Discussion in 'Development' started by Gareth Bain, Aug 22, 2018.

  1. Gareth Bain

    Gareth Bain Member Forum Partner

    Shojin Property Partners has just reached its funding target of £1.63m for two of its latest crowdfunded projects in Southend-On-Sea and Hampshire, which attracted 38 investors.

    Planning permission has been granted, subjected to signing the Section 106 to demolish a derelict pub and neighbouring fish and chip shop in Southend-On-Sea to build a five-storey, contemporary landmark building, comprising of 49 residential flats, two ground floor restaurants and basement parking. The site occupies a prime location on the seafront with fantastic views over the estuary and is close to the iconic 1.34-mile Southend pier where the ‘Jamie and Jimmy Friday Night Feast’ is filmed and where Jamie Oliver’s family restaurant, Oliver’s on the Beach.

    The development is being undertaken by Shojin Property Partners in partnership with Beyond the Box Developments Limited, who purchased the main site in August 2017. This project is targeted to be delivered in 33 months, with an expected Gross Development Value of around £ 22m. The targeted annualised return for investors is 26%. Like with every investment project, Shojin Property Partners has co-invested a percentage of its own funds to show its commitment to the project.

    The crowdfunding for a bridge loan secured against a detached, residential property in Hampshire took just five days to reach the funding target of £189,000, with 50% of the money raised from cash ISAs, which were transferred in using an IFISA (Innovative Finance ISA). Over 80% of the investors in the project were UK based with 20% being international investors. The property is currently vacant and in poor condition with the borrower obtaining the bridge loan in order to apply for planning permission for an enhanced

    residential development. Investors benefit from a 1st charge secured against the property which has an existing use valuation of £400,000 (LTV 64%) plus a second charge secured against another property owned by the borrower. Investors can expect to receive a fixed return of 8% annualised with a loan term of 12 months. The difference between the two projects is that Southend-On-Sea was an equity raise (variable profit share) while Hampshire was a debt raise with a fixed return.

    Jatin Ondhia, CEO of Shojin Property Partners, commented: “We are delighted with the response we’ve had from investors for these two crowdfunding investment projects. Many investors are disillusioned with traditional buy-to-let investment, thanks to the government’s crackdown. Recent figures from UK Finance show that the number of accidental and first-time landlords buying new properties continues to drop, with 9.8% fewer buy-to-let mortgages completed in May 2018, compared with the same time a year ago.

    “Increasingly landlords are looking for alternatives that offer them hands-off and hassle-free investments with good returns. Many want to be free of the legal responsibilities and increased tax burdens associated with traditional buy-to-let. Landlords are facing increased legislation and eroded profits, so it’s no surprise they are exiting the market.

    “We have seen a sharp increase in investors diversifying into property crowdfunding, having previously invested in buy-to-lets, together with cash ISAs. The returns for both are currently poor, with average buy-to-let yields in London for example, being between just 2-3% and cash ISAs offering no more than 1%-2% pa.

    “Since the launch of our crowdfunding platform, we have seen investors from different walks of life and across a broad age range, investing in our projects, from as little as £5,000. We now offer investors the opportunity to invest across the entire property spectrum. Our success is down to the broad range of investment opportunities we offer, including hands-off buy to let, bridging loans, mezzanine loans and property development.”

    For further information, please call Gareth Bain on 0203 871 5959 or visit Shojin Property Partners is authorised and regulated by the Financial Conduct Authority (No. 716765). Shojin Property Partners is a trading name of Shojin Financial Services Limited (company number 09697161) and the registered office is at Golden Cross House, 8 Duncannon Street, London, WC2N 4JF.
  2. Longterminvestor

    Longterminvestor Administrator

    I would be interested to learn your views of the UK property market at the moment when you consider concerns regarding Brexit. Even just looking at Wednesdays post, you seem to have a number of developments in the pipeline. Is this something you expect to continue in the short term? For will Brexit concerns potentially tighten finances and restrict property investment opportunities with potentially subdued demand for homes?

    Please note, if there is a short-term reduction in demand for properties (both purchase and rental) it will only be short-term as the UK population continues to grow.
  3. Gareth Bain

    Gareth Bain Member Forum Partner

    Putting aside Brexit for a moment, the residential property market is in an odd state and I would tread carefully. There is naturally demand, especially in the major cities. But we have also hit an affordability buffer. Previously the market was buoyed by foreign buyers. As they bought property in the UK, it provided cash to the sellers, who went on to buy their next property and so on. More recently, the foreign buyers have slowed down and therefore not as much money is sloshing around. At the same time, people are finding it increasingly difficult to get decent mortgages following the mortgage market review. And while we thought that the lower end of the market was well supported due to the government's Help to Buy scheme, we are finding that first time buyers are also slowing down. Many first time buyers are consciously deciding not to take on the burden of a mortgage in favour of a lifestyle choice to rent. This gives them more social mobility and freedom to enjoy life without being tied down.

    That being said, there is always opportunity in property. It's important to look at micro-level demand in any area. People will still need homes, so the rental market should remain well supported. While residential has always been a favourite for investors, it's worth looking outside of residential too. There are better yields to be had in many commercial property sectors such as student accommodation, warehouses and distribution centres, to name a few.

    Now back to Briexit. The current uncertainty will scare many people off, and that creates opportunities. Funding is currently available for investment purposes and it's worth investing in high yielding property with good growth potential. Naturally I would also add that it's better to do this through a Crowdfunded model which enables you to spread your investment over several properties, provides some element of liquidity in case you ever need to take some money out and takes away all the hassles of sourcing, due diligence and management.

    Depending on what happens with Brexit, there may be a short term impact on availability of finance (as happened when we had the Brexit vote) but I believe that will be short-lived. The UK property market has strong demand both from its' rising population, as well as global investors who see it has a safe haven and a very secure market with strong property-rights. That is not going to go away just because of Brexit. If you have the ability to invest for the long term, you will still do well.
  4. I am very interested to see a drop in foreign investment at a time when the £ is so low against a raft of major currencies. I would have thought that short term Brexit uncertainty would have been outweighed at least partially by the increased spending power of foreign investors looking at the UK.

    The UK government is finally calling the EUs bluff with "preparations" for a no deal which will see a compromise deal at some stage - they have even softened the October deadline. Whether UK opposition parties, under pressure from their supporters, will vote a compromise deal through Parliament remains to be seen. However, good to see the UK leading a little more in talks rather than being at the beck and call of the EU.
  5. Gareth Bain

    Gareth Bain Member Forum Partner

    I think that there is a lot of uncertainty at the moment. @PostBrexitInvestor you are correct in saying that it is more affordable for foreign investors to invest in the UK, however they have had nearly two years of these prices.

    It will be interesting to see what happens as we approach the March deadline, if that still remains the deadline. I think there is a lot to be discussed at the moment and with uncertainty brings opportunity.

    There are a lot of opportunities available in the market now that were previously not accessible to investors. But one thing is for sure, that people will still need homes and the country still has a housing deficit which needs to be rectified.
  6. Longterminvestor

    Longterminvestor Administrator

    I believe that the Brexit timetable will be extended, there will be more brinksmanship between the UK and the EU but ultimately at the last minute they will fudge a deal together. In the meantime, just prior to the "deal" we will see panic in some areas of the UK property market leading to a sell-off, consolidation and then the realisation that the UK can survive outside of the EU and the EU need UK trade as much as the UK needs EU trade.

    All of this posturing by the EU is simply a way to "show the UK" who is boss and ensure that no other EU members are encouraged to follow the same route.

    As a side note, all is not well in the EU and especially Germany with increase racial tension. I think the EU will need to dilute the freedom of movement rules and the refugee crisis needs to be addressed asap. There seem to be no structure to the crisis and just dumping refugees in countries where there is no support is not working.

    If Germany decides to weaken its stance on freedom of movement and the refugess crisis then the EU as a whole will follow.

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