Looking for advice for sourcing JV equity funders
Discussion
We have been asked by a client to supply them with quite a large amount (100+) of properties. Mainly in blocks of 6-20 units. The client is a registered provider for the government and will lease the supplied buildings from us from 5 - 25yrs on full FRI leases. In turn, the government pays the rent to them, so the leases are very strong and highly rated.
It`s quite a considerable request from the client, it`s way beyond what I could personally raise and would require a generous amount of equity funding/private JV investment, so my question is, does anyone have any advice or experience, on going about raising this amount of private funding?
As you can imagine, the equity amount required, would be in the millions to fulfil the full order, but they said they`d take as many as I could supply and it will be an ongoing relationship. So I wouldn`t require a large amount in one go, more like a few dozen £100k+ deposits ongoing.
I am connected to a few `family offices` for HNW families, who may be interested and I will discuss it with them. I`ve also heard of Angel network meetings but never been to any or know if they are any good. Then there`s crowd funding, which I will also consider using too.
Any advice on other routes to go, would be appreciated. Thanks.
Ps if anyone has any blocks of 1-bedroom apartments, up to 20 units, please get in touch!
It`s quite a considerable request from the client, it`s way beyond what I could personally raise and would require a generous amount of equity funding/private JV investment, so my question is, does anyone have any advice or experience, on going about raising this amount of private funding?
As you can imagine, the equity amount required, would be in the millions to fulfil the full order, but they said they`d take as many as I could supply and it will be an ongoing relationship. So I wouldn`t require a large amount in one go, more like a few dozen £100k+ deposits ongoing.
I am connected to a few `family offices` for HNW families, who may be interested and I will discuss it with them. I`ve also heard of Angel network meetings but never been to any or know if they are any good. Then there`s crowd funding, which I will also consider using too.
Any advice on other routes to go, would be appreciated. Thanks.
Ps if anyone has any blocks of 1-bedroom apartments, up to 20 units, please get in touch!
Hi
Is your customer a Housing Association or similar? If that’s the case then I would be wary of their proposal. A couple of similar sounding schemes ran into difficulties when the Govt froze the amounts of HB payable to landlords (due to austerity) so they were stuck with the leases they’d signed up to but a fall in real incomes and increases in costs.
If they were a strong client then they would be able to raise their own financing. Lots of RPs borrow big chunks of money to fund social house building. Some of the big ones issue their own bonds.
I think you’d be better off building to sell. HAs are crying out to buy decent properties to replace the ones they’re losing due to RTB/RTA.
Is your customer a Housing Association or similar? If that’s the case then I would be wary of their proposal. A couple of similar sounding schemes ran into difficulties when the Govt froze the amounts of HB payable to landlords (due to austerity) so they were stuck with the leases they’d signed up to but a fall in real incomes and increases in costs.
If they were a strong client then they would be able to raise their own financing. Lots of RPs borrow big chunks of money to fund social house building. Some of the big ones issue their own bonds.
I think you’d be better off building to sell. HAs are crying out to buy decent properties to replace the ones they’re losing due to RTB/RTA.
Countdown said:
Hi
Is your customer a Housing Association or similar? If that’s the case then I would be wary of their proposal. A couple of similar sounding schemes ran into difficulties when the Govt froze the amounts of HB payable to landlords (due to austerity) so they were stuck with the leases they’d signed up to but a fall in real incomes and increases in costs.
If they were a strong client then they would be able to raise their own financing. Lots of RPs borrow big chunks of money to fund social house building. Some of the big ones issue their own bonds.
I think you’d be better off building to sell. HAs are crying out to buy decent properties to replace the ones they’re losing due to RTB/RTA.
No, it’s for supported living via a registered provider. The rents are contracted in and index linked. We have a pension fund who has said they’d buy them from us once set up.Is your customer a Housing Association or similar? If that’s the case then I would be wary of their proposal. A couple of similar sounding schemes ran into difficulties when the Govt froze the amounts of HB payable to landlords (due to austerity) so they were stuck with the leases they’d signed up to but a fall in real incomes and increases in costs.
If they were a strong client then they would be able to raise their own financing. Lots of RPs borrow big chunks of money to fund social house building. Some of the big ones issue their own bonds.
I think you’d be better off building to sell. HAs are crying out to buy decent properties to replace the ones they’re losing due to RTB/RTA.
JPJPJP said:
Have a look at Civitas social housing plc which is one of the main movers in this space
Might give you some ideas / pointers, or put you off
The key is the contract from the LA(s). The closer you get to that, the cheaper and easier the money becomes
Already spoken with one of their directors about a month ago. ThanksMight give you some ideas / pointers, or put you off
The key is the contract from the LA(s). The closer you get to that, the cheaper and easier the money becomes
cerberaperv said:
No, it’s for supported living via a registered provider. The rents are contracted in and index linked. We have a pension fund who has said they’d buy them from us once set up.
OP - are you looking at "Building to sell" or "Building to lease"? The funders will look at different things dependent on what your intention is.Last year one of the companies I do some work for negotiated a £140m facility with Santander. that was to finance 1200 new builds (for affordable rent). As part of the agreement they went through our books with a fine toothcomb, looking at 30 year business plans, cashflows, effectively mortgaging the existing portfolio, and putting in place various covenants. They used Savills to negotiate the agreement.
https://www.savills.co.uk/services/finance.aspx
cerberaperv said:
No, it’s for supported living via a registered provider. The rents are contracted in and index linked. We have a pension fund who has said they’d buy them from us once set up.
the rent payments to you might be index linked. There's zero guarantee that the rent payments from the Guv'mint to the person you're leasing to will be index linked. They froze rents for 4 years which meant a cut in real terms and it's only with effect from April that RSLs can start increasing rents again.Countdown said:
OP - are you looking at "Building to sell" or "Building to lease"? The funders will look at different things dependent on what your intention is.
Last year one of the companies I do some work for negotiated a £140m facility with Santander. that was to finance 1200 new builds (for affordable rent). As part of the agreement they went through our books with a fine toothcomb, looking at 30 year business plans, cashflows, effectively mortgaging the existing portfolio, and putting in place various covenants. They used Savills to negotiate the agreement.
https://www.savills.co.uk/services/finance.aspx
We'd decide our exit strategy on a case by case basis. I'm currently discussing a jv with a private funder and his opinion is that he wouldn't mind holding on to a few as long as it's hands off for him. Last year one of the companies I do some work for negotiated a £140m facility with Santander. that was to finance 1200 new builds (for affordable rent). As part of the agreement they went through our books with a fine toothcomb, looking at 30 year business plans, cashflows, effectively mortgaging the existing portfolio, and putting in place various covenants. They used Savills to negotiate the agreement.
https://www.savills.co.uk/services/finance.aspx
Freshprince said:
You’ll struggle on land agaisnt build to sell developers on residual values. Depends where you’re buying.
There was an insteresting piece about investment in adult supported living few weeks back in the Gazette supporting investment in this market.
My business partner is the contractor, so we can build at cost, which gives us an advantage compared to developers using main contractors.There was an insteresting piece about investment in adult supported living few weeks back in the Gazette supporting investment in this market.
JonnyJustice said:
Where are you looking to procure sites? I am Hampshire based and work in the sector and have some ideas, if this area is under consideration.
Not considered Hampshire yet as we are NW based and have been asked to look at Merseyside, East Cheshire and Birmingham. Happy to have a chat though to see what we could put together. PM me.
A bit of caution may be wise here. My sister worked for a registered provider of supported living accommodation who were trying to grow quite aggressively and she left because she was alarmed at how little cash they had and close the wire they were running. They struggled to pay their fairly modest salary bill most months. The Directors were often paid late.
On the face of it, it's incredibly lucrative - rent someone a 1 bed flat and send someone to check on them a couple of times a week for 3-5x the normal rental cost. They were burning a lot of cash on rental deposits and first months rent to get the properties adapted to meet the needs of the clients, only for the client to decide they didn't like the place or social services to decide it wasn't acceptable. Clients disappearing off the face of the earth, trashing the place, or moving the local homeless population in with them were very frequent occurrences.
On the face of it, it's incredibly lucrative - rent someone a 1 bed flat and send someone to check on them a couple of times a week for 3-5x the normal rental cost. They were burning a lot of cash on rental deposits and first months rent to get the properties adapted to meet the needs of the clients, only for the client to decide they didn't like the place or social services to decide it wasn't acceptable. Clients disappearing off the face of the earth, trashing the place, or moving the local homeless population in with them were very frequent occurrences.
who cares about that though, this chaps risk is:
needs to find sites to build on
build
get accepted by provider who then takes 25 year lease
flog site to pension fund
he needs someone to fund the build, so taking planning / development risk only, if the exit is guaranteed.
as long as its a sounds financial model, with a track record of doing this, cant see the issue.
needs to find sites to build on
build
get accepted by provider who then takes 25 year lease
flog site to pension fund
he needs someone to fund the build, so taking planning / development risk only, if the exit is guaranteed.
as long as its a sounds financial model, with a track record of doing this, cant see the issue.
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