Obtaining development finance has never been easy but in recent times it has proved impossible for many potential development site owners. The two biggest obstacles that effects site owner’s attempts to obtain speculative development finance is either an existing charge or finance on the site. Many speculative development finance providers simple will not consider lending on a site that is not unencumbered and already has outstanding finance charged against it. The other thing that banks and development funding providers have increasingly looked at to minimise their risk is development experience. First time or novice developers are finding it very challenging to obtain suitable development funding without the correct development team in place. Those that are able to overcome these obstacles are finding that their development sites no longer stack up because the percentages that the banks will lend are so restricted. The best way to overcome these issues is by making sure you have the correct members on the development team or carrying out a joint venture property development. Having an experienced quantity surveyor will not only give the banks confidence it will also help control build costs, assist with drawdown valuations and increase the opportunities for improved finance structures and cash flow management. Another way around these challenges is to use a private investor to clear off bridging or other finance charged on the site. This can be expensive with private investors expecting returns between twenty and fifty percent dependant on financial input and their risk levels. These considerations can often be weighed against the interest charges on existing finance or funds that are tied up in sites that the owner or development team are unable to build out.
Dilapidation repairs to commercial buildings
April 6, 2012
Business owners are often faced with a need for a base to operate their businesses, a commercial business premises. This could be retail, industrial or office space the two main options to acquire a business premises if through purchase or lease. The majority of businesses chose to lease their business premises. So just like renting a private house you usual look round the local business premises agent’s usually commercial surveyors. The other option is to retain the services of a commercial surveyor to assist you in the acquisition of your new business premises. This of course comes with a cost in the form of professional fees, many elect to do it themselves to avoid these fees. The issue with this is that the surveyor that will assist in acquiring your premises will have expert knowledge in lease negotiations. If a business owner elects to negotiate his own lease or in some cases retains a lawyer to help him there is still a gap in the process. One of the biggest problems that affect business tenants is dilapidations. If you take on a least on a business premises you may find that under the terms of that lease you as the tenant have certain legal responsibilities. The two that often catch out the unsuspecting tenant are dilapidations and a responsibility to maintain statuary requirements. The responsibility to maintain statuary requirements sounds harmless enough but could like dilapidations land a business tenant with some costly bills from building or mechanical and electrical contractors. You may find you have signed a lease that requires you to alter the businesses premises to keep up with modern building regulations, fire regulations or the disabled access regulations. These requirements could land you with invoices for building works running into tens of thousands of pounds. Dilapidations can be equally onerous, if you move in and on week two find a leak on the roof. Your friendly building contractor informs you that the whole roof needs replacing you call the landlord and you may not like his response. He may inform you to check the terms of the lease and inform you that it is now your responsibility to pay for the twenty five thousand pounds that it will cost to replace the roof. You may also find that the landlord is within their rights to serve you with a notice for non compliance to the terms of the lease if you do not affect the repairs in a timely fashion. Ultimately this could result in the landlord taking legal steps to take back possession of the property and recover their costs for the repairs, lack of rent etc. So you can see it may be worth paying for professional fees to protect your position once you sign a lease. A good surveyor will be able to negotiate your lease perhaps even saving you money and protect you from these issues.
Commercial property agents face fines over energy performance certificates
April 3, 2012
It is estimated that well over half of commercial property agents are currently on the wrong side of EPC regulation. With the change in regulations on the 6th of April property agents will also be responsible for making sure that commercial properties have the correct energy performance certificate in place when marketing a commercial property. If they do not comply with this regulation they will be receiving a visit from the trading standards compliance team. These regulations originating from Brussels will add another regulatory burden to property agents many are already governed by various regulations and professional bodies. If their mortgage department are not keeping up with FSA compliance their surveyors are making sure they keep up to date with Royal institute of chartered surveyor’s guidance and now they will have further regulation and paper work to monitor and complete. This is good news for EPC providers and of course office suppliers who will have a good opportunity to sell more filling cabinets.
Continued increases in rents drives better yields and buy to let recovery
March 28, 2012
New data released from the Lloyds Banking group shows continuing increases in monthly rents with the average rent rising from £682 to £716 in the last year alone. The rental market in London is also showing no signs of slowing with the average monthly rent in London at an eye watering £1212. This shows London average rents rising at well over five percent per year. Many cite the high costs of home purchase and the large deposits required to buy forcing many to stay in rented property. With the end of the stamp duty holiday it looks like the upward pressure on rents will continue.
Solid results delivered by UK Commercial Property Trust
March 20, 2012
The Guernsey based commercial property giant has delivered impressive £53million pounds of profit for the 2011 period. They produced these figures party because of good acquisitions and an enviable void rate of 3.4 percent down from 3.6 percent in the previous year. They achieved this while only booking £5 million pound portfolio uplift. Their portfolio is valued at £1.052 billion increasing 9 percent on the previous year’s holdings, with a net asset per share value hovering over 77 pence per share. They are well liked in the industry because of their low borrowings and a strong war chest of a cash facility. The company has performed well in the various key performance indicators of this type of Property Company. With good acquisitions, a high rental collection, low voids and an impressive tenant base.
Property developers and regeneration consultants look beyond the banks for mezzanine funding
March 13, 2012
With record low levels of bank lending, the banks appetite for lending on commercial property and speculative development projects is heavily reduced. Many property developers and surveyors are looking to alternative sources of development funding, the banks are holding around £280 billion of loan notes secured by commercial property. This as a proportion of their balance sheet is leaving them looking to avoid any additional lending to this sector in an attempt to spread their risk. It seems the best way around these challenges is to use a percentage of traditional primary bank lending with lending vehicles like tax incremental funding, regional growth funds, and enterprise zones topped up with private investment and mezzanine funding. There is some frustration in the property industry that tax incremental funding (T.I.F) is being drawn into other related amendments to business rate schemes. As with all finance and business success it is the most innovative schemes that will deliver the best results for the community, developers and ultimately private investors.
Property sector committed to green goals despite economic down turn
March 6, 2012
The government is gearing up to make residential and commercial property that fails to meet rating F and G for energy efficiency unlettable. It is estimated just in the commercial property sector this will include 18 percent of the current commercial property stock. The government are looking at penalising the worst offending properties but are not looking to reward landlords that make the effort to hit the highest standards. Ultimately the next band up band E rated properties will be looking over their shoulders as ultimately if will probably be those that are next to suffer penalties. Those in the property industry are looking for clear direction and a road map to sustainability. With this in mind experienced property investors will be looking to buy newer of more efficient properties to protect their portfolios letability.
The tax payers “Bad bank”, shines as its loan book continues to perform
March 4, 2012
There was much speculation during the height of the credit crisis that the Northern Rock and Bradford & Bingleys loan books would collapse under a huge default from various property backed securities. In fact these two bad banks have produced a pre-tax profit of over 1 billion pounds. This shows their profits up a rather incredible 145% some have attributed this to their investment tactic of purchasing back residential mortgage back securities RMBS’s. These have been trading at depressed capital values as the banking world have been quick to get out of the sector and repair their balance sheets. These bad banks have repaid over 2billion back to their government investors. Interestingly the Bradford and Bingley have seen arrears on their loan note below the average of the council of mortgage lenders. There figures suggest that things in the business world have been improving since the arrears peak of April 2011.
Buy to let back as landlords expand their residential property holdings by 20%
February 10, 2012
The last year has seen the number of buy to let properties expand by an impressive 20%. Banks are keen to point out that they are not favouring buy to let landlords over first time buyers. If you ask yourself how you would behave if you had to reduce the banks risk would you lend to highly geared first time buyers with a limited track record? Or would you favour experienced landlords who probably have other assets in the back ground? Many landlords are the cash rich in their 40’s and 50’s who are just buying one or two properties to help supplement their depleted pension pots.
