bulletbill
Member of DD Central
Posts: 90
Likes: 223
|
Post by bulletbill on Nov 17, 2019 1:13:06 GMT
Seems we are screwed then.. better get used to it. There’s worse to come, much worse.
|
|
|
|
Post by mrclondon on Nov 17, 2019 1:15:45 GMT
Its perhaps worth me quoting my June 2016 post from page 2 of this thread, in which I hypothesised the land value as £1.1m - £1.2m. Yesterday's R1 interim repayment was £1,159,687. Given we can assume a hefty deduction by RSM/Lendy in Admin I suspect the actual proceeds received (before that hefty deduction) can not in reality be considered a bad outcome.
It shouldn't be a surprise that I have never invested in this loan.
However notwithstanding the numbers which I respect the valuers professional opinion on, my own personal opinion from my knowledge of the area and the fact that site has been dormant for the best part of 20 or 30 years and no developer has felt able to do anything with it despite the council having it allocated for residential development for ages and ages, my opinion is that 3 million pounds for that site if you sort it in that area of St Leonards seems an awful lot and I'd be amazed if anyone in the real market would pay that for it in the event it had to be sold.
Agreed.
The one figure that is noticeably absent from the valuation report is land area. However some research using the "Hastings Borough Council Whole Plan Viability Assessment" suggests the land area is 0.7 hectares.
Those that have read my posts on the FS board in recent months will know that I like to sense check land valuations that have been back calculated from GDV to arrive at residual value against government published average land values for the appropriate region. www.gov.uk/government/uploads/system/uploads/attachment_data/file/488041/Land_values_2015.pdf
Table 1 of that pdf shows consented residential development land in the Hastings council area would be typically valued at £1.65m per hectare, so 0.7 hectare would be around £1.1m to £1.2m. A comparable might be this 0.41 hectare parcel of land www.landsourceplc.co.uk/details.php?property_id=LSCOB_30084 which has a guide price equivalent to £1.52m per hectare.
Taking into account earlier comments (including a reference to the valuation report) concerning the viability of developing this plot having not been proven over the years, I'd suggest there is a discreet chance the fire sale valuation of this plot is less than the loan value even allowing for "sea views" to enhance the typical land value prices I've referenced.
|
|
|
|
Post by mrclondon on Nov 17, 2019 1:41:04 GMT
Were we not promised that at no point ever would LB expose us to any “hope value”. I think LB’s hope value was “I hope these dumbo investors don’t wise up to my con before I’ve robbed them of enough money to buy that big house me and the missus have our eye on”. Its debatable whether many (any ?) senior staff at quite a number of p2p platforms really understand the risks (to lender's capital) associated with secured lending, particularly against residual value valuations at high LTV's. I have been disappointed by the attitude of a number of platform reps when lenders have raised concerns about valuations before the loans have drawn, throwing common sense out of the window. "hope value" I think is generally understood to have a specific meaning and is used in the context of future planning approvals / land zoning, but that doesn't detract from the overall point you make.
A number of platform owners will (in years past) have viewed p2p as a get rich quick scheme for themselves.
|
|
sb
Posts: 166 
Likes: 118
|
Post by sb on Nov 17, 2019 9:56:51 GMT
The valuation was a residual value valuation and has nothing at all to do with what the site would achieve as a distressed sale. In fact this was one of the better valuation reports of its type as it included a detailed sensitivity analysis on the residual calculation (page 15 of the pdf), and concluded that a range of £565k to £5.5m was possible with a 20% variance on the input data.
It is regretable that retail lenders who could not be expected to necessarily appreciate that a distressed sale would almost never realise the value dervived from a residual value valuation have been exposed to loans such as this (which make up a high % of self select p2p loans). It was and is, simply a gamble on the development being built before the loan defaulted. Those that "invested" in this loan lost the gamble. Yes, its unfortunate, but its a lesson being learnt the hard way.
There are VERY few instances where a residual value valuation could be challenged.
So you think this is the b case. I disagree with you the valuation was correct. As you can see at the end of my post it was for Market Value and there was enough time to properly market the property. The method how it was derived is irrelevant here. I agree that proving a valuation error could be very difficult as they provided a wide error margin. You would need many valuations to show that they are biased and overvalue properties on average. I also agree that in practice valuations include a premium of a finished development and they are not prices at which a land would be sold as it is. This is in a contradiction the valuer's claim in the valuation reports. The borrowers know about this and in some cases engage in a fraud with no intention to start a development. For this reasons I have stopped lending money for development projects as real LTVs for those loans well over 100%. I think the platforms have a case to answer here as they should be aware that valuations they use most likely will not allow to recover loan principal amount in a case of a default when the development is not finished. They should stop using those valuations or adjust LTVs accordingly. From the valuation document "The basis of valuation will be Market Value (MV) which is defined in The 2014 edition of the RICS Valuation – Professional Standards (incorporating the International Valuation Standards) – Global and UK edition as ‘The estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and a willing seller in an arm’s-length transaction after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion’ "
|
|
adrianc
Member of DD Central
Posts: 10,026
Likes: 5,152
|
Post by adrianc on Nov 17, 2019 13:44:21 GMT
I disagree with you the valuation was correct. As you can see at the end of my post it was for Market Value and there was enough time to properly market the property. For Ly to market the property, they'd have had to go through all the steps to enforce the security. Then they'd have had to market it, wait for a buyer, go through all the legals, and hopefully complete on the sale. How much more would that have brought in, after all the expenses and disbursements, and when? It's a good bit of selective quoting - but I think you forgot to mention that it's boilerplate from the Ts & Cs accompanying the engagement letter, not from the actual report. The £3m figure is clearly specified as being residual site value, back-calculated from the finished GDV and build costs (all explained and illustated in section 13 of the report). That same section gives RDV as being in a range from £565k to £5.5m - again, back-calculated from the GDV and build costs. There is no attempt to even value the land as just a bit of land. Everything is back-calculated from the build plans - and the report says of them that there is "limited information available in respect of the consented development" (start of section 4). If this one really has reached the end of the road (and, yes, I should have been clearer in my earlier post that I was talking generally, because I've seen nothing that you haven't on this one), and there really are no more routes to follow for repayment of the outstanding amount, it'll be interesting to see how Ly-in-Admin handle the write-off when it comes to our accounts - I'm still showing as holding 44.8% of the value of my original parts, as the rest of us will be.
|
|
sl75
Posts: 2,092
Likes: 1,245
|
Post by sl75 on Nov 17, 2019 14:51:39 GMT
The valuation was a residual value valuation and has nothing at all to do with what the site would achieve as a distressed sale...
... which I would say is the main issue with the valuation...
The issues seem to me mostly related to: - what type of valuation was asked for - how that valuation was presented on-site (e.g. giving a simplistic "LTV" calculation for example, as though that represented the value of security that could be called in and realised if required)
@monetus claim that there are "no issues with the valuation" implies that Lendy asked for the right kind of valuation, and presented that valuation in a way that most retail investors would be expected to fully understand the implications.
I strongly disagree with that view.
|
|
|
|
Post by samford71 on Nov 17, 2019 15:09:05 GMT
The valuation was a residual value valuation and has nothing at all to do with what the site would achieve as a distressed sale. In fact this was one of the better valuation reports of its type as it included a detailed sensitivity analysis on the residual calculation (page 15 of the pdf), and concluded that a range of £565k to £5.5m was possible with a 20% variance on the input data.
It is regretable that retail lenders who could not be expected to necessarily appreciate that a distressed sale would almost never realise the value dervived from a residual value valuation have been exposed to loans such as this (which make up a high % of self select p2p loans). It was and is, simply a gamble on the development being built before the loan defaulted. Those that "invested" in this loan lost the gamble. Yes, its unfortunate, but its a lesson being learnt the hard way. There are VERY few instances where a residual value valuation could be challenged.
I totally agree with your view that this is one of the better valuation reports. The valuer not only gave their assumptions but also did a sensitivity analysis on the RV calcuation. I also agree the it's hard to challenge such a valuation. There is no reason for the distressed value sale to be a functon of the RV calculation. One does not follow from the other since they have completely different conditionality.
I disagree with the idea that retail lenders could not be expected to appreciate this. They were being paid a very high rate of 12% so they should have expected a high risk position. This is self-select P2P; the investor needs to appraise the investment proposition and this loan was about as speculative as they come. I never touched since this loan since they RV was highly sensitive to inputs (a 10% downside tweak to the input conditions, changed the LTV by 80%, so 8x levered) plus if it went wrong you were just left with < a hectare of land. Investors have received almost £1.2mm, and that is after possibly substantial holdbacks. This looks a good result. Better loans than this will recover at worse levels.
The only issue left now is the same issue that plagues all model 2 loans: whether or not the fee waterfall, as defined in the Mar 18 T&Cs represents a valid SLA between SSSH Ltd and Lendy Ltd or whether it can be set aside. Whichever way RSM decide (presumably based on Shoosmith's legal counsel), that will almost certainly be challenged by the "losing" side. RSM may be trying to bolster their "impartiality" by using Grant Thornton to oversee the 'firewall', act as 'conflict administrators' or recommend a "CLB", but it's a clear conflict of interest and this will end up in court.
|
|
sb
Posts: 166
Likes: 118
|
Post by sb on Nov 17, 2019 15:22:54 GMT
If the security was really worth 3mln there was enough money to cover the costs as the principal was 2.1mln. It is not a selective quoting, Letter of engagements is a contract between Lendy and the valuer, in which the valuer confirms terms of the service he is going to provide. What I quoted was a definition of Market Value they promised to deliver in point 7 of the letter of engagement "Basis of Valuation - Market Value (MV) as defined in Valuation Practice Statement VPS4 paragraph 1.2.1 of The 2014 Edition of the RICS Valuation – Professional Standards (incorporating the International Valuation Standards) – Global and UK edition. See below regarding any Key Assumptions or Special Assumptions." What methodology they used is irrelevant, it only matters what they were obliged to deliver by the contract. I acknowledge they quoted quite wide error for their estimation, which would make difficult to validate the correctness of the valuation against the price obtained. However some of their assumptions like 6% funding rate rather invalidates the valuation. We know that Lendy charged at least twice that, which reduces the valuation based on their approach to less than 1.7mln, below principal. The Market Value provided by the valuer is mostly made-up and overvalued, in my opinion a breach of their contract with Lendy. It should have never been used to value a security for a loan purpose. We have a situation that the valuer is doing a lousy job. potentially a fraud if intentional. Lendy not caring as long they get paid their fees. Directors extracting money as much as possible leaving long liabilities. Inexperienced and unorganised lenders happily lending their money for a promise of higher interest, not aware of risks, conflicts of interest or just fraudulent schemes. FCA siting in their ivory tower ticking boxes and collecting their fat remunerations. The administrators, coming last to the party, trying as quickly as possible to collect anything valuable what left. It is up to you to judge who is to blame, naive lenders, valuers/Lendy/borrowers/administrators taking advantage of a "business opportunity", sleepy and indifferent FCA.
|
|
adrianc
Member of DD Central
Posts: 10,026
Likes: 5,152
|
Post by adrianc on Nov 17, 2019 15:35:55 GMT
The Market Value provided by the valuer is mostly made-up Well, of course. They even told you how they made it up. But, of course, you decided that when you read it before putting your money into this loan, right, so walked away? (Anybody got access to the relevant bit of the 2014 RICS standards, so we can see whether back-calculating RSV from GDV does indeed conform, as I rather suspect it does...?)
|
|
sb
Posts: 166
Likes: 118
|
Post by sb on Nov 17, 2019 16:50:44 GMT
The Market Value provided by the valuer is mostly made-up Well, of course. They even told you how they made it up. But, of course, you decided that when you read it before putting your money into this loan, right, so walked away? (Anybody got access to the relevant bit of the 2014 RICS standards, so we can see whether back-calculating RSV from GDV does indeed conform, as I rather suspect it does...?) My claim is the valuation produced by the valuer is bad quality and it should have been rejected by Lendy as not meeting requirements of the contract between Lendy and the valuer for the following reasons a) it is very imprecise, they are practically saying we don't really know, no more than a few millions b) it likely overvalues the property (funding assumptions too optimistic, uncertainty of the cost is symmetric, which not realistic as in practice costs are more likely to be higher than lower) The valuation is not a Market Value as defined in the RICS standards. Whether I invested or not in this loan is irrelevant to the point I made. Lendy as a FCA regulated entity should provide correct information about LTV and interest rate should reflect the risk of a loan. Those are the FCA rules for P2P platforms. Terms and Conditions of Engagement quotes the definition of Market Value from the RICS standards. "The basis of valuation will be Market Value (MV) which is defined in The 2014 edition of the RICS Valuation – Professional Standards (incorporating the International Valuation Standards) – Global and UK edition as ‘The estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and a willing seller in an arm’s-length transaction after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion’"
|
|
sl75
Posts: 2,092
Likes: 1,245
|
Post by sl75 on Nov 17, 2019 19:31:42 GMT
Whether said valuation was either the correct type, appropriate for this loan, presented correctly for retail investors, or in fact Lendy Ltd acted irresponsibly in any other way, shape or form as your agent on this loan is not related to this third-party valuation whatsoever and something I have therefore not passed any comment on. That was the point I was making with my previous comment mentioning "... issues with it (not necessarily ones that are the actual valuers responsibility of course)."
From an investor's perspective, the wrong type of valuation for the decision the investor is being invited to make is an "issue with the valuation"; exactly the point I was making.
... to which you repeated "no issues with the valuation" implying that you also meant these aspects of the valuation too.
My point is that just because the valuers themselves did their job properly doesn't seem to me to imply that everyone involved in the valuation is fully off the hook.
|
|
boundah
Member of DD Central
Posts: 368
Likes: 430
|
Post by boundah on Nov 17, 2019 20:29:32 GMT
OK, there are plenty of valid gripes about the quality of valuations and allowing the borrower to walk off with the property at half-price. However, I'm planning to put this one behind me. I actually count myself lucky I got 55% back and will be ecstatic if I get the same result for the rest of my LY loanbook.
|
|
|
|
Post by missydoom on Nov 19, 2019 16:52:36 GMT
I've had a quick look back but may well have missed it, did we ever get a value for the actual land purchase? I.e. was the whole of the loan actually used for the purpose cited? This appears to be a massive problem across many of the loans, money has been lent, drawn down and not used for the intended purpose with monitoring saying little about this at the time.
|
|
sussexlender
Member of DD Central
Cheat seeking missile
Posts: 550
Likes: 916
|
Post by sussexlender on Dec 1, 2019 12:06:44 GMT
Update (following a drive by the site)
Nothing new happening on this waste site; bits of the fence still missing. No sign that anyone, including RSM, have visited the site.
No doubt to RSM this loan is simply a set of photographs and figures but to the local residents it is a bit of land that could be made into a wild life area instead of an ugly landmark failure by a P2P platform. An application some years ago by local resident to turn it into a wild life area was refused by the local authority (details on the Hasting planning site).
The borrower and his fellow directors will be enjoying a very long laugh at all the investors who have lost nearly 45 % of their cash to this lot of suspect individuals. I certainly don't think that counts as being lucky. Whilst I may well be able to take being ripped off there will be many who will be very seriously damaged by this con.
We have never been told how much of their own cash this borrower ever put into obtaining the site so can only assume we (investors) paid for it all, whilst Lendy and LB made sure they collected all their fees upfront, from our original cash loan. Borrowers and Lendy win. Investors lose.
The tease from RSM that there might be a further payout in 48 months time is clearly a load of nonsense. From whom is a further payment ever likely to be received? RSM are silent on this point.
Now that the borrower has got his hands on the land once again, free of any obligations to Lendy investors, he will no doubt stick 2 fingers up at us all and will move his "office" once again; I will not be surprised to see it suddenly end up off shore and out of reach of the highly paid experts employed by RSM.
This Borrower and his company may well then play the system by transferring the land to various different close companies, borrowing more cash if they can, as they go. I am surprised that it has not yet reappeared on another P2P platform.
He and his fellow directors have retained the site at a vastly reduced price with the approval of RSM, whilst retaining much of the excess original cash from Lendy investors, and without paying interest for 880 days plus. Various reused promises fed to us via Lendy of refinance or other buyers were obviously bogus.
Quite a clever and devious business plan which appears to have condoned by those at Lendy.
Some may hope that the long arm of the SFO will eventually have a look at this lot and LB.
|
|
iRobot
Member of DD Central
Posts: 1,680
Likes: 2,477
|
Post by iRobot on Dec 1, 2019 13:38:46 GMT
The tease from RSM that there might be a further payout in 48 months time is clearly a load of nonsense. From whom is a further payment ever likely to be received? RSM are silent on this point. Re: this; I assumed / presumed (take your pick) that there was a claw back / uplift clause in whatever transaction has taken place to realise that 45% such that there may be future returns if the site is developed or has its value (as agreed at the time of the aforementioned transaction) in some other way increased. What was more of a conundrum to me was how it would be monitored / evaluated / collected in 48 months time. What mechanism will RSM have in place for beneficiaries? Or do RSM anticipate Lendy will still be under their administration in 2023?   ( NB: not in this loan, so maybe the answers are available to those that are and have asked... )
|
|
