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Post by martin44 on Sept 19, 2016 19:22:04 GMT
I was interested in your applying "realistic" to the 90 day value. Of course you can use whatever value you like in your assessment of the loan, but the subtext to saying one is realistic is surely that other valuations are unrealistic. I note that what you call realistic SS calls distressed. On that basis presumably you are bringing into your meaning of "realistic" some assumptions about a fairly widespread and imminent decline in property prices? No, I was not thinking of imminent issues. I always tend to think of "whenever" valuations as not realistic, because of the nature of P2P agencies having lenders snapping at their heels. If one is selling a property oneself, then I reckon the "whenever" valuation is useful to aim for. And if a P2P agency is expediting a sale, then they can use the "whenever" valuation in negotiation. But I would never expect that value to be achieved. It is distracting (for me) that the P2P agencies all use the "whenever" value in their calculations. IMHO i would not even trust a 90 day valuation in a defaulted sale, as per pbl020, not sure if pbl020 had a 90 day sale valuation, but if it did i am willing to gamble it was not as low as £1.5m.
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sam i am
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Post by sam i am on Sept 19, 2016 20:32:22 GMT
As I commented on the pipeline thread, I believe the presence of the UNs gives this loan the characteristics of a 73% LTV second charge loan rather than a 67% first charge loan. See my post here: p2pindependentforum.com/post/139716I would like to understand these UN's better. For instance, as more deposits are made on units exchanged do they too jump to the queue ahead of us? Good question. I would assume so. Note that there are a further 38 units to be sold which, if they have the same average size deposits as the existing ones, would be a total of £0.6m. If these deposits are taken before any value is added to the development then we have the following LTVs. (The SS 'adjusted' land only value becomes £6.2295m - £0.6m = £5.6295). So now the SS LTV becomes £4.166/£5.6292 = 74%. And using my calculation treating the deposits as a first charge loan: Total loan = £4.166m + £1.34m + £0.6m = £6.106m Total land value = £7.5675m So SS has a second charge loan with a combined LTV of 81% (SS participate in 26-81%). Ouch. And that's before we start to worry about a possible reduced value in the case of a forced sale. savingstream, if I'm making any incorrect assumptions here, please put me straight.
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jjc
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Post by jjc on Sept 19, 2016 22:50:12 GMT
It might be worse than that. From the sales brochure I picked up at the time of the MT loan launch payment terms set out for buyers was 5k on reservation, 25% on exchange (to follow within 28 days of reservation), further 25% within 3 months of exchange, & 50% balance on completion.
Judging from deposits made so far 50% of the price (ie 50% of the GDV) might likely be received early in the development process, before much value can be added to the site. Scary if something was to go wrong then, but maybe I’ve misunderstood.
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arbster
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Post by arbster on Sept 20, 2016 6:55:05 GMT
So, we're faced with having an effective second charge on a development where the first charge is growing at an uncontrollable and unknown rate? Sounds fairly unacceptable to me, but presumably savingstream can explain how this risk is mitigated? |
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Post by Deleted on Sept 20, 2016 7:15:31 GMT
Heh, I always assumed that deposits were kept in separate, ringfenced accounts. Is that me showing my naivety?
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greeb
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Post by greeb on Sept 20, 2016 7:20:46 GMT
I wonder if we are not seeing the wood for the trees here. Yes the deposits rank ahead but the deposits themselves and the more we have of them surely add very significantly to the value of the project in the event of its sale
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arbster
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Post by arbster on Sept 20, 2016 7:39:28 GMT
I wonder if we are not seeing the wood for the trees here. Yes the deposits rank ahead but the deposits themselves and the more we have of them surely add very significantly to the value of the project in the event of its sale Yes, in theory, but given the potential for cross-subsidisation of the borrower's many projects, my concern is that the deposits may not be ring-fenced or may not be spent wholly on this project, leading to a higher liability without the funds either being available as cash or as added value to the construction.
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Post by Deleted on Sept 20, 2016 7:40:34 GMT
Secondary market starting to fill up - expect most allocations in the new loan to be filled.
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sam i am
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Post by sam i am on Sept 20, 2016 8:33:36 GMT
Heh, I always assumed that deposits were kept in separate, ringfenced accounts. Is that me showing my naivety? Yes, an escrow account ideally. But if this was the case then why would the deposits need to have a charge over the development? I assume that the deposits are helping to fund the build. Maybe savingstream could enlighten us.
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Post by Deleted on Sept 20, 2016 8:43:25 GMT
I assumed that the depositors having a charge over the development was in case of a shortfall in the ringfenced area (ie an extra guarantee for the depositors, one that shouldn't be needed if their ringfenced accounts are managed correctly)
But again, maybe I'm just being naive.
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Post by Deleted on Sept 20, 2016 8:54:42 GMT
Any chance of an approximate go live time ?
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Post by Deleted on Sept 20, 2016 8:59:02 GMT
After all, it isn't just us lenders taking a risk is it.
Someone paying a cash deposit up front for an incomplete development is taking a risky leap of faith too.
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sqh
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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 Sept 20, 2016 10:13:27 GMT
It might be worse than that. From the sales brochure I picked up at the time of the MT loan launch payment terms set out for buyers was 5k on reservation, 25% on exchange (to follow within 28 days of reservation), further 25% within 3 months of exchange, & 50% balance on completion. Judging from deposits made so far 50% of the price (ie 50% of the GDV) might likely be received early in the development process, before much value can be added to the site. Scary if something was to go wrong then, but maybe I’ve misunderstood. The sales brochure also states that investors get 7% interest on their deposits. I wonder if that takes precedence over our charge? According to the VR the contract for construction costs is c.£7m, but it hasn't been signed off yet. I wonder if the construction costs have increased post brexit and what the implications are?
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Post by portlandbill on Sept 20, 2016 11:01:43 GMT
Any chance of an approximate go live time ? Based on recent experience? Sometime this week, maybe.
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jjc
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Post by jjc on Sept 20, 2016 11:59:05 GMT
After all, it isn't just us lenders taking a risk is it. Someone paying a cash deposit up front for an incomplete development is taking a risky leap of faith too. The way these things usually work is that buyers are motivated to participate on the basis that if they don’t they lose out (ie strong demand is considered to cover the risks.) Here the proposition looks different. It seems there is a primary lender (buyer’s deposits) lending at 7% on a 1st charge & we are secondary lenders (earning 12%, with presumably a higher rate to the borrower) on a 2nd charge. Which explains why the marketing of the units is being pushed well ahead of build-out, the borrower will always prefer to use the cheaper funding. On MT we had advanced 2.22m. Here, based on sales made so far (c. 50% of the 249 units sold) we can expect 25% of GDV (50% due on 50% of the units) ie 4.071m to jump ahead of us very shortly. This tranche is 4.166m, so a total of 8.237m advanced to the borrower vs the 2.22m on MT. That’s a lot of money for what is still a plot of scrubland. Does the MS have any control over the buyers’ deposits or do they go straight to the borrower? Ranking of buyer’s 7% interest also important. If it ranks ahead of our charge that’s potentially a further 570k (half the GDV ie 8.143m at 7%) that jumps ahead of us. savingstream?
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