This post details the first report that I wrote to obtain development finance.
Prior to this I had been buying and selling property through normal mortgages. At this level of property development its important to try and convey passion into the report, ultimately the bankers are looking for someone they believe can do the job and will be far more likely to trust a developer who genuinely cares about the area and has an interest in the architectural landscape.
Proposed Purchase of 124 Globe Road, London E1
Details of the Property:
A former public house offering over 2,200 square feet of live work space. The property is arranged over four floors and has a garden to the rear and balcony to the first floor. Internal proportions lend themselves well to a versatile future interior. Currently arranged as ground floor former public house encompassing the whole level, lower ground floor used as storage, with first and second floor arranged as two two bedroom self contained units.
Details of the Location:
Globe road is within a short walk of the following tube stations and bus routes: Stepney Green, Bethnal Green and Mile End which makes easy access into the city and central London. It is an up and coming area close to Queen Mary University and Roman Road Market.
Plan of action for 124 Globe Road in Summary:
Point 1
Achieve change of use from A4 use to C3 use (residential)
Point 2
Apply for planning permission to demolish and create 12x 1 and 2 bed flats then sell on the plans to a developer or undertake ourselves.
Point 3
If planning to demolish and rebuild 10 flats is not given then create extra square footage (in this case only requires building regulations and no planning application) by digging out the basement and works to both balcony.
Point 4
Review plan.
Point 5
After increase in square footage develop the ground and lower ground into two high quality luxurious separate units and develop the units on the first and second floors into high quality units.
Point 6
Sell all units on at a premium to Investment Banks, our client at the moment is a derivatives company based in Dublin with offices in London and New York.
Response to the above points;
Point 1
The property has already had a change of use from Public house (Class A4 use) to residential (Class C3 use). This was granted on 23 Nov 2007 and can be viewed online at Tower Hamlets planning portal application number PA/07?01965.
Point 2
In the first instance we intend to apply for planning permission to create 12x 1 and 2 bedroom flats. London Borough of Tower Hamlets Core Strategy and Development Control Plan RT6 states with regards to loss of Public Houses permission will be supported if:
"the loss will not create shortage of public houses within easy walking distance (300m) of residential areas and
following and active marketing exercise there is no reasonable prospect of reuse or refurbishment for an appropriate A Class use, particularly on the ground floor of the site"
There are more than 4 public houses within easy walking distance; and
124 Globe Road has been empty for a good while
so there is a good chance that planning will be given to convert.
The unitary development framework set out by the LBTH Planning has requested a need for more housing in the area, the conversion 124 Globe Road will see an increase from the existing 2x 2 bedroom flats to in excess of 10x 2 bed flats which is in line with the Strategic Planning policy for Tower Hamlets ST2.
If this is not achieved we will apply for planning permission to convert the basement and ground floor into residential. There is a strong likelihood this well be granted as the pub is currently arranged as 2 flats upstairs and has recently been given residential usage throughout (The whole pub has been permitted residential usage on 23 November 2007).
Point 3
Breakdown of projected costs to increase square footage from 2,300 to 2,775 achieved by works to lower ground floor and first floor balcony.
RIBA - £2000
Structured Engineering Fees - £1100
Insured UK Builder (Federation of Master Builders) digging out basement - £30000
Basic decorating, plumbing and electric costs - £15000
Total Cost to increase square footage - £48100
Point 4
Current price of 124 Globe Road is £300 per square foot.
Nearby pub (200m walking distance) sold for £521 per square foot Mile End Road E1.
In this instance the pub was a 2,300 square foot property recently sold at £1.2 by Symmon Smith Estate Agents. We believe it achieved a premium due to its location on Mile End Road.
A conservative estimate of the sale price after an increase in suqare footage of 124 Globe Road would be (2,775 square foot x £500) = £1.36 million.
Point 5
Apply for planning permission to convert the basement and ground floor into residential. There is a strong likelihood this will be granted as the pub is currently arranged as 2 flats upstairs and has recently been given residential usage throughout. (The whole pub has been permitted residential usuage on 23 November 2007).
Breakdown of projected costs for conversion into flats as Ground and Basement:
Planning application - £250 x 2
Building control application fee - £205
Building control inspection fee - £300
Plumbing
Max - £5000
Corgi registered (Copper and Plastic included)
Plumb in bathroom, shower and tray, hand basin and toilet through out including towel rail, and run necessary gas, hot and cold supplies to the new kitchen areas ready to be picked up by kitchen fitter.
Fitting of 2 Worcester Bosch boilers and pumps - £2000
Electrical testing report - £250 (to indicate the quality of existing electrics)
Electrical - Min £2000 Max £7000
NICEIC (minimum to include whole house fire alarm, entry phone system)
Dependent on electrical testing report rewire if required, allowing for 40 double sockets and 50 fire proof spotlights and associated kitchen, bathroom and living area electrics.
Carpenter - £4000
Hanging doors architrave and skirting throughout
Knock wall down between male and female bathrooms, checking if load bearing walls. Take out all the sanitary ware and tiles off the walls.
Plaster board all ceilings where required and skim with plaster to smooth finish.
Insured UK Builder (Federation of Master Builders) digging out basement - £30000
RIBA - £2000 (as above not to be duplicated from point 3)
Three months multi skilled labour 3 men - £12000
5-8 skips - (£170 per skip)
To complete ceilings decorating and tiling (£6000 materials including internal and external high quality paint and fire proof/water proof plasterboard where required).
Material Bathroom tiles - £2000
Tile the shower floor and walls completely for allowing for one border
Matching grout - £200
Standard adhesive - £150
Helo steam generator x2 - £1200
Control unit - £400
Pharo Showers x2 - £2400
Sanding original chevron floor over 3 levels - hire of equipment - £250
Kitchen - Carcass Selco or Wickes - £500
Kitchen doors from Urban Myth - £1000
High quality work top - £1000
Architrave throughout - £1000
Skirting 150 metre - £1000
Cost of building £80000 plus £20000 for contingency = £100000
Point 6
Sell all units in one sale at a premium to Investment Banks.
Properties in area are selling for:
£508 per square foot - Cavell Street, Whitechapel E1. One bedroom live work warehouse.
£627 per square foot - Berhard Baron House, Shoreditch E1. Newly built, two bed room dupled apartment.
£651 per square foot - Strype Street, City E1. One bed room second floor flat.
£513 per square foot - Adler Street. Three bedroom duplex.
£520 per square foot - Assam Street, Aldgate E1.
£564 per square foot - Jamaica Street, Stepney E1. Two bedroom freehold house also ensures a private garden to the rear.
£599 per square foot - Clark Street, Whitechapel E1. Two bedroom duplex flat.
£721 per square foot - Settles Street Mews, Aldgate E1. Two bedroom ground floor flat.
£588 per square foot is the average but we intend to make a high quality luxurious development which taking a conservative view will sell at £650 per square foot, which gives a sales price of £1.8 million.
Over One Year:
£660,000 Cost of Freehold
£34,644 Finance for 1 year
£26,400 Stamp Duty
£2,000 Professional fees
£100,000 Cost of Buliding plus contingency
£30,000 Selling Estate Agent’s fee
-------------
£853,044 TOTAL Expenditure
Expected Profit
£1,800,000
(£853,044)
---------------
£950,706
Our Experience:
In September 2007 we sold a 2,000 square foot property in E1 for £895,000 which was bought for £475,000 in February 2006. The build cost £60,000 mainly on bathroom, floors, kitchens and lighting with a nil increase in square footage. The project was completed on time and within budget. The above sale leads us to believe that there are high money buyers willing to pay good money for high quality luxurious builds in the area, most likely due to the proximity to the City and Canary Wharf. We have extensive knowledge of the requirements of differing types of tenants and home buyers in the area, ranging from traditional European gap year traveller to city executive. This experience has been gained from buying and selling and having a genuine appreciation for the are since 1995.
In Summary:
We have used our local knowledge to identify this public house as an AAA development opportunity.
We are using our knowledge of who will purchase the end product to build to specification.
We intend to use our experience of working with basements and knowledge of how to increase square footage sympathetically.
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