oik
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Post by oik on Aug 2, 2018 10:36:56 GMT
I'm heavily invested in this one because I thought it would be a very solid and safe loan based of the figure and updates. I could't think the figures could just be a list of made up numbers. How likely it is to recover 100% of the money? And what's the most likely scenario? I expect your guess is as good as anyone's. Depends whether there are potential buyers out there with an idea for putting to use an old listed building in an insalubrious part of a small town that's been empty for many years. I doubt anyone is likely to place much value on the PP for student accomodation. It will have a value but could be on the market for a while. Hope it goes well for you.
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cwah
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Post by cwah on Aug 2, 2018 10:47:46 GMT
The RICS valuation report goes as follow: Market Value (MV1) £1,200,000 Market Value (MV2) 90 day £750,000 Market Value (MV3) 180 day £950,000
Surely it must have some legal value? If it gets offers at £400k max after 180 days we should be able to claim insurance against miss-valuation?
Because it's written market value. If no one wants to offer this amount then it's not market value isn't it?
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averageguy
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Post by averageguy on Aug 2, 2018 10:48:07 GMT
On this particular loan, Ed was well warned and ignored us, collecting some negative kudos along the way, imo.
Indeed. Incompetent or non-existent DD by the platform is one thing, but in this case DD was done by the platform's clients themselves, clearly presented to the platform, and still they ignored it. Having read it, did MT expect a loan based on PP for student accomodation for non-existent students of a non-existent language school to a group with such a colourful trail of failure to go well? I don't understand the MT business plan. Selling any loan they can get as hard as they can might be tempting, but for how long did they expect to have lenders?
I'm not so sure they are doing that
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Post by mrclondon on Aug 2, 2018 10:53:25 GMT
How did you find out about the borrowing company and people associated? I couldn't see it anywhere??? A combination of googling the address of the asset and discovering advance publicity for the language school, and by digging through the planning applications (which the valuer helpfully provided links to in their follow up letter).
I'm heavily invested in this one because I thought it would be a very solid and safe loan based of the figure and updates. I could't think the figures could just be a list of made up numbers. How likely it is to recover 100% of the money? And what's the most likely scenario?
As oik says the amount likely to be recovered is pretty much impossible to guess.
In the very unlikely event that an established language school has been watching the site and is interested in stepping in a full recovery might be achievable fairly quickly.
Beyond that we are most likely in the realm of conditional offers, i.e. offers to purchase the site if planning permission is achieved for some other purpose. Which tends to imply a partial recovery a few years hence. Permission to demolish the listed building is likely to lead to a fairly full recovery (if we assume recovery costs + demolition at c. £100k) but is very unlikely to be achieved. The alternative requires a developer / architect combo to come up with a plan for the site that retains the listed building, demolishes the modern wings, and proposes new building(s) on the site which are architecturally symapthetic to the listed building. The problem here is this implies demand for residential apartments in an area where individual housing stock is preferred.
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cwah
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Post by cwah on Aug 2, 2018 10:59:20 GMT
Thanks for your answer mrlondon.
Why would a RICS valuer put so high values on 90 and 180 days selling date if it's a site that is potentially very hard to sell???
Couldn't we claim insurance against that valuation? It's clearly wrong and overinflated number
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Post by mrclondon on Aug 2, 2018 11:14:32 GMT
The RICS valuation report goes as follow: Market Value (MV1) £1,200,000 Market Value (MV2) 90 day £750,000 Market Value (MV3) 180 day £950,000 Surely it must have some legal value? If it gets offers at £400k max after 180 days we should be able to claim insurance against miss-valuation? Because it's written market value. If no one wants to offer this amount then it's not market value isn't it? The property was last marketed for just under £550k (in Dec 2014).
Unfortunately all p2p platforms base development loans LTV on residual values back calculated from gross development value (GDV) of the scheme (take estimated final selling price , deduct cost to build, deduct finance cost, deduct 15% profit then whats left is the residual value of the site). This encourages "over development" of sites by borrowers to increase GDV and hence residual value.
As I think you are beginning to realise, unless there is proven guaranteed demand for the end property (in this case language students on weekly rentals) no one else will offer the residual value for a site. It is almost impossible to claim mis-valuation against residual value valuations - the valuation is for a residential language school, and based on the assumptions in the VR is probably pretty accurate.
Purchasers of distressed development site sales are usually land banking them, and prefer cleared sites. It is hard to see how this site could be formally valued on an as is basis. p2p platforms make practically zero effort to warn prospective lenders of easily forseen risks associated with specific loans, and have damaged the whole p2p concept by their behaviour. This loan is likely to join the A-list of p2p mishaps.
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cwah
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Post by cwah on Aug 2, 2018 11:18:50 GMT
So basically what I thought was current value was residual value or gross development value?
I completely miss understood how they did the valuation??
And very likely, the borrower didn't put any of his own money to purchase the site. He just told them what the site could worth and got the money from that?
It sounds like a scam.
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Post by mrclondon on Aug 2, 2018 11:27:19 GMT
Why would a RICS valuer put so high values on 90 and 180 days selling date if it's a site that is potentially very hard to sell??? A very perceptive question. If you read enough of these valuation reports you'll see that such numbers are provided only reluctantly by the valuer. 90 day marketing valuations should of course be distressed / auction / fire sale price and not simply the residual value less a certain percentage. So basically what I thought was current value was residual value or gross development value? I completely miss understood how they did the valuation?? And very likely, the borrower didn't put any of his own money to purchase the site. He just told them what the site could worth and got the money from that? It sounds like a scam. "You might think that. I couldn't possibly comment" Francis Urquhart.
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cwah
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Post by cwah on Aug 2, 2018 11:29:56 GMT
So 90 day valuation of £750k would be a fire sale price on current value? Sold as is?
You mentioned previously it may worth £400k as is.
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SteveT
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Post by SteveT on Aug 2, 2018 11:30:11 GMT
So basically what I thought was current value was residual value or gross development value? I completely miss understood how they did the valuation?? Did you not read the valuation report?! Caveat emptor
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cwah
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Post by cwah on Aug 2, 2018 11:32:19 GMT
So basically what I thought was current value was residual value or gross development value? I completely miss understood how they did the valuation?? Did you not read the valuation report?! Caveat emptor I did read! But didn't realise it was based on residual or GDV
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SteveT
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Post by SteveT on Aug 2, 2018 11:44:43 GMT
Did you not read the valuation report?! Caveat emptor I did read! But didn't realise it was based on residual or GDV I've just looked up the VR (I steered clear of this loan so hadn't studied it since launch) and, to be fair, it's one of the worst examples of "valuation out of thin air" I can recall. The main VR gives no justification at all of how the MV was arrived at, and there's only a side letter to explain that they've used "£10,000 - £12,000 per room". Given those rooms do not exist until / unless the scheme is completed, £12k is indeed the assumed residual value per room but it doesn't say so clearly.
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Post by mrclondon on Aug 2, 2018 11:46:04 GMT
Did you not read the valuation report?! Caveat emptor I did read! But didn't realise it was based on residual or GDV Unfortunately with hindsight you may conclude some of the wording of the original valuation report was opaque, not intuitive, and should have raised red flags (as indeed it did for those investors with more experience of reading such reports)
The valuation basis was actually stated in the subsquent follow up letter to MT which was also attached to the loan:
"The subject valuation report does not include comparable evidence, we are valuing a specialist property being a mansion house with 99 studio apartments, therefore there is no direct comparable evidence in the current market place. In our professional opinion and from valuing other student accommodation in the North of England and Scotland we are basing the valuation on £10,000 to £12,000 per room."
EDIT: Cross posted with SteveT
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Post by westcountryfunder on Aug 2, 2018 12:35:58 GMT
I did read! But didn't realise it was based on residual or GDV Unfortunately with hindsight you may conclude some of the wording of the original valuation report was opaque, not intuitive, and should have raised red flags (as indeed it did for those investors with more experience of reading such reports)
The valuation basis was actually stated in the subsquent follow up letter to MT which was also attached to the loan:
"The subject valuation report does not include comparable evidence, we are valuing a specialist property being a mansion house with 99 studio apartments, therefore there is no direct comparable evidence in the current market place. In our professional opinion and from valuing other student accommodation in the North of England and Scotland we are basing the valuation on £10,000 to £12,000 per room."
EDIT: Cross posted with SteveT Yes, but I share cwah's confusion. The side letter also includes the sentence "We have valued the property on a Vacant Possession basis only, with the benefit of the current planning, we have not considered any alternate use values." I must be dim, but I can't see how that implies GDV.
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Post by mrclondon on Aug 2, 2018 12:44:54 GMT
Unfortunately with hindsight you may conclude some of the wording of the original valuation report was opaque, not intuitive, and should have raised red flags (as indeed it did for those investors with more experience of reading such reports)
The valuation basis was actually stated in the subsquent follow up letter to MT which was also attached to the loan:
"The subject valuation report does not include comparable evidence, we are valuing a specialist property being a mansion house with 99 studio apartments, therefore there is no direct comparable evidence in the current market place. In our professional opinion and from valuing other student accommodation in the North of England and Scotland we are basing the valuation on £10,000 to £12,000 per room."
EDIT: Cross posted with SteveT Yes, but I share cwah's confusion. The side letter also includes the sentence "We have valued the property on a Vacant Possession basis only, with the benefit of the current planning, we have not considered any alternate use values." I must be dim, but I can't see how that implies GDV. Correct, nothing in the VR or followup letter talks about GDV.
However, what the valuer has done is based on their experience of student developments, plucked a residual value of £10-£12k per room out of the ether. Normally you would see an attempt to set out the calculation of residual value from GDV, but not in this case.
EDIT: By way of comparison have a look at the VR's for student devs on Lendy (e.g. DFL006 where the residual value is shown calculated out as £23k per room, or DFL013 Blocks A&B at £16k per room)
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