The Daily Arsenal

The outstanding mortgage has come down £49k in about an hour.

It'll be clear by midnight at this rate.

 

The idea that a surveyor representing a lender is going to do anyone any favours when it comes to valuing the property, and not play it absolutely down the line (which HIAG seems to be insinuating) is ridiculous. They represent the lender's interests first and foremost, not the buyer's.

 

As far as I'm aware s106 is still applicable to pub conversions depending on the size of the proposed scheme and whether the developer is also building in the grounds, particularly those pubs that are already consented for change of use. I could be wrong (no shame in admitting to not always being right Walter). I've never got involved in a pub site, the emotional attachment to the property by the locals (who neglected to use it) makes planning a ball ache.

 

The outstanding mortgage is around £299,000 (as I said before). The bank will take that all day long, and the owner will sell to us for that price, because it clears the mortgage and there is no risk of the bank calling on the PG. However, I am negotiating with the bank to get it to clear the mortgage for less than is actually owed, on the basis that it won't call on the PG. I am confident that a deal can be struck for around £250k.

 

Indeed mate, especially on commercial property.

A bank valuation of an existing business premise is both detailed and pain staking.

I went through it recently actually, as the balance sheet property value was out of date and below its true worth and I wanted to leverage additional borrowing, so got it revalued. The idea that they'd take a property that'd just changed hands at £300k and lend £600k against it, is completely preposterous

 

I have done deals tbh HIAG, many years ago. We were turning refurbs though and the occasional undervalued property. You may very well be right tbf but you haven't explained yourself very well which is why I asked the question.

 

Surely wouldn't the bank want to max the amount you pay, so as to reduce their loss on the original mortgage ?

 

Exactly. We are under 10 residential units, and we are not going over the max sq footage. In fact, we're squeezing in the extra units by making better and more efficient use of the existing pub footprint.

 

Why would the bank take a £49k hit on a property who's market value is at least (according to you) £450k and they've got a DG in place against the current owner?

Plus you can't negotiate a sale price with a bank on behalf of the current owner you turnip. If they've not called in the debt it's still his property and they won't engage with you. It can't be both, ergo you're talking absolute bobbins.

 

The loan committee approving HIAG's application

 

I apologise, then, Trebs.

It's just that I've had a pack of muppets on my back, poring over something that I had no intention of acutally discussing, trying desperately to trip me up (no doubt for the wummage value).

Not that it matters to anyone, but we've been throught this particular project with a fine tooth-comb, and it is a no-brainer, provided I can tie up the strings on the negotiations. We've also had a very astute lender going through our figures like a dose of salts, and they have offered terms, subject to valuation. They would not have done that if they didn't like the look of the deal.

 

Yep, in fact if I remember correctly they have a duty to do so otherwise they could be stung if it goes to court.

 

The pub closed a while back. We already have a valuation on the bricks and mortar from 2009, when the market was more depressed than it currently is. We are confident that the bricks and mortar will value up at £500k (at least). Whether or not we could turn it on the market for that is utterly besides the point, because we are going to build it out. We want to maximise our profit, not make a quick turn. The reason why we want to build out is because we are building up a relationship with a particular lender, with the intention of doing more deals through them.

Financing of property developments is not like how it used to be. The banks are extremely focussed on the likelihood of you finishing the project, on time and on budget, and for that you need to have a proven track record, especially for the larger deals, which is where I and my business partner want to position ourselves, in the medium to long term.

 

I've only literally caught the end of this discussion. And just now realised it's for commercial property/land? I had little dealing of that as we only really dealt with residential. Having said that, I was involved with people who bought and sold commercial. The biggest concern for you (from what I remember about commercial property sales) was the whole thing can take ages and yet fall through on the drop of a hat. Unlike residential where you know you're waiting to cross the t's and dot the i's, with commercial proprty I remember it's not done until it's done and can fck up on a technicality.

 

They do, once they've repossessed

I've bought a few. Once they accept your offer they are legally obliged to place notices in papers etc advising that they've received an offer of £x against the property and any other interested parties should make their bid within 14 days.

They have to do this in order to ensure that the original owner hasn't had his asset disposed of at way below its market value.

HIAG is trying to say that it's not been repossessed and yet he's negotiating to buy it direct from the bank. He's talking ****e.

 

Yep that's what I was getting at. Tbh though, it's usually the agent that places the advert, and depending on the kick-back will usually bury it in the classifieds!

 

The bank wants its money. The pub had been failing for many years, and the mortgage fell into arrears. It indulged the owner by enabling him to get planning for redevelopment, but the owner ran out of money, and has to sell before the bank appoint a Receiver (which is what they have threatened. I heard about this last week, and I have this short window of opportunity to get a deal done. I am confident I can do that.

I don't know if the bank will take a £49k hit, but the way negotiations are progressing, I get the impression that some kind of deal is certainly on the cards. We will see.

Oh, ffs! Why is this difficult for you to grasp, Tobes?

I'm not negotiating with the bank for the sale of the pub - I have already agreed with the pub's owner that I can buy the pub for whatever price it takes to clear the company's mortgage, on the basis that the bank doesn't call on its PG. I have explained all of this several times!

I'm dealing (together with the owner) with the bank to see if they will take a hit on their legal charge.

 

So how is that a faux pas when I said you should make sure the extra units didn't incur (additional) 106, given that I didn't know how many units your fantasy scheme already incorporates?

Also, your figures don't stack up. The profit is £400k and two extra units will add another £100k to the profit.

That's £50k per unit profit so if your profit with the extra units is going to be £500k then that averages out at 10 units.

Making the units smaller increases their price psf but as you're using the existing envelope to squeeze extra units in you will also give away space to communal and access areas for the two extra flats. You can't charge buyers a premium for corridors.

Also if you're refused the extra two units having invested money (which come out of your profit fella, if you've learned one thing from this roasting then make it that) in new drawings and your Section 73 then you've killed the entire projects. Even your fake returns are too skinny to have a gamble like that.

Turning it makes far more sense. Only a moron wouldn't turn it.

 

The lender has to value and thus lend - against the true asset value

As they have to factor in what they'd be left with if you went pop. So what you could turn it for on the market is completely relevant as that's the prime parameter that they'll factor into their risk calculations, and thus the price they'll put on it.

 

No, that isn't what I am saying, at all. Please read exactly what I have said.

I can see why you weren't very successful with property deals, Tobes.