Case study: Golden Hill Fort, Isle of Wight

Golden Hill Fort, Isle of Wight was brought to our platform in July 2018. It is one of the most unusual, yet most spectacular properties on our platform.

We also think it’s one of our best deals, having been bought at a 36% discount to market value and boasting a forecast five year total return of 98%. And others clearly agree: it’s was shortlisted for Deal of the Year at the RESI Awards 2019!

Here, we’re going to tell you how we discovered it, the work required to bring it to platform, and why we think it’s such a great investment opportunity.

The Property

Golden Hill Fort is grade I-listed and was constructed in 1863 by the Royal Commission as part of the Palmerston defences. The building has been recently converted in 2007 into 18 luxurious and high-spec terraced homes, repurposing this magnificent building to meet the modern-day requirements of the island while preserving its historic and architectural significance.

Located on a strategic hilltop with 360 degree views of the surrounding countryside, the fort is 1.5 miles south of the picturesque town of Yarmouth and under a mile from Freshwater village. It is within easy driving distance of several local tourist attractions. You can read more in the investment case.

Rob Weaver, our Chief Investment Officer, and his property team have built a nationwide network of property professionals and associates over the years. A member of this network alerted us to the property and recommended it on the basis of his local knowledge.

The fort had been making headlines online and in nationwide newspapers as being a truly unique property one could only dream of owning. Site visits were conducted without delay to ensure we could secure the acquisition.

Preparing it for the platform

The fort was being sold by a receiver with no knowledge of the property, so this was going to be a brave acquisition from the outset. The list of unknowns and potential issues was a long one:

  • The building is a unique, grade 1-listed monument, which would put off many buyers in the first instance!
  • The island is renowned for subsidence
  • There had been a previous landslide to the earth works
  • The access through the external earthworks is too narrow for a fire tender
  • Building regulations for six of the units had not be issued, and no information available
  • There was no listed building consent sign off, and no information available
  • There were no service charge estimates or operational costs available
  • It had historical right of way and maintenance obligations
  • One unit had been damaged by water ingress
  • One unit was unfinished
  • There were leasehold issues
  • There were title issues

With their extensive experience and property know-how, our team felt confident this was a sound acquisition and that they could overcome most of these issues. But nonetheless the agreed purchase price reflected the uncertainties.

In the time between brokering the deal and exchanging contracts, they were able to identify costs to rectify the problems or remove the risks, converting our risk pricing into profit. Since its acquisition, shares in the fort have been trading on our property exchange at an 18% premium to its valuation, a testament to its impressive investment potential.

The deal

As a result of the property’s complications, and it being in receivership, the team was able to negotiate a substantial discount to break up value. This meant we were able to lock in capital growth for our investors by buying the houses in bulk, with a view to selling them separately in the future.

Word travelled fast of the deal we had agreed, leading to the threat of being gazumped by some of the UK’s largest property investors. Fortunately, owing to what a unique and potentially lucrative investment it was, our investors raised the funds for the fort’s purchase just in time, allowing us to complete on the deal before anyone else could outbid us and succeed in acquiring the property.

On 14 September 2018, we purchased Golden Hill Fort on the Isle of Wight on behalf of our investors for £2.68m; a 36% discount to the break up value of £4.2m. This, combined with the monthly rental income generated by the property, equates to a forecast five year return on investment of 98% or 19.6% per annum after all fees and costs.

Robert Weaver, our Chief Investment Officer, said “this is a standout property and an absolutely fantastic opportunistic investment. My first thought was that this is a military fort – it will have been built in the right place, over-engineered, and will definitely stand the test of time. These types of investments are rare to come across, with this purchase being secured from a receiver and us leveraging our deep in-house expertise. I think this might be one of the best deals I have done in my 35 year career in property.”

We are very proud to have acquired this property on behalf of our investors. Not only do 1,130 of them now own a share of a truly magnificent and rare building, but they are also benefiting from the impressive returns of such a well-negotiated deal.

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Capital at risk. The value of your investment can go down as well as up. The Financial Services Compensation Scheme (FSCS) protects the cash held in your Property Partner account, however, the investments that you make through Property Partner are not protected by the FSCS in the event that you do not receive back the amount that you have invested. Past performance is not a reliable indicator of future performance. Forecasts, if stated, are not a reliable indicator of future performance. Interest and capital returned may be lower than expected. Gross rent, dividends, and capital growth may be lower than estimated. 5 yearly exit protection, exit on platform or exit in line with Opportunistic Fund strategy, subject to price and demand. Property Partner does not provide tax or investment advice and any general information is provided to help you make your own informed decisions. Customers are advised to obtain appropriate tax or investment advice where necessary. Financial promotion by London House Exchange Limited (No. 8820870); authorised and regulated by the Financial Conduct Authority (No. 613499). Please read Key Risks before investing.