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Post by investorman on Aug 23, 2017 16:13:20 GMT
I guess the fact they need to source a loan to pay off this loan could be the biggest risk? It says they have had 'initial conversations' but I read that as currently nobody has 100% agreed to give them £1.3m once they have all the land?
Based on the LTV it seems there is enough value to cover the loan eventually, its whether it will be there in 10 months.
Thats my inexperienced opinion.
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ptr120
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Post by ptr120 on Aug 23, 2017 16:20:37 GMT
ablrate as the underlying borrower is connected to another loan, please can we have an update on how that project is progressing?
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Post by investorman on Aug 23, 2017 17:49:28 GMT
I guess the fact they need to source a loan to pay off this loan could be the biggest risk? It says they have had 'initial conversations' but I read that as currently nobody has 100% agreed to give them £1.3m once they have all the land? Based on the LTV it seems there is enough value to cover the loan eventually, its whether it will be there in 10 months. Thats my inexperienced opinion. We will fund the 1.3M to to exercise the option to acquire the remaining land/make final settlement of the first parcel. This is the bridging loan whilst the borrower seeks finance for the development loan (which will be a larger loan to build out the 89 units). Main risk would be no development refinance which could mean selling the property and relying on the headroom of the current valuation with full pp and top-ups from the SHs should there be any shortfall. Interest is retained on account. Thanks, I don't think I worded my post very well, what I meant was they need to own the full land to get the development loan to pay us back, but as far as I can see there is no agreement in place that if they do x, y and z then somebody has agreed to the development loan. I understand they need the bridging loan from us to unlock the bigger loan, its just trying to understand if it was normal to have the second larger loan agreed in principle in advance or whether it is normal follow this route. I guess the risk and therefore return would be lower if the loan that pays us back was in place subject to the land being acquired and other conditions met.
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hazellend
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Post by hazellend on Aug 23, 2017 18:04:00 GMT
ablrate as the underlying borrower is connected to another loan, please can we have an update on how that project is progressing? which other loan is connected?
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Post by dan1 on Aug 23, 2017 18:10:31 GMT
ablrate as the underlying borrower is connected to another loan, please can we have an update on how that project is progressing? which other loan is connected? 1000074 Edit - see page 14 of the proposal
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stub8535
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personal opinions only. Not qualified to advise on investment products.
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Post by stub8535 on Aug 23, 2017 19:23:20 GMT
which other loan is connected? 1000074 Edit - see page 14 of the proposal I have heard of some of the other companies the only director (companies house) record for this company. Cannot remember where from in p2p land though. Company office (maildrop?) Is just down the road from me. Might drive by on Tuesday.
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Post by epicurean on Aug 26, 2017 11:59:07 GMT
I thought this was a very clear proposal with a much better valuation (although still not great) than has been provided for other loans. Questions for Ablrate in bold.
I'm not sure why the borrower couldn't look to take out a development facility now on the whole project rather than taking a bridge facility? They could use the proceeds from that to acquire the land. It doesn't make sense for a lender to make ownership of the land a pre-condition when the purpose of a development facility is to fund development costs of which land is one. I suspect it might be because the shareholders haven't been able to get a development facility and I see this as the key risk. Getting development finance on small projects like this with small developers is notoriously difficult. The government has tried to fill the void with the £3bn 'Home Building Fund' but I imagine that is a laborious process.
A mainstream lender will typically only lend a maximum of 65% Loan to Cost or 55% Gross Development Value (GDV). That leaves an equity requirement of £2.4m if you believe the construction costs in the valuation. How do the shareholders plan to find this cash in order to get a development facility? If they had the cash now they wouldn't need this bridge facility.
If the development facility doesn't transpire, that leaves the land value which is primarily a function of GDV and construction cost.
The valuer has assumed GDV is as according to an estimate provided by an estate agent for the borrower. A key part of a residual valuation is for the valuer to independently assess using comparables whether the implied £255/sq ft is reasonable but this hasn't been completed. An estate agent pitching for a sales mandate will always inflate the sales prices they think they can achieve.
The other key part is the cost of construction and this also hasn't been checked by a quantity surveyor but instead a builders quote has been relied on (without stating what construction contract type and 'builder' suggests guy-in-a-pub rather than a professional contractor). I think the costs seem too low and haven't accounted for all costs. This is a refurb of Grade II listed buildings with multiple planning conditions. This is the main reason there is no affordable housing or s106 requirement. This screams 'cost overruns' and will also scare lenders (long track record of refurbs with the developers, a strong contractor and large budgeted contingency being the only mitigants).
Any reduction in the GDV or increase in costs comes straight out of the land value. Therefore if GDV is actually 12% lower or project costs 39% higher (or any combination of the two), you are at 100% LTV.
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Post by epicurean on Sept 10, 2017 12:07:17 GMT
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Post by oktaeder on Sept 21, 2017 11:59:18 GMT
Why is underwriten+invested > 100%?
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djpix99
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Post by djpix99 on Sept 29, 2017 13:18:56 GMT
Are there any updates on the drawdown of this loan ablrate?
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Post by brummiefred on Sept 29, 2017 13:44:42 GMT
Just received email advising fully funded and bids accepted.
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treeman
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Post by treeman on Sept 29, 2017 13:45:44 GMT
Instant returns now credited
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djpix99
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Post by djpix99 on Sept 29, 2017 14:01:58 GMT
Excellent
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rgog
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Post by rgog on Oct 3, 2017 10:19:01 GMT
I thought this was a very clear proposal with a much better valuation (although still not great) than has been provided for other loans. Questions for Ablrate in bold. I'm not sure why the borrower couldn't look to take out a development facility now on the whole project rather than taking a bridge facility? They could use the proceeds from that to acquire the land. It doesn't make sense for a lender to make ownership of the land a pre-condition when the purpose of a development facility is to fund development costs of which land is one. I suspect it might be because the shareholders haven't been able to get a development facility and I see this as the key risk. Getting development finance on small projects like this with small developers is notoriously difficult. The government has tried to fill the void with the £3bn 'Home Building Fund' but I imagine that is a laborious process. A mainstream lender will typically only lend a maximum of 65% Loan to Cost or 55% Gross Development Value (GDV). That leaves an equity requirement of £2.4m if you believe the construction costs in the valuation. How do the shareholders plan to find this cash in order to get a development facility? If they had the cash now they wouldn't need this bridge facility. If the development facility doesn't transpire, that leaves the land value which is primarily a function of GDV and construction cost. The valuer has assumed GDV is as according to an estimate provided by an estate agent for the borrower. A key part of a residual valuation is for the valuer to independently assess using comparables whether the implied £255/sq ft is reasonable but this hasn't been completed. An estate agent pitching for a sales mandate will always inflate the sales prices they think they can achieve. The other key part is the cost of construction and this also hasn't been checked by a quantity surveyor but instead a builders quote has been relied on (without stating what construction contract type and 'builder' suggests guy-in-a-pub rather than a professional contractor). I think the costs seem too low and haven't accounted for all costs. This is a refurb of Grade II listed buildings with multiple planning conditions. This is the main reason there is no affordable housing or s106 requirement. This screams 'cost overruns' and will also scare lenders (long track record of refurbs with the developers, a strong contractor and large budgeted contingency being the only mitigants). Any reduction in the GDV or increase in costs comes straight out of the land value. Therefore if GDV is actually 12% lower or project costs 39% higher (or any combination of the two), you are at 100% LTV. And we never did get an answer to these very pertinent questions?
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Post by investorman on Mar 22, 2018 10:39:00 GMT
Sold this one on 28/02. Really liked the 15% but thought them having to find £1.3m was a big risk so got out.
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