Widespread media coverage and investor fury over Liverpool’s stalled apartment schemes will not spell the end for the “fractional sales” model, according to City Residential managing director Alan Bevan.
There have been six projects that have run aground in the last few years in the city, with North Point Global and Pinnacle, along with associated companies, being in the spotlight. The fractional model sees investors buy off-plan at discounted rates, with their substantial deposits being pooled together to fund development.
The latest Pinnacle business to call in administrators was Pinnacle Residential Liverpool, this month.
In the latest edition of City Residential’s quarterly update on the Liverpool flats market, Bevan addressed the stalled schemes issue. He said: “Does this mean the end of fractional sale developments? The short answer is no, as this type of sale is a viable alternative to traditional bank-funded development, which is almost impossible for many fractional sale developers to obtain.
“The model continues to prove popular with buyers and developers but there is no doubt that it will almost certainly be tougher to sell fractional sale developments than in the past. It is likely that new developments from those developers with strong track records of delivery and rental performance post-completion will be more popular than those without.
“The financials of these schemes – the amount on deposit and how that money can be used – may also change going forward. As with any investment it is imperative that any purchaser carries out full and exhaustive due diligence on the developer, the development and the financials of the investment.”
Bevan said that there are numerous successful developers using the model, but admitted that there is a danger that the collapsed schemes could taint others, along with “damaging the overall Liverpool residential market”.
Elsewhere, City highlighted a flight to quality. Chancery House, Orleans House and now Hadwen’s Apartments have all let well at “decent” prices, it was reported. Chancery House, the former Gordon Smith Institute redesigned by Falconer Chester Hall, was fully let within a week, while Orleans House, formerly a Bruntwood office building now owned by Delph, also let in full quickly.
Hadwen’s saw 50% of its apartments go within a week – although the scheme only contains eight apartments, in a listed former bookbinding building in Tithebarn Street.
The burgeoning build-to-rent market was also cited in this flight to quality, with strong interest reported in Promenade Estates’ Cargo Building. Plaza 1821 is now on site and 21 Strand is forward-funded by Invesco in a market that only started with Glenbrook’s The Keel but has become established in the city.
The City Residential report can be read in full online.