C&B assets - negative equity

On 22/2/2012, the IFS web-site (http://collins-bone-investors.blogspot.com/) posted the list of C&B property assets. Of the 29 properties on this list, 15a Moira Street has been removed as it was repossessed by the mortgage company and sold in November 2011. This, coupled with:

• the fact that the outstanding mortgage value on these C&B assets has increased by minimally 200k since 2008 (and this increase was measured only on 16 of the remaining 28 properties – there could very well be mortgage increases on the remaining 12 properties)
•  that Novocastria Lettings has not been paying any monies to C&B in recent times for non-Loughborough based C&B assets
• Loughborough based C&B assets being managed by Rami Hariri and, with very minor exceptions, all of the properties are vacant/not being rented (see http://www.landlords-uk.org.uk/properties.asp?id=19133)

, it is reasonable to assume that either:

• rental income is not sufficient to pay the maintenance costs and mortgage payments, in which case the situation with C&B is totally hopeless.

and/or

• Novocastria Lettings and/or whoever is managing the Loughborough properties has been keeping monies for themselves, in which case the bankruptcy trustee will be able to claw back these monies.

When Liam Collins sent an e-mail to all investors on February 28^th making us aware that C&B had found 2 IVA practitioners that may be prepared to handle their case, the following dialogue occurred:

[ewart]: Since you have to have the information at hand now in order to be engaging an IVA practitioner, can you send me the latest C&B propertty spreadsheet with valuations, along with an indication of when the valuations were performed and by whom. You will see from the article I have written on my blog that on the currently IFS posted C&B property spreadsheet I have little or no faith in the current valuations. This statement is based on the fare market price that 15a Moira Street was sold for versus the valuation price on the spreadhsheet - they were very different (54k vs 90k respectively)!

[Liam]: If You use Mouse price or net house prices you will see that our figures are optimistic at best .... It is in everyone’s interest to sign the IVA proposal once we send it out.  If we do not achieve 75% all investments are lost.

[ewart]: I will not approve any IVA without, as a bare minimum, the following information being provided for each C&B asset:

    + The full address.
    + A proper going market value assessed for the property, not
       some web tool, performed by a qualified appraiser.
    + The name of the qualified appraiser who performed the
        assessment, and the date.
    + The outstanding mortgage on the property.
    + The mortgage rate being charged.
    + The rental income on the property on a month by month basis
        since the property was acquired. Whether there are charging
        orders on the property held by other creditors as a result of
        country court actions and, if so, the value of the money owed
        these creditors.

The only rationale for MX selling the properties on C&B entering  bankruptcy is if the rental income is not even enougth to cover the mortgage payments which, in the absence of any other date, is exactly what has been happening (read 15a Moira Street, read no monies coming in from Novocastria Lettings, read 200k increase in the mortgage value of 16 of the 29 properties between 2008 and October 2011 that I am so far aware of). If this is the case, and there is no reasonable basis for expecting rental income to cover mortgage payments within the forseeable futute, then keeping these properties on is draining more and more equity out of them, so the amount by which property prices would have to rise over the IVA term to recoup monies owed is impractical, as I suspect it already is.

[Liam]: The IVA practitioner will provide everything and based on the info provided you can make a decision. Getting RICS valuation will cost on average £300 per property so that is not possible. We can only use the sites which are reputable.

Because the C&B asset spreadsheet does not give the full address of the properties, in some cases I have not been able to identify the specific properties, but as per Liam Collin's suggestion of using http://www.mouseprice.co.uk/ estimated valuations, I have gone through the 28 properties and compiled the spreadsheet below. What this shows is that:

• there is a negative equity of 115.927k based on mouseprice value estimations in the 28 C&B assets.
• at least 77k more was paid for these properties 4-5 years ago than they are now worth based on mouseprice value estimations.

And the situation is likely much worse than this because:

• Liam Collins has not dated the IFS posted spreadsheet, so we don't know how much worse the outstanding mortgage balances are on these properties.
• It is known that some of these properties have charging orders against them as a result of investors having county court judgements in their favour - depending on how much money these investors are owed, no monies realised from any rise in asset values from these properties will be available to other creditors.
• two of the properties I have not been able to identify specific locations for, and so the current C&B value estimations have been used which are invariably optimistic.

Given the above, and the table below, it clearly potty that C&B are still claiming to repay investors 100p to the pound.

The Editor

Property address	Current C&B mortgage value	Current C&B asset value	Charging orders	Last sold value (last sold date)	www.mouseprice.co.uk  website valuation estimate
56 beckford court, Manchester	106.314k	100k	<being investigated>	129.95k (3/7/2007)	125.8k
Flat 1 25 shelton street, London	499.324k	550k	22/12/2008 –Restriction Michele Rathbone 19/1/2010 –Final charging order by Paul James Sparks 3/8/2011 –Final charging order by Toyota Financial Services Plc 24/1/2012 –Restriction Andrew Dixon	550k (10/7/2007)	612k
2 abbeycroft close, Manchester	240k	265k	<being investigated>	270k (9/10/2007)	268.3k
60 dundonald street, Preston	68.755k	100k	<being investigated>	80k (12/10/2007)	72.9k
250 deane church, Bolton	94.267k	115k	<being investigated>	95k (16/7/2007)	83.6k
15 dart street, Preston	107.483k	120k	<being investigated>	110k (25/5/2007)	99.6k
206 plungington road, Preston	94.768k	115k	<being investigated>	98k (21/5/2007)	89.4k
97 wharncliffe, Loughborough	181.934k	160k	<being investigated>	152.5k (23/06/2006)	146.5k
113 station street,  Loughborough	152.439k	140k	<being investigated>	138k (2/1/2008)	125.5k
36 langhorn close, Newcastle-upon-tyne	113.046k	125k	<being investigated>	105k (14/7/2007)	100k
138 paget street, Leicester	132.848k	125k	Central London County Court, 24/05/2011,   £14159.26 + costs + ongoing interest, claim # 9QT48442	106k (18/5/2006)	112.2k
101 queens road, Loughborough	166.843k	155k	<being investigated>	123k (14/7/2005)	127.5k
91 shelthorpe road, Leicester	120.049k	110k	<being investigated>	100k (4/6/2004)	119.3k
30 peacock avenue, Salford	97.361k	105k	<being investigated>	85k (24/11/2006)	85.7k
73 cobden street, Loughborough	126.342k	125k	<being investigated>	112k (16/11/2006	111.2k
2 dronfield road, Salford	116.814k	115k	<being investigated>	90k (21/4/2006)	96.9k
2 peacock avenue, Salford	110.251k	115k	<being investigated>	92.5k (12/7/2006)	89.5k
151 leicester road, Loughborough, LE11 2AF	147.6k	135k	24/8/2005 -Nemo Personal Finance Limited 22/2/2006 -Charge in favour of Progressive Financial Services Limited 24/5/2010 -Final charging order in favour of Davenham Trust Plc 7/4/2011 -Final charging order in favour of Arkle Finance Ltd 3/6/2011 -Interim charging order in favour of Toyota Financial Services	143.8k (25/6/2004)	143.8k
9 carlton close, Loughborough	124.423k	120k	<being investigated>	<unknown> assume 120k (??/??/????)	117.3k
81 king street, Loughborough	127.583k	125k	7/4/2011 -Final charging order in favour of Arkle Finance Ltd 3/6/2011 -Interim charging order in favour of Toyota Financial Services	71k (28/3/2003)	105.1k
66 queens road, Loughborough	119.149k	100k	<being investigated>	91k (25/6/2004)	106.1k
27 albert street, Loughborough	128.160k	115k	<being investigated>	116k (1/6/2005)	124.4k
4 albert street, Loughborough	121.213k	115k	<being investigated>	115k (28/4/2006)	113.8k
Flat 3 court B, Rose Cottage B, Nottingham Rd., Loughborough	77.508k	85k	<being investigated>	<unknown> assume 85k (??/??/????)	<unknown> assume 85k
36 holderness road, location ?	77.906k	85k	<being investigated>	<unknown> assume 85k (??/??/????)	<unknown> assume 85k
11 queen street, Salford	107.558k	110k	<being investigated>	95k (29/6/2007)	89.8k
41 albert road, Preston	82.389k	110k	<being investigated>	94k (24/8/2007)	84.7k
24 carnarvon, Preston	95.5k	105k	<being investigated>	110k (6/2/2008)	101k
	Total: 3.737827m (which means a negative equity of 111.927k based on mouseprice value estimations)	Total: 3.845m		Total: 3.55775 (68k more was paid for these properties than the mouseprice value estimations)	Total: 3.6259m