24 Dec 2016
With the end of 2016 approaching, it’s time to take a recap of the year and try to peek into the next.
This year has been a tumultuous one, where we ended up holding assets which were high in value and could not be sold due to the dampening market conditions. For most of the projects we have somehow or another found a way out. Some by going back to the drawing board and finding another more innovative strategy, some through finding JV partners, and making the deal attractive to them. One we had to let go of.
Property development is about three things mainly. One is reading the market, another is doing the development on time and on budget, and lastly getting the borrowing right in terms of rates and Loan to Value.
One or more of these factors can destroy the deal, as we have painfully learnt.
These few deals which haven’t gone to plan will be a blemish on our immaculate record of trades and sourcing deals.
To date we still have an exceptionally high record of both trading and sourcing deals.
On a positive note we are finally due to complete on a deal in Marylebone for £3m today, I say due because at the time of writing the funds have not yet been received by the lawyer, and the date for completion is today. Worst case notice will be served and we will then have 10 working days, which take us to 4th January 2017, to complete.
There is a new strategy which we will be pursuing with a vengeance in 2017. It will bring life back to property investments.
To do investments in the same way as the rest of the market doesn’t really give you an edge. The market is too small and knowledgeable. Generally, when a development is sold, it is sold with the appraisal done by the seller to ensure 20% to 30% is left for the incoming purchaser.
There can be an edge if you know of a planning angle which the seller has missed or you can do the development very cheaply by having in-house builders.
On the whole, this is the market. The property market in particular is very backward looking, there is not much innovation and forward thinking. Demographics are changing and there is a lot going on, especially in London. The property market is unable to read the current trends, and even at times when it does, it is very slow to react.
We have a strategy which will be yield focused in the prime parts of London. This means you still adhere to the scared mantra of Location, Location, Location; but the concentration is on the monthly cash flow. Yes, it is possible to get one. We will be announcing a seminar in the beginning of the year, which will be an opportunity for you to attend and see first-hand what we are planning.
Suresh Vagjiani
