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Project Title: The Gelliwastad Collection: Office to 4-Flat Residential Conversion
Location: 16 Gelliwastad Road, Pontypridd, CF37 2BW
Proposed Structure: Joint Venture Equity Partnership
Projected Investor Return (on Sale): Target 34.7 %
Return on Capital (ROC) Partner ROC: £117,000 / £337,000 = ~34.7%
Projected Investor Return (Rent & Refi): Capital Repaid + Ongoing Cash Flow Share: Refinance Amount (75% LTV of £569k): ~£426,750
Partner Capital Repayment: £337,000
Surplus from Refinance: £426,750 - £337,000 = £89,750
This surplus can repay Houzy's £84.6k net equity, leaving a small kicker of ~£5,150 (could go to partner or Houzy).
Mortgage Houzy Services (after partner paid, Houzy equity mostly out): ~£337,000 (or slightly less if kicker paid from it).
Annual Mortgage Cost (£337,000 @ 6%): £20,220
Net Annual Cash Flow (to Houzy): £34,410 (NOI) - £20,220 = £14,190
1. Executive Summary:
Houzy Limited (Special Purpose Vehicle, SPV ) presents a compelling, de-risked property development opportunity in the thriving market of Pontypridd, South Wales.
We are seeking a joint venture partner to invest £337,000 to refinance an existing bridging loan (£217k) and fund the complete reconstruction (£120,000 incl. contingency) of a strategically located former office building into four modern, self-contained residential flats.
Full planning permission (Ref: 22/1466/10) is secured, and detailed builder quotations are in place, significantly mitigating upfront risks. The development is projected to deliver a Gross Development Value (GDV) of £569,000 for the 4 flats.
We offer attractive returns via two clear exit strategies: outright sale of the completed units or a rent-and-refinance model providing ongoing cash flow.
2. The Opportunity:
High-Demand Location: The centre of Pontypridd benefits from proximity to South Wales University, excellent transport links (rail & bus station 1- 5 min away), and a vibrant town centre with amenities – all within walking distance of the property.
Market Undersupply: Strong demand for high-quality, modern rental accommodation and for-sale properties for students, young professionals, and first-time buyers.
Value-Add Conversion: Transforming an underutilised commercial property into desirable residential units.
De-Risked Project:
Full Planning Permission GRANTED.
Detailed architectural plans (by WeStruct) and builder quotations (£99,780 base cost) finalised.
Clear title and existing structure.
3. The Property:
Address: 16 Gelliwastad Road, Pontypridd, CF37 2BW
Current Use: Vacant former office building.
Proposed Use: 4 x self-contained residential flats:
Flat 1 (Ground): 1 Bed, 1 Bath (635 sqft)
Flat 2 (Ground): 3 Bed, 1 Bath (681 sqft)
Flat 3 (First): 3 Bed, 1 Bath (667 sqft)
Flat 4 (Maisonette - First & Second): 3 Bed, 2 Bath (1163 sqft)
Key Features Post-Conversion: Modern design, energy-efficient solutions (insulation, potential for solar as per plans), high-quality finishes.
4. Financial Summary & Funding Requirement:
Houzy Limited Contribution (Net Equity): £126,600
Funding Sought from Partner
To Fund Full Reconstruction (incl. 20% contingency): £120,000
Total Effective Project Capital Base: £421,600
Projected Gross Development Value (GDV - 4 Flats): £569,000 (Based on £181/sqft average from recent local comparables - PropertyData Oct 2023)
Estimated Sales & Legal Costs: ~£37,000
5. Proposed Exit Strategies & Investor Returns:
Funding Required from Partner:
To Pay Off Bridging Loan: £217,000
To Fund Reconstruction: £120,000
Total Funding from Partner: £337,000
Total Effective Project Capital Base: Partner's £337k + Houzy's Net Equity £84.6k = £421,600
Exit Strategy A1: Sale of 4 Flats
GDV: £569,000
Less Partner's Capital Injection: £337,000
Less Sales/Legal Costs: £37,000
Project Net Profit (before split): £569,000 - £337,000 - £37,000 = £195,000
Example Profit Split (60% Partner / 40% Houzy):
Partner Profit: £195,000 * 0.60 = £117,000
Partner ROC: £117,000 / £337,000 = ~34.7%
Houzy Profit: £195,000 * 0.40 = £78,000
Exit Strategy A2: Rent 4 Flats & Refinance
Refinance Amount (75% LTV of £569k): ~£426,750
Partner Capital Repayment: £337,000
Surplus from Refinance: £426,750 - £337,000 = £89,750
This surplus can repay Houzy's £84.6k net equity, leaving a small kicker of ~£5,150 (could go to partner or Houzy).
Mortgage Houzy Services (after partner paid, Houzy equity mostly out): ~£337,000 (or slightly less if kicker paid from it).
Annual Mortgage Cost (£337,000 @ 6%): £20,220
Net Annual Cash Flow (to Houzy): £34,410 (NOI) - £20,220 = £14,190
(C) Exit strategy: Houzy limited 100% ownership/shares sale based on GDV ( please see comments below).
6. The Developer - Houzy Limited (Special Purpose Vehicle, SPV ) :
Houzy Limited is set up for this project as (Special Purpose Vehicle (SPV).
Committed to delivering high-quality, desirable homes and strong returns for partners.
7. Project Team (Secured/Proposed):
Architect & Design: WeStruct (Detailed plans completed)
Main Contractor: Quotations secured, selection process advanced.
Solicitors: to be appointed
Project Management: Houzy Limited & Q9 Trade Limited.
8. Timeline (Estimated):
Month 0: Funding Secured, Bridging Loan Refinanced.
Month 1-5/7: Reconstruction & Fit-out.
Month 6/8 onwards: Marketing for Sale / Letting.
Months 9-12: Target for Sales Completion / Refinance Completion.
9. Risk Mitigation:
Planning Risk: Eliminated – Full permission granted.
Construction Risk: Detailed quotes secured, 20% contingency in funding, experienced contractors.
Market Risk: Strong local demand, realistic GDV based on current comparables. Dual exit strategy.
Finance Risk (Bridging Loan): This investment directly addresses and removes this risk early.
10. Next Steps & Due Diligence:
We invite interested parties to discuss this exciting opportunity further. A comprehensive Due Diligence Pack is available upon request, including:
Detailed Builder Quotations flat 4 & Project costs estimates
Comparable Market Data (PropertyData Reports: Local prices and comparables files,
Comparable Market Data (PropertyData Reports: Local rental market and comparables files
[Any other relevant documents: Title deeds, SPV structure proposal, etc.]
selling the shares of the Limited Company (the SPV holding the property) instead of selling the property directly can avoid Stamp Duty Land Tax (SDLT) for the buyer and potentially some other transaction costs. This can make the "package" more attractive to a buyer, allowing you to achieve a slightly higher effective price, thus boosting your ROC:
Assumption for Recalculation:
Let's assume the buyer effectively "shares" the SDLT saving with you by paying a premium for the company shares.
SDLT Saving Estimation: SDLT is complex and tiered. For residential properties, especially a portfolio of 4 flats or a high-value HMO, this can be substantial.
For the 4 Flats (GDV £569,000), if sold as a portfolio to one investor, the SDLT (including the 3% surcharge for additional properties) could be roughly £32,000-£38,000.
For the HMO (GDV £820,000), if sold as a commercial property or to an investor, the SDLT (non-residential rates if it's truly commercial, or residential if it's just a large house being bought) could be £25,000-£45,000.
Shared Saving Premium: Let's conservatively assume you can achieve an effective price increase for the company shares equal to 50-75% of the buyer's SDLT saving.
For Flats: 50-75% of (say) £35,000 = £17,500 - £26,250 premium.
For HMO: 50-75% of (say) £35,000 = £17,500 - £26,250 premium.
We will use an average premium of £20,000 for flats and £20,000 for HMO for simplicity in demonstrating the ROC increase. The actual sales/legal costs for a share sale might be slightly different (more on legal due diligence, less on conveyancing), but for this exercise, we'll assume the previous sales/legal cost estimate is roughly applicable to overall transaction advisory, or the saving there is minor compared to SDLT.
RECALCULATED SCENARIOS WITH SHARE SALE PREMIUM
We will adjust the "Project Net Profit (before split)" by adding this £20,000 premium, which then flows through to the investor's profit and ROC. We'll focus on the "Sale Exit" strategies for Option 1 Funding (Partner Refis Bridge + Funds Recon) as these are the cleanest.
Scenario 1 (MODIFIED): 4 FLATS - Funding Option 1 - SHARE SALE EXIT
Funding Required from Partner: £337,000
Total Effective Project Capital Base: £421,600
Original GDV (Asset Sale): £569,000
Premium from Share Sale (Buyer's SDLT Saving Share): +£20,000
Effective Sale Price (Company Shares): £589,000
Less Partner's Capital Injection: £337,000
Less Original Sales/Legal Costs (as proxy): £37,000
Project Net Profit (before split): £589,000 - £337,000 - £37,000 = £215,000 (Increased from £195,000)
Example Profit Split (60% Partner / 40% Houzy):
Partner Profit: £215,000 * 0.60 = £129,000 (Up from £117,000)
Partner ROC: £129,000 / £337,000 = ~38.3% (Up from ~34.7%)
Houzy Profit: £215,000 * 0.40 = £86,000
Benefit to Buyer: The primary advantage for the buyer is a significant saving on Stamp Duty Land Tax (SDLT), as share transactions typically do not attract SDLT.
Benefit to Us (Seller SPV & Partners): By facilitating this SDLT saving for the buyer, we can often achieve a premium on the sale price of the company shares compared to a direct asset sale. We estimate this premium could be in the region of £17,500 - £26,250, effectively increasing our Gross Development Value.
Impact on Returns:
For the 4-Flat Sale Strategy: This premium could increase the total project net profit from ~£195,000 to ~£215,000 (using a £20k premium). For an investor partner, this would uplift their profit from ~£117,000 to ~£129,000, increasing their ROC from ~34.7% to ~38.3% (based on a 60/40 split).
Considerations:
This exit route is typically more attractive to experienced property investors or companies rather than individual owner-occupiers.
The buyer will undertake more extensive due diligence on the company itself. Our SPV will be maintained as a 'clean' entity solely for this project to facilitate such a sale.
We will seek specialist tax advice to ensure the most efficient structure for all partners should this exit be pursued."
Why this is attractive to an Investor:
Increased Upside: It demonstrates an additional way to maximize returns beyond a standard asset sale.
Flexibility: It adds another potential exit route, appealing to a broader range of end buyers (those who prefer company purchases).
Important to Emphasise:
The exact premium achievable is negotiable and depends on the specific SDLT saving for that buyer and their willingness to share it.
Transparency about the increased due diligence for the buyer is important.