With me today is Motiul Islam of Sotherby’s Asset Management. He is also the host of the PPN in Stratford and we speak about a title split deal we worked on last year, which is a true No Money Left In deal - yes they still exist! It is a block of converted flats. Each floor has one flat with four in total. Specifically, we speak about how Motiul found this deal and the title split on completion of his purchase.
Motiul, just to recap, you bought the freehold of the land and building, which is the deal that you struck with the seller-landlord, but we also created four separate leases to your Group company on completion, by way of title split, creating four new leasehold titles. The property is in Sunderland, just in front of the beach and the views are stunning.
How did you come across this deal?
MI: It was presented to me by somebody in Progressive Property. They had this property with four flats but all were on one freehold title. That meant only a few lenders would consider lending on it and most likely on a commercial mortgage, which meant low loan to value and valuation. That individual heard that it’s possible to split the title into four leasehold flats, thus enabling vanilla buy-to-let mortgages but having never done it before, wasn’t sure how to structure the deal or the mechanics or even if the numbers stacked. I discussed it with him, ran through the structure, mechanics and whether the numbers stacked. As a result of helping him out in that way, he basically asked if would mind having a look at it and possibly joint venturing on it.
When I went through the numbers, it turned out to be a pretty good deal. When looking at a title split, you should assess what is the value of the flats together on one freehold title and what are the values if they were on separate leasehold title - who could the target buyer of these flats be, either all on one freehold title or separate leasehold titles. Naturally, if they are on separately leasehold titles, it opens up potential buyers considerably as they could even be sold to owner-occupiers, instead of just an investor-landlord if they were all on one freehold title. Doing this analysis helps determine whether the title split actually adds value - you shouldn’t assume it does, sometimes in certain circumstances, it simply doesn’t. In this instance, there was a major difference between the asking price by the current owner, selling all four flats on one freehold title and the value of four flats, each on its own separate leasehold title. (We run through the numbers below so keep reading!)
TM: What was the state of the flats - did they need a lot of work?
