The Poole Estate Agent Who Spoilt My Investment Opportunity

Today I spotted a great building for sale in a popular area in Poole, Dorset.  It was a commercial building which had A1/A2 (retail/office) use on the ground floor and was used as offices on the upper 2 floors.  It was let on a long lease for £14,000 per annum.  It was an executor sale from the freeholder.

It overlooked a small green (being refurbished) and was in a sought after area with thriving businesses nearby.

I was chomping at the bit to get in – so I quickly called the agents who told me they had yet to organise any appointments as they were liaising with the current occupiers.

“OK, the problem is I’m going on holiday soon and the auction is next week, so I could really do with getting in there asap” I said to the auctioneer.

He murmured noises that he would try his best and all the rest and so I just said “Well, I’ll knock on and see what the tenants say about showing me round” to which he suddenly bursts into life “If you do such a thing you’ll be doing it without my permission”

“OK” I reply “Well, if you just let me know when you’ll be doing viewings that would be great”

And so off I went back to the building to see if the current tenants would show me round…

Unfortunately there was no door bell on the outside door and nobody seemed to be answering my knocking. Well, I reasoned to myself – if the offices are upstairs then they probably can’t hear me down on the ground floor. So I tried the handle…and it turned and opened. And in I was!!

Tentatively I started walking along the corridor and making my way to the stairs leading upstairs when suddenly someone came out of the side door to the ground floor retail and we made each other jump “OHHHHHH”

“Oh I am SO sorry” I stammer and then rush into my excuse in a speed not known to human ears “I-saw-the-sign-outside-that-this-building-is-going-to-auction-and-I-was-in-the-area-and-I-wanted-to-ask-if-I-could-have-a-look-as-I-am-going-away-on-holiday-and-nobody-heard-me-knocking-and-then-I-tried-the-door-handle….and, and….” and I sound like a run away typewriter…and the bloke looks at me trying to decide if I am mad or for real

“I’ll go and get the manager” he turns on his heels up the stairs and I am left standing in the hall

A few minutes later and the manager appears and so I launch into my story again “I am so sorry to bother you…but..auction…holiday…in the area…would you be so kind…???”

Luckily he would be so kind and takes me on a grand tour – and lets me take pictures as though I am some sort of tourist 🙂

There are a lot of different rooms  – you have the ground floor retail:

And then you have the offices (as you can see they are occupied!)

So I am totally in love with the location and with the building…but can I make figures stack…

So off I go to planning…and to cut it short – the God of planning says ‘Yes’ I can make the upper floors residential, ‘Yes’ they can see no policies which would impact upon my plans, ‘Yes’ they would encourage such a development – and ‘Yes’ I have never felt so confident having met with planners about a potential development!

And so then I call my surveyor to see if he can check the building….and I call the tenants of the building (having obtained their details at my earlier visit). They are lovely and helpful and allow me to organise a visit the very next day.  And I am so excited…

And despite the surveyor pointing out a few large cracks my excitement will NOT be diminished…

And then when my solicitor points out there is no break clause for another 5 years and I will have to wait 5 years until I can start implementing my grand plan my bubble starts to gradually fizzle…and it’s pretty complicated as the building has a long lease and then has been sub-let again.

So I speak to the second God of property development (the first – being planning!) my bank manager

I send him the property details and talk about my grand ideas…but the bank will only lend on income. The additional premium I want to pay for the future residential angle cannot be seen as part of the deal. In their terms this “premium” – or what is known as “hope value” – value you hope you will achieve in the future because of a planning gain you hope to make – cannot be calculated as part of the deal.  It is a major blow – yes the building produces a good income stream, but the real money…and we’re talking 6 figure profit sums here – will be in the residential conversion on the upper floors.

I sit down and do my sums and try and calculate the opportunity cost of having money invested in this development for the next 5 years.  It’s a hard call trying to predict the future – and it gets even harder when I find out that the company renting the building (not the one’s in the office – the people who have sub-let) are also trying to buy the building…

And so the day of the auction arrives…and the lot comes up…and I never even get a chance to put my hand up as the building sells for £57.5k more than what I had budgeted. And I later find out – it was the landlord who bought the building…and guess what – the landlord is a flipping estate agent!!! No wonder it had been so difficult to get a viewing!!!!