trying to decide if the £350k valuation makes sense given the sale of the ground floor on a long lease. One way of analysing this is to take the difference between the overall valuation (£350k) and the valuation of the flats (£170k) which is £220k. If we assumed an investment yield of 5% pa (crude approach I know ...) that would imply a ground rent on the ground floor unit of £9k pa. Does that sound plausible ?
I don't like being asked to make investment decisions when the supporting documents don't reflect current reality .....
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Post by profunder on Apr 8, 2016 0:07:52 GMT
I'll check out what's going on, so far I see a 999 year lease on ground floor, but 22000pa rent... Let me keep checking
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Post by mrclondon on Apr 8, 2016 0:16:44 GMT
I'll check out what's going on, so far I see a 999 year lease on ground floor, but 22000pa rent... Let me keep checking Hmm I missed the 999 year lease - that's a "virtual freehold" and normally such leases only attract peppercorn ground rent.
£22k however sounds sensible for the annual rent on a 15 year lease prior to the granting of the 999 year lease in 2014 which will have involved a substantial capital payment by the bank to obtain.
The whole thing just doesn't stack up ... but with the loan 94% full most lenders obviously disagree.
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Post by profunder on Apr 8, 2016 0:23:57 GMT
What's even more weird is that there is no land registry trace of any virtual freehold or lease I can find.
So the land registry shows me the title is one freehold title and no long lease is granted.
The surveyor says they found a 999 year lease.
The surveyor says they were provided details only of a lease with rent to HSBC, but they are not verifying its existence. But use it for valuation.
I can only assume the title has been checked by FS solicitor and no lease exists now. All leases over 7 years should be registered. Maybe HSBC paid to end and terminate the lease?
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Post by profunder on Apr 8, 2016 1:19:54 GMT
I've sent an email. I read this all again and agree with you. Let's see what they say
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Post by fundingsecure on Apr 8, 2016 10:02:57 GMT
Apologies for any confusion, we have added an update to the loan to clarify.
There is indeed a 999 year leasehold on part of the property, owned by a connected party.
Once the legals have completed we will have security over both the freehold and the leasehold.
Hopefully this clarifies the position
FundingSecure
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Post by profunder on Apr 8, 2016 12:56:13 GMT
Apologies for any confusion, we have added an update to the loan to clarify. There is indeed a 999 year leasehold on part of the property, owned by a connected party. Once the legals have completed we will have security over both the freehold and the leasehold. Hopefully this clarifies the position FundingSecure Yes that clarifys, the leasehold doesn't detract value as its included in the security. Thanks
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mikes1531
Member of DD Central
Posts: 6,453
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Post by mikes1531 on Apr 13, 2016 16:31:20 GMT
Latest update on this loan...
With £206k having been returned from the first incarnation of this loan, it might be expected it wouldn't take long for the new £119k loan to be funded. But the LTV isn't as attractive -- 70% now vs. 59% before -- so it may not fill that quickly after all.
I see no comment regarding when it might be ready to draw down and/or start paying interest, and that no doubt will cause some people to hesitate investing.
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Post by profunder on Apr 13, 2016 22:02:34 GMT
Latest update on this loan... With £206k having been returned from the first incarnation of this loan, it might be expected it wouldn't take long for the new £119k loan to be funded. But the LTV isn't as attractive -- 70% now vs. 59% before -- so it may not fill that quickly after all. I see no comment regarding when it might be ready to draw down and/or start paying interest, and that no doubt will cause some people to hesitate investing. It went in a few hours 
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