Only yesterday I had a meeting with a Fund manager, they were annoyed as it looks like they might lose £100k on a property deal. The reason was the person they were dealing was not giving a straight story. It transpired there were 3-4 people in the loop before you got to the vendor.
The person who was facing the owner actually said it was him who was purchasing the property which of course was untrue, when you speak a lie you need to speak more lies to cover the original one up.
The Fund had exchanged on the site and were waiting for planning documents in order to complete. The party in the middle was telling the owner another story that there was an issue with the bridging loan and this was causing the delay. The buyers realised they had been fed false stories as well. As they were nearing deadline for completion they requested more time, this was denied due to the time already lapsed.
The reason they were dealing with the middleman was that they were not just looking to do the deal but also to have a JV partner who could get planning on the site and perhaps even build out, as this was outside their normal area. They soon realised this man wasn’t the right person to partner up with.
The deal is one of those outside of London where it is a piece of land without planning, but it is in a location were the council are eager for someone to come in and develop. It is almost a certainty planning will be consented.
The purchase price is £2m, the site is expected to go up in value to £4m minimum once planning has been granted. The planning which will be applied for will be for a plain vanilla scheme which should be granted, for 55 houses.
However this can be tweaked to get even more onto the site, along with commercial property too. It is anticipated you should be able to get between 90 to 150 units here.
Sometimes it is best to do planning in bite sizes, get what you can straight away and then go back for more, you waste the planning fees and time but at least you have one layer of planning locked in. It also helps the council to get used to the idea rather than going in with all guns blazing from day one.
We were brought in for two reasons one was to deliver the deal, and the second to get the planning through.
I try and avoid situations where the line leading to the deal is too long, normally it is best if you only have one agent in between, and at times it’s better if you don't even have them in between as they may have their own agenda.
I remember a deal we did in December last year, in W2 Southwick Street for £3.7m, apparently there were five people in the mix (which I didn’t know about). My contact whom I knew well, passed my number on to the agent directly, and allowed me to just get on with the deal, we already had a trustable relationship built up.
We managed to close the deal, it was a little complicated as it was a company purchase and not the sale of an asset. There was another layer of due diligence to be done, and extra legal fees. Lawyers love to point out anything outside of the norm to give a reason to jump their fees up.
After the deal was done, I had no less than three people call me up and claim I owed them money. One even insisted I meet him, his name was Ali. I agreed to meet and told him in person that I didn't know him, had no written, verbal or any form of agreement with him and therefore why would I pay him?
There was a lot of resentment created after this deal was done, shortly after completion we had a phone call from an irate neighbour, who informed us there were squatters in the building.
In residential properties you can simply call the police and get them removed. However this is not the case for commercial. There does exist an expedited route to have them removed, we followed this and got them out. It is ludicrous that in the UK a person can enter someone else’s property and occupy it and the owner cannot do anything about it.
The word on the street was one of the characters who felt he was circumvented on the deal had arranged for the squatters.
Anyhow this is part and parcel of the property game, we got them out and then we had an unexpected offer for £4.5m within 8 months, unexpected as we hadn't even put it on the market; we took the decision to sell the building.
Another example of this circus is a building we own in Portland Place, I was told by a trusted contact that a member of the Saudi Royalty wanted to see the property. On arrival I met a Sri Lankan man and then four other parties, not one of whom looked Middle Eastern. On top of this the Sri Lankan man started quizzing me on whether I owned the building.
I allowed the viewing to take place, and then heard one of the parties speaking to the buyer, telling them this was a freehold building and the company was being sold. Neither of which were true.
On exiting I told the agents in between I did not want any offers on the building, and they should not pass the information to anyone as the building is not for sale. The reason I did this was because I knew it would be a waste of time dealing with them.
It transpired later the ultimate buyer was a bonafide buyer, and a proper outfit. They wanted the building for office use. We as a company have been victims of shrinking office space in London, as a result we were looking for office space ourselves and came across a company who were offering office space. Coincidently this party had actually been present at the viewing of Portland Place, they put two and two together and then contacted us, getting rid of the noise in between.
The role of the agent is to put the deal together and facilitate it to ensure it is closed. If this is not being done then they are redundant or even an impediment to the deal.
It’s hard enough to do a deal with a buyer and seller and their lawyers let along a raft of people in between.