The residential consists of 4 flats generating £100k per annum, and the commercial element should bring in another £78k per annum. What’s more is the property has the potential for further development, which our architect is exploring.
What’s interesting is I had been staring at this property almost every day, a year after we started the business for about 6 years as our offices in Paddington were directly opposite this building, when we first moved into the area. Little did I know that one day we would be purchasing it.
This is an area which has a lot going for it. This is the second building we have bought in the area, the other being 6 London Street, W2 which is a stone throw away; which we purchased and resold prior to completion a couple of months ago. This was a commercial building with commercial on the ground floor with offices in the basement and three floors above. It came with planning permission for 4 flats. We picked it up for £1.9m and resold it for £2.025m which is still a good deal for the incoming buyer for a freehold block.
Prior to this a few years ago we sourced a site with planning for a row of four mews houses in London Mews, W2 which took a long time and effort to come to fruition, at one point we thought the deal was dead, but it got reincarnated and we got another chance to grab it at auction. This however was more of a charitable transaction as we didn't get paid on it, luckily not all of our clients are charities.
This area is set to be hotting up with the coming of the New Cross rail link and prices will rise even further despite the rather gloomy outlook on property currently. I have seen this area go up heavily since the time I have been there. This patch was always seen as the poor relative of the W1 postcode. The wrong side of Edgware Road, it was so close but yet had a stigma attached to it.
This started changing when ambitious plans were announced for the Paddington Basin, and big companies were said to be relocating their HQ to here including Marks & Spencer which was coming from no less than its Baker Street location to be in this area. The policing of the streets increased with the aim of cleaning it up. Then Heathrow Express started from Paddington station which will get you to the airport in 15 minutes.
There was a time when I could get 10 flats in a new development for free. No kidding. However I chose not to purchase any, as they were too expensive. Officially they were priced at £350k each and I was getting them for £275k. They came with the benefit of a two year rental. This was in the good old days when you could get mortgages based on the valuation and not on the purchase price. Days when all you needed was a good credit rating and some bravado.
Which at the time I didn't have; my thinking was if they were ever empty how on earth was I going to afford the mortgage and the service charges which seemed to me at the time horrendous. These flats must now be worth at least £650k a piece.
The way we managed to close the deal in Southwick was a bit topsy turvey. We were originally introduced through a ‘runner’, these are people who run around the market and claim to have control over deals which they don’t. They work on the principle if you shovel enough some of it will stick. This runner was one of the better ones to be fair, we had transacted through him before many years back. He wasn't direct with the owner, he knew someone who knew someone who knew the owner.
I’m highly averse to these types of situations, as most of these end up being a complete waste of time, effort and money. Nonetheless I saw no harm in putting forward an offer, albeit a cheeky one of £3.6m.
The agent who did have direct control over the deal wasn't having any of it, apparently he had a higher offer which he was progressing with (rumour has it that it was £4.2m).
Finally after going quiet, the agent called me up directly from out of the blue and said he’s ready to do a deal. He said he can introduce me to the owner, who was Malaysian, and we can agree the price there and then.
So I went to meet this Malaysian gentleman whilst he was eating his chicken satay, and agreed the deal there and then; we struck a price of £3.7m after a quick phone call to his sons in Malaysia.
So papers were sent and as this was a purchase of the company it became a protracted transaction. Often lawyers can lock horns on certain issues, they each say they are protecting their clients, but I have a sneaky suspicion they’re actually protecting themselves and their insurance premiums.
We locked horns on some points and the deal got stuck in a dead lock, the seller who was not a details kind of guy decided to pull out of the transaction completely.
Whilst this was going on the runners involved, of which there were four in total, (this I later discovered) were trying to sabotage the deal, knowing they had lost control of the transaction. They started offering £4.2m to the buyer directly in Malaysia and trying to break the deal.
However with the relationship I had developed with the agent we managed to come to a compromise and exchanged on the transaction with the completion 6 weeks away.
Then I started getting harassed with thinly veiled threats over the phone. One gentleman by the name of Mohammed who claimed to know me called me up and asked for a meeting. I replied I didn't not want to meet because for all I knew he may just shoot me dead, truthfully this is what I told him. He insisted on meeting me and so at the risk of my life I agreed. He then explained to me he had come to know I had purchased the property, he claimed he was in a chain of four runners who had ‘introduced’ the deal to me. I explained to him that I didn't know him, neither did I have any agreement with him, verbal or otherwise, if I did I would honour it. I explained to him he should approach his link on the chain and sort out any agreement they had. This was the second call I had! The first from a woman who was also claiming to be in a chain. Whom I also did not know!
This is the colourful world of property! Certainly in this patch of London.