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  • Property-a-holics

    Godwin Development / Godwin Capital Loan Note

    Dear Tribe,

    Has anyone had any experience with Godwin Development / Godwin Capital?  I am currently conducting due diligence in order to evaluate their Loan Notes.  My particular interest is in the 2 year income note.

    Many thanks in advance.

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    Is Godwin Capital the same one as the "fundraising arm" of Godwin Developments as quoted from the publicity of Godwin Developments?

    I am always dubious of any company which up sells itself ("fundraising arm"; visions of a dynamic team) and then it turns out on companies house to have £100 net assets and no employees according to its latest accounts.

    Its directors appear to have over 50 companies each, what's that all about?

    10% per year on an unregulated investment.  Can you stand to lose your whole investment?

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    Dear Muzungu,

    Many thanks for your reply, much appreciated.  I have tried to respond to the comments below and also added some more food for thought:

    Is Godwin Capital the same one as the "fundraising arm" of Godwin Developments as quoted from the publicity of Godwin Developments?

    I am always dubious of any company which up sells itself ("fundraising arm"; visions of a dynamic team) and then it turns out on companies house to have £100 net assets and no employees according to its latest accounts.

    ** Agreed.  From what I can gather:
    - Godwin Group has been around for c. 15 years and the Board includes the founders of the business (Stuart & Stephen Pratt) and some interesting senior professionals (formerly GKN PLC, KPMG, Natwest etc)
    - they have a number of projects spread across residential, commercial and mixed currently in development or acquired.  Hard to tell from the website which are the projects (if any) which Godwin have developed from scratch, completed and subsequently either (i) still manage or (ii) have sold. 
    - they mention several highly visible names as tenants in the projects to be developed or in the projects acquired including Lidl, MacDonalds, Costa, Subway, Starbucks, Greggs etc

    Its directors appear to have over 50 companies each, what's that all about?

    ** I assume these are SPVs which are formed to ring fence individual projects and provide remoteness

    10% per year on an unregulated investment.  Can you stand to lose your whole investment?

    ** You have hit the nail on the head and this is exactly the question I am trying to address.  Even though first charge security is on offer, I need to establish the credit worthiness of the project(s), the comfort/buffer in place, the security enforcement, etc.  I was thinking of placing a small % of overall portfolio. 

    I have only just initiated by DD, but thought to ask the Tribe community as a part of my efforts.

    So far I have requested the following preliminary questions:

    * What is the capital structure of the projects?
    * What amount of equity does Godwin (or otherwise) contribute towards the projects? Or are they entirely debt financed.
    * What are the use of proceeds from the loan notes?  Are proceeds directed towards a specific development (over which the first charge is granted) or general corporate purposes
    * What is the current status of the GBP 10m fund raise (which is broken down into individual GBP1k notes, minimum for entry is GBP 5k)?  How much has already been raised?

    Will endeavour to keep you posted as to how my DD develops.  Thanks again for taking the time to contribute.

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    You are certainly going about this in a comprehensive manner, kudos to you.  Great pity your example is not followed by all.  I never fail to be amazed at how naive and gullible some people are with large amounts of money that they can ill afford to lose!

    All the best.

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    So my question I’m asking myself. Why ask individual investors and offer 10% if they can borrow for 8% from banks. If the developments are good development finance is easily available (have not yet tried it myself). Good development and developer can easily afford current finance and generally there should be enough headroom in the project to finance at 65%.

    But as mentioned I have not yet done it myself

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    I had to sign up to answer this.

    Virtually all small property developers need funding from outside of Banks. I have numerous friends who have very established small companies with turnover or c.£10m and all require funding from private individuals as well as banks.

    To answer the question re.10% pa - this is basically what the average return is to most investors if they invest in a development through an SPV and achieve it on the back end. I suspect this company are factoring it in and simply paying it yearly due to their margins.

    It always frustrates me when I see people saying you can just get funding from the banks easily. It’s not the case.
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    You are right banks are a to simple term and I should have used lenders. Yes high street banks would not be doing this kind of stuff, but there are funding various places available.
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    Thanks for this explanation, provided me with some useful context.

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    Virtually all small property developers need funding from outside of Banks.  Really???? We don't, and the majority of competitors that we are in touch with don't.

    Our lenders are keen for us to borrow more than we can use and a lot of developers are in that boat.

    The developers I see that want private funds want the money because its riskier deals the banks won't touch or are borderline, but these guys do it because if they fail they don't lose anything and all the time the deal is running they take a management fee.

    If the guys mentioned in this thread are doing pre-lets to the likes of McDonalds / Greggs etc, banks would be banging the door down to lend on those schemes and sub 5% and probably up to 80% LTV

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    Phil Stewardson.

    Stewardson Properties.

    Stewardson Developments Ltd.

    Burson Land Ltd. & Jennings & Gilchreaste Ltd.

    http://www.stewardson.co.uk

    Follow me on twitter - @philstewardson


    Hi Phil,

    Many thanks for the valuable input.  I did raise the role of bank financing at the time of my original DD - as I was concerned about the capital structure and funding sources of their business model - and below is a summary of the response I received:

    "The loan note products provide Godwin with monthly liquidity of income allowing them to to take advantage quickly of land and property purchase opportunities, particularly option deals.  Bank finance can be delayed and takes time to arrange.  Godwin does use alternative capital raising initiatives to ensure a blended cost of capital"

    Now the problem is, I did not receive any detailed financial or commercially sensitive information including with respect to the capital structure and credit ratios of the business i.e. I could not ascertain the amount of funding which is coming from equity (including if any is coming from Godwin or its shareholders), traditional funding sources like bank lending and how much is coming from alternative capital raising initiatives like the loan note being discussed.  The rationale for this not being provided was as a result of the investment being of a passive nature. 

    I do not have any knowledge of the subject, however as you alluded to, I assume successful developers would have access to general corporate facilities, including quick turn around times on deployment and decisions from the credit teams?  I do not know if there any aspects of the Godwin model which would cause restrictions, such as ring fencing of individual project, etc.  

    I am not sure if the developments are "pre-let" however they do have a track record (according to their website) of having secured prominent anchor tenants, a few examples are below:

    https://www.godwingroup.co.uk/development/brampton-hut/  

    Copied from link above: The site of just under two acres was acquired with an existing consent for a small fast food retail development. A new application was submitted successfully increasing the development size by over 50%. Leases to Burger King, Starbucks, Subway and Greggs were agreed off plan. Lease lengths are between 10 – 25 years with strong covenants. The site employs approximately 200 people and serves the A1 – A14 interchange where the daily car passes are 80,000.

    https://www.godwingroup.co.uk/development/langley-mill/ - McDonalds

    https://www.godwingroup.co.uk/developmen...tock-road/ - Lidl

    I tried to google to find any red flags including troubled developments, etc. and also undertake due diligence on companies house on the Directors and SPVs - I could not find anything specific.

    I invested the minimum amount and am unlikely to invest again.  I should add this is mainly because I have realised I prefer a more active investment where more information is being provided and being involved with specific project(s).

    Hope the continued discussion helps with other fellow Tribers and I'll make sure to update everyone over time.

    Thanks again.

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    By way of update, I invested the minimum amount.  First coupon is due in a couple of weeks, will keep everyone posted how it goes...

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