Property Development Finance Explained: London Edition - www.accumulatecapital.co.uk
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Property Development
Finance Explained:
London Edition
www.accumulatecapital.co.uk
Introduction Real Estate investments have been gaining traction as reliable and profitable avenues to accumulating wealth for decades. Ever-more frequently, investors are drawn towards the attractive diversity of the property market and successfully navigating the abundance of opportunity can be challenging in itself. Thus, the first in a series of important decisions that must be made in relation to this is which option is best suited for you to become involved with. In the same way that purchasing a stock for its surface-value could mask intrinsic issues, the key to making a successful return from real estate is investing in a thoroughly researched, valuable asset. Debatably, Britain´s fixation with owning property was kick-started by the implementation of the Housing Act 1988. This legislation was implemented to bolster the private rental sector and introduced a series of rights for tenants. One of which was the opportunity to purchase their home. This then evolved into the immensely popular buy-to-let (BTL) property investment scheme. However, in the past few years the property market has seen drastic changes to the regulation of private lease agreements and it has become increasingly difficult to manage the various obstacles introduced over the years. Accumulate Capital recently surveyed over 750 landlords, all of whom own three or more residential properties in the UK. Results revealed that over half (53%) expressed regret towards their initial purchase and professed they would not have invested in the scheme had they foreseen the regulatory challenges that lay ahead. A further 37% expressed an intention to sell at least one of their properties in the near future. Regardless, real estate remains an attractive asset and property investment is still extremely popular. However, landlords are increasingly looking for more lucrative opportunities, one of which is property development finance. The aforementioned research also found that over a fifth of UK landlords (21%) are now leaning towards this investment opportunity, and here we will discuss why.
What is Property Development Finance? In the wake of the financial crisis of 2007-2008, banks became far more sceptical and demonstrated a reluctancy when it came to lending money. The onset of familiar financial difficulties for the public economic sector have led property developers to consider alternative funding methods in order to fulfil project demand. From the various innovative funding methods utilised by developers came the evolution of property development finance. With property finance, developers such as ourselves are able to gain significant funding prior to construction. In our case, the finance is provided by an investor who is given a legal document outlining the terms and conditions, amount of interest to be remunerated and the duration of the investment. Property development has become an increasingly significant sector, without the finance we provide many projects would not be able to afford the project development process. Therefore, in return for the participation of our network of registered investors we are able to facilitate market-leading returns on their money. How it Works The first stage consists of thorough planning and preparation. A property developer decides what terms are achievable and necessary for the construction process, including the amount to be raised, the duration, conditions and interest rates involved with the loan. Their lawyer then drafts the documentation and structures the agreement. The investment opportunity is then offered to high net worth individuals or sophisticated investors by either the developer or a third-party promoter. Investors loan the developer the required funding on the terms associated with the agreement. Interest payments are made according to the conditions which can either be for the entire duration of the investment or at the end of the term. On completion, the original capital is returned in addition to the remuneration outlined in the terms of the agreement at point of subscription.
London’s thriving housing market
Despite turbulence to the economy changes are not likely to take effect market crash. The fundamental demand to supply situation in
this year activity has risen in until the second half of 2021. factors which are considered in the UK will also be a preventative
the past few months as house these predictions are: the rate of factor to a potential market crash.
prices, especially in London More favourably, according to economic growth and subsequently According to data collected from the
and surrounding arears indicate Hometrack the first quarter of 2021 is interest rates; the availability and Office for National Statistics (ONS),
a buoyant market. According set to record a property uplift, with affordability of homes and any for the UK to meet the demand
to research accumulated by 100,000 additional sales expected movement to wages or income rates. 300,000 new homes must be built
Nationwide, house prices rose to complete before the end of Needless to say, all of these factors each year and data from the past few
by 0.9% in September in a fairly the stamp duty deadline. Market have been directly impacted by the years evidences a consistent and
even spread with the previously analysis continues to look positive consequences of the pandemic and significant shortfall. Therefore, this is
mentioned areas increasing by as as UK house price growth rises thus, the extent of the economic also a positive towards ensuring that
much as 3% in the third quarter of to +3.5%, the highest for almost 3 fallout largely depends on how long house prices continue to accumulate
this year. This strong price growth years. Though demand has dipped it will take for society to return to value and will not drop to an amount
has been driven by high levels of slightly to below pre-Covid levels, a form of normalcy. The increased that would cause a market crash.
competition and market activity. In likely a reflection of the latest interest rates stem from the Treasury
fact, 76% of Surveyors in a recent lockdown, it still remains 34% higher and the Bank of England’s attempt The announcement of the extension
RICS survey report a vast increase in than last year. to stimulate the economy with of the furlough scheme until March
new buyer enquiries with a further expenditure and it is likely that this 2021 is another round of welcome
69% reporting an increasing level of Taking all of this into consideration, method of quantitative easing will news as this may slow the rate of
instructions. are we likely to see a correction to continue until the pace of economic unemployment. The housing market
house prices in 2021? growth strengthens. A continuation has remained remarkably immune to
The release of the OTS of low interest rates is favourable the pitfalls caused by the pandemic,
recommendation to double the rates This has been a contentious to the housing market as it ensures bolstered by the temporary stamp
of capital gains tax could bolster topic with many leading analysts mortgage funding remains relatively duty holiday and various income
further activity in the property dissenting on whether recent data is cheap and this in turn keeps house support schemes.
market, especially seen as these indicative of an imminent housing prices high. The vastly greater
London: the world’s most ‘magnetic’ city In the second week of December the World Economic Forum announced London’s recognised status as the world’s most ‘magnetic’ city for the ninth consecutive year. In spite of the difficulties endured, London increased its lead over its nearest rival (New York) as its popularity continues to grow. The Global Power City Index is a measure compiled by the Mori Memorial Foundation’s Institute for Urban Strategies based on official data and interviews conducted with approximately 1,000 people in each of the respective cities. The purpose of the index is to rank prominent world cities on their ability to attract people, capital and enterprises from elsewhere globally, using many indicative measures including their economy, research and development activity, cultural interaction, standard of living and accessibility. The 2020 rankings place London in the lead for almost every category, a fact which left many critics confounded. Rather than the UK experiencing a ‘brain-drain’ migration of UK born nationals, The number of EU workers in the UK increased 133,000 to 2.44 million this past year, which according to official figures is the largest annual increase for some years. Furthermore, the city continues to rival New York for status as the world’s leading financial centre. With nearly half of the world’s euro currency trading activity taking place in this city, it is well on its way to achieving leading global financial status.
INVESTMENT
OPEN
Emerging opportunities in Chelsea:
South London’s creme de la creme
One area which consistently create a ranking of the Top 10 best-
turns heads for its wealth, and performing boroughs. Pursuant to
will continue to do so, is the a recent publication by Foxtons, the
Royal Borough of Kensington and average property price in Chelsea is
Chelsea. Historically renowned £2,140,886 which is 245% above the
for its thriving, well-populated London average and the average
area this infamous area of London rental is £662 per week, 18.2%
is home to both corporate head above the London average. The
offices and small businesses. Over majority of sales in Kensington and
18,000 businesses are employing Chelsea during the previous year
120,000 people from the borough, were flats, selling for an average
throughout London and the south- price of £1,626,663. Overall, sold
east. Key employment sectors within prices in Kensington and Chelsea
the area are business services, were 2% higher than previously
retail, hospitality, real estate and and 7% higher than the 2017 peak
medicine. The borough is home of £2,110,861. In addition to being
to London’s museum quarter valued fetching enormous property
which includes the Natural History prices unseen anywhere else in
Museum, the Science Museum and
the Victoria and Albert Museum, a
the UK, Kensington & Chelsea also
ranked 3rd in Rightmove’s happiest
Cheyne Walk Residences, Chelsea
tourist hotspot which accumulates place to live in London index. THE PROJECT
approximately £3 billion every year. Further to this, the area is also the
According to the local council´s most popular borough searched The project will see the creation of 13 the globe seeking the elite status affiliated
data, nearly half of all visitor capital for on Airbnb by both national and ultra-luxury apartments on this most with a Chelsea address.
is spent in the area’s well-known international visitors and, ever more famous of London streets. Currently,
shopping districts of Portobello recently, staycation goers. the 5-storey building is a combination This is an investment worthy of premier
Road, Knightsbridge, and Kings of smaller residential flats with varying league status; Cheyne Walk is a mecca
Road. Considered to be the crème de la commercial and retail space on the for the world’s mega-rich. We’ve already
crème of Chelsea, the infamous ground floor. Located on the banks had enquiries about end units from Hong
The annual Hot 100 report by Cheyne Walk is one of the most of the River Thames in this especially Kong, Beijing, Dubai, Moscow and New
CBRE revealed that Kensington prestigious and impressive glamorous area of the UK capital, we will York.
and Chelsea occupy the fourth residential areas in London. be demolishing the rear of the building
position in its list of best-performing Simply as a matter of its historical and maintaining the grade 2 listed façade. This is your opportunity to join with
London boroughs. This ranking was importance and personification of The basement level will be extended Accumulate as a property development
based on analysis from the CBRE’s luxury, property valuation along this and a steel frame structure will form the finance partner to create these stunning
collection of market data, including street is guaranteed to increase with contemporary, spacious apartments, the apartments and claim a share in the
monthly rent and house prices to time. type of which are extremely sought-after forecasted £2.7 Million profit.
by many prominent buyers from across
Previous Case Studies
INVESTMENT INVESTMENT INVESTMENT INVESTMENT
CLOSED CLOSED CLOSED CLOSED
HACKNEY ROAD, RIVERSIDE PLACE, C A LV I N R O A D , P O L A N D S T R E E T,
SHOREDITCH KINGSTON UPON THAMES S P I TA L F I E L D S SOHO
INVESTMENT CLOSED INVESTMENT CLOSED INVESTMENT CLOSED INVESTMENT CLOSED
We obtained this site in 2011. The Purchased in 2019 for just over £4 This building was ideally located and Purchased in December 2014 at a
building was bought for (what is now million, and with such high demand prime for a residential conversion. A cost just short of £12.5million this
a modest) £990,000. With a further for residential property within this turn of the century, former printers previously abandoned office block is
£628,000 construction costs, we affluent area and no further new- warehouse the double-fronted located on Poland Street in the heart
created a multi-use asset featuring build planned until 2023, we decided building was the last of its kind in of London’s thriving Soho district.
commercial retail space, office space to seize this opportunity with our a street that had become mainly The building is a beautiful example of
and two floors of prime residential construction partner, Store House residential developments. £2.2million mid-20th-century architecture which
apartments, including two penthouses London. The proximity to Central plus professional fees just short of a was converted into nine ultra-luxury
with balconies and expansive roof London resulted in a targeted GDV of further £300,000 secured the purchase apartments including a penthouse
terraces with commanding views over £12 million and a projected profit of £2 of the site. with 360-degree views over central
London. million. London.
Project costs: £1.8million Project costs: £9.94million Project costs: £4.2million Project costs: £15.5million
Capital raise: £600,000 Capital raise: £1.19million Capital raise: £1.25million Capital raise: £5.4million
Project GDV: £2.25million Project GDV: £11.91million Project GDV: £6.12million Project GDV: £17million
Project Profits: £465,959 Project Profits: £1.97million Project Profits: £1.95million Project Profits: £1.5million
Open an account with Accumulate Register with us Today Moving forward as a company, entering an investor’s market with Accumulate Capital continues to low interest rates set to continue anticipate the most recent market into 2021 and optimism surrounding trends and navigate these to ensure the likeliness of a control of the virus that we make the most of the to kickstart an economic recovery resilience of the housing economy shortly after. whilst it flourishes. Sentiment amongst our investors has seen Register with us to enter our investor a significant morale boost with lounge and receive first pick of a the encouraging news announced variety of exclusive development towards the end of 2020. We are finance opportunities. Priority off-market product launches only available to account holders Install the smartphone App Subscribe to investments directly within the App Get invites to events, product launches and exclusive networking dinners Book development reality tours. Book site tours and inspections Click Here to open an account or visit https://www.accumulatecapital.co.uk/registration/
Canterbury Innovation Centre
University Road, Canterbury, Kent. CT2 7FG
Email: info@accumulatecapital.co.uk
Tel: 01227 936 996
www.accumulatecapital.co.uk
References
https://www.weforum.org/agenda/2020/12/london-top-world-city-poll-brexit-covid-19/
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