Who’s afraid of a vacant commercial property…?

Hi everyone. And it’s Friday again and so close to lock down ending (fingers crossed).

If you’ve been reading our blogs over the past few months, you will know that I have got involved in a couple of properties for development.  I’d like to talk about the commercial one for this blog.

I’d known about this property for a while, as the buyers are clients of mine.  The property is a D2 usage large building in Salford.  D2 is leisure, as it was a crown bowling social club.  It was also run down and vacant.  As you can imagine this can cause challenges in getting funding.

The property had a 15 month option from February 2020 in order to get planning for residential.  You’d think that 15 months is enough time to get things sorted, which in normal times it would be.  The property stands on an acre of land, the building itself has a footprint of around 320 sq/m – so there are many options for an exit, it was the purchase that was proving challenging!

I got involved end of last year, just to find funding.  This proved rather difficult.  The commercial market has really taken a hit with lenders during COVID.  For a while it simply wasn’t available, then when it did return it was specific to certain professions and whether they had been trading during lockdown.  This fell into neither camp.

The week before exchange I put my hat in the ring to be a part of this.  Thankfully the investors were happy to do that; it spread their cashflow, which is important at the moment.  If you know and trust the investors you get in bed with, then it’s better to share a number of projects than be responsible for it all.

When a property has a lot of options, although it should be a positive it can prove a negative with lenders as it causes uncertainty.  We could go full on development of 36 or so apartments; a mixture of houses and apartments; renovate the house and split off the land; keep the property commercial and split off the land… and the list goes on.

We now had a deadline to exchange by May 10th, but due to planning having been changed (a housing association wanted to buy it with planning) so we still have no planning.  As most of you will have experienced, COVID has caused such bottle necks in so many areas and this is clearly one of those areas! The application went in for an AIP on 7th May and I looked at it as an auction buy.

I approached Shawbrook to see if they would consider it – at the time we wanted to convert the house into 7 flats under permitted development, but could not get it on PD due to D2 usage not allowing it.  We could also not apply to change the commercial usage as planning was already in.  It was all really frustrating.  We decided just to buy as is and landbank it until planning was through.  I can’t praise Shawbrook, particularly Mark Whitburn and Kieran Route enough, for really getting on with this knowing the completion date of 18th June.  They have agreed 60% ltv on Vacant Market Value, which was the purchase price (£500,000) – very reasonable indeed.

The property is a good buy. There is no way that a piece of land of this size in Salford can lose you money, but having to react quickly at the moment can be a challenge.  Sometimes you really need to go with your gut, as properties are in low supply and you can lose out.  Of course there are risks here, but aren’t there in all walks of life? You could argue that doing nothing is the biggest risk of all.

All is set for completion on 18th.  I know I bleat on about the power team – IT IS THE MOST IMPORTANT THING – we couldn’t achieve this without our amazing solicitor (Phillip Adam) and the safe hands of Shawbrook and Laura Nicholl at Pure Law.  They are worth their weight in gold for the stress they alleviate.  Particularly when the completions side of things is really boiling over at the moment.

What have I learnt from this? 

The educational part of this is the change in lender appetite towards properties like this as we have progressed with it.  There has been a realisation from lenders that there are some properties that are worth funding; there is a still a massive shortage of residential properties and the Government is pushing for smaller builders to step up.  I would ask you to consider these when you are looking at your next investment.  If you don’t have enough experience, then bolt onto someone who does; spreading the risk/cash and progressing up the development ladder as well.

As always, we are happy to run through the figures and see what options are available to you.

Reasons for not changing your agent…… and why you should

Hi everyone, yes, it’s Friday again already! I hope you’ve had a chance to enjoy a bevvy in the sun.

I think this lockdown has allowed a number of us to reflect on our current situations, perhaps make overdue necessary changes.

I was talking to some like minded individuals a while ago about my portfolio; it had all started because I disagreed with the term ‘a passive income’ from a property portfolio. We all need to put time in to build and manage our properties, but effective time.  We have 8 properties between myself and my partner, so not too many to manage.  And so the conversation started…

Mid 2017 I had had enough of my current lettings agent. Even though it was full management it required so much of my time to address things that weren’t being chased or dealt with by them.  I just had to change, me and my partner kept talking about it but there was always something that kicked it down the road.  As we have student let’s, we always seem to be near the time for changeover, so left it. When we finally made the decision to do something about I got diagnosed with breast cancer, which was early 2018, so there was no chance; but it also made dealing with them even harder and exhausting – and it was all my fault.  My excuses were always that it may not be better, wrong time and the old favourite of better the devil you know!

I had always had a good relationship with one of the guys working for the agent, but he he’d left a while before.  I asked him, Manny, to keep my number….

September 2018. It could not have been a worse year, my Dad was also very poorly and we had taken a well earned holiday in Sicily. I got a call from Manny asking if any of my properties were empty.  Two were (they were student lets at the time).  A couple of phone calls back and forth and some e-signatures later and both properties were rented out before I even got home.  Perhaps circumstances pushed me over the edge, but I have never looked back.

The new agent (Prominence Estates) are outstanding. They have given me my time back, and less pain at home!

But why do we procrastinate on important decisions that involve change?

I actually think it is a form of laziness, which comes in a variety of guises – comfort zone, poor excuses and just haven’t got the heart as a few examples. My friends and colleagues would not think I was lazy in the traditional sense, but I really couldn’t be bothered with the effort of that change, yet I was really struggling with the system I had.

All parts of the property business need good, decisive decisions.  Where a lot of us have full time jobs time is our most precious commodity and should really be looked after.  Taking change head on is important.

I have learnt from what happened and now focus on my power team.

Reflection on your properties and your power team are so important. Look to see what areas are too time consuming (we obviously have to do some work) and consider other more efficient options.  Each one of the team has to count – estate/letting agents, solicitors, brokers. You are paying for all their services, both time and cash. We often sacrifice cost for our time and therefore seriously underestimate the value of ourselves.

Check out recommendations, good service floats above the rest and poor service can’t hide for long. Listen to your gut! I ignored mine but thankfully Manny called me – the rest is history.

A good relationship should not be that hard, it really shouldn’t.

Enjoy your weekend everyone.