L2 Loan Security Flashcards
What are your 2 Examples for L2 Loan Security?
Revaluation of a portfolio in Newbury
&
Shared Ownership Special assumption
What is a valuation on an Indicative basis?
Estimate based on available data
When calculating the EUV-SH what factors did you consider?
The EUV-SH stock will be rented in to Perp, no sales
Discount Rate
- What is the Risk
- What is the risk free rate
Bad debts and voids
- What is the local average income
- How do my properties compare to the average
- Assumed to be higher in the short term
Management costs
- What are local housing association paying for management at the moment
- are local labor costs likely to be high
When calculating the MV-T what factors did you consider?
These units will ultimately be sold down to a rump of 22%
They will be increased to market rent of a number of years
Discount Rates
Sales
- Will the stock sell (is there demand)
- is it up to market standard
Income
- How much income will the portfolio produce when you are increasing rents
- Likely void periods
- as the stock is sold how much income will the portfolio make through out the 50 years
Bad debts and voids
- Location
- Can the tenants afford market rents?
Management costs
- Age of the Stock
- Condition of the stock
- Higher in the first few years as the clients bring stock up to market condition
Sales rate + Fees
- How much rump will remain
Where are the complexities in establishing these? (Assumptions Newbury Portfolio)
Getting accurate data is essential
If dealing with a large portfolio also very important to get good data as properties are spread through different areas
Social housing is unreliable, some units are well kept some are not so a blanket costs need to be considered for certain stocks
What Strengths did you identify in you Newbury Portfolio?
Strengths
- Demand - Commuter town for two of the largest city’s in the south
- 105,000 house hold on the waiting list
- Cost- Good skill base and multiple RP so economies of scale
What Weaknesses did you identify in you Newbury Portfolio?
Weaknesses
- Older properties in the portfolio will required more and continued investment
- Interest rates make buying hard, this will be double so for RPs if the client wishes to sell the stock
What Opportunities did you identify in you Newbury Portfolio?
Opportunities
- The MV-T properties even when upped to market rent will still be below new build rent levels and therefore much more competitively priced
- Contunired investments by REITs In the industry make it more than like the portfolio will be bought quickly in the case of the mortgagee taking possession
What Threats did you identify in you Newbury Portfolio?
Threats
- Global concern
- Labor markets and costs
- Material costs increasing
How did you value the S.O. units with this special assumption?
What specific considerations or adjustments did you make? (S.O. Midlands)
Did you encounter and challenges or complexities due to this special assumption? (S.O.)
Difference between assumptions for the GN and the S.O.?
Are Shared Ownership units not having further trance sales a Special Assumption?
Yes
- The cashflow is set over a 50 year period in that time at least one of the S.O. units would be expected to purchase a further
tranche
In the Current Market Would you expect to sell S.O. tranches?
Yes but at a slower rate
- The initial purchasing of S.O. units is high
- Purchasing further tranches will be more difficult due to mortgage rates conditions
- However you would have to borrow on much smaller amounts so people will still be buying tranches
