Details
The Distressed Asset Sale – Lesser than the sum of its parts…
This fantastic opportunity was highlighted in a regional auction catalogue, following the appointment of liquidators to manage the sale of assets held by a local developer in administration. The property had been a multi-unit rental property (converted into eight flats) for many years prior to the developer’s purchase, after which they had planned to add a further two or four units through a rear extension. What they had perhaps not fully accounted for however, was that the property was Grade II listed and the local authority (conservation officer) did not support plans to create additional units or to extend.
With an unrealistically low guide price of just £180,000 our team conducted a detailed due diligence assessment, taking into account required works and the restrictions on further development, before setting a realistic budget for both the purchase and works. With five of the eight self-contained flats retained within the freehold title (three having been sold off on long leases), the building was purchased for £250,000 including legal fees and associated costs, thus equating to just £50,000 per unit, which we believed to be significantly below a realistic fair market value.
Our plan was to recover funds within a reasonably short timescale, by refurbishing two of the flats to a high standard, making them available for sale within 12 months and undertaking communal (internal & external) works to raise the general standard and appeal of the property. The remaining three units were to be retained and refurbished to a good ‘rental’ standard, ready for letting via the local Private Rented Sector (PRS).
The two properties designed for sale were launched onto the market with a local agent during a buoyant Easter period, each quickly securing buyers at or around asking prices. The rental properties were re-let on new (higher yielding) tenancy agreements and one of the existing long leases was extended for a (market rate) premium. The property offers further development potential within the attic space (either a new unit or extension of existing units) and local values have continued to increase, supported by a predicted regeneration of the local area. Known investors were invited to take part and had their expectations (profits) exceeded and funds returned within 15 months. The remaining units provide Freelands with high yielding rents and further opportunity to extend and/or raise secured funds for future projects as required.
Financials:
Please contact us if you would like to know more about financing and returns offered by Freelands.
As featured on ‘Homes Under the Hammer’ – Click here to watch
