Doubling The Pie
28th May 2019
Last Friday I attended an auction, with the hope of acquiring a property on behalf of a client. It was a corner property with the benefit of a large piece of land on the side.
The deal seemed obvious. There was potential to build another dwelling on the side, to be sold off on a separate title, or refinanced. The house opposite had done the same.
The idea was run by our planner who gave the affirmative, or as affirmative as a planner gets.
We were hoping to pick the property up for £575K-ish, however, the price went to £602K.
It seemed as if half the room was after this lot. In my opinion this was due to a couple of reasons. One is it’s very local to investors who live in this location. Many investors like to buy and own in and around where they live. The other is there are a lot of builders now looking to acquire development projects. Their purpose is not only to make money, they have another purpose, that is to keep their work force busy in between jobs. If they do not do this they may not have a work force.
This property floated in and out of auction over the last couple of months. It was only put into this one a couple of weeks ago. I was hoping given the background it would slip through the net and miss the attention of many potential investors. It was not the case.
I never saw the property from inside, as the interest was driven by the development angle. The property was a probate. Even though the probate had not been granted it had been put into auction, with the proviso the deal can only be executed once probate has been granted.
Considering it was a probate, it was almost a given it would require substantial updating. This meant the margins for this deal were becoming tighter and tighter; unless of course you’re in the building game.
The principle of building on the side of a plot seems obvious, however sometimes such opportunities are completely missed by the developer; little or large.
I’ve seen an office to resi conversion in prime Ealing, where the developer completely missed the potential in the carpark to build a whole new building. They were simply fixated on the office building.
Our planner had advised getting planning for a second building in the carpark was very strong.
We tried to buy the whole site off the developer, however, we could not get terms to meet.
I spotted a similar opportunity, last week, where there was a site with 29 car parking spaces, close to the station. Where a site is close to the station, the council may elect for the site to be a car parking free zone.
Under this premise the carpark can be converted into a new freehold block in addition to the existing block.
To describe this as a cherry on the pie would be doing it an injustice. You are looking at doubling the pie – at least.
However, although the principle sounded sane, the reality did not match on this occasion. Our planner informed us that having the carpark was pivotal in getting the office to resi scheme approved, therefore the additional development would not be viable.