Project:
Propportunities have recently been notified of a property to be disposed of at Public Auction. Perhaps an unrealistic proposition for many of our readers, but these propportunities don’t come along that often, so we felt we simply had to advance to take a deeper look.
Location:
The property is located in the heart of the Solent, one of the world’s most famous and popular yachting locations, although access can at times be tricky!
As well as the obvious attraction for the yachting fraternity, the property sits almost perfectly between the Isle of Wight and the Hampshire mainland, serviced by both Portsmouth and Southampton, as well as the Ports of Cowes and Ryde on the island.
Property:
The property is a purpose built sea fort, dating back to the 1860s and is one of five such structures, with three of these currently held by Solent Forts. Neighbouring forts of similar type and same ownership (No Man’s Fort & Spitbank Fort) have both been converted to Hotel & Restaurant facilities, operating since 2012 and 2015. The operator’s website gives an insight into their history:
“The tale of The Solent Forts dates back over 150 years when fear of invasion by the French led by Napoleon III resulted in the commissioning of these sea based defences by British Prime Minister Lord Henry Palmerston. Concerned that the naval fleet and Portsmouth dockyard would be a target, work began on five commissioned forts in the 1860s. With 15ft granite walls and armour plating, these magnificent structures are testament to the skill of Victorian engineering. Large stone blocks were used as foundations, transported from the quarry by train, and then by barge before being set in place by divers. Taking 15 years to complete, by the time the forts were ready for occupation, the feared French threat of invasion no longer existed and hence, the forts became known as “Palmerston’s follies”
Neighbouring “Spitbank” Fort Hotel
The sister Hotel Forts currently have rooms available from £300 to £1,000 per night, along with a variety of bars and facilities for functions (including weddings).
We don’t know the full background behind Horse Sand coming to the market, but the company website, describing the property as “a historic monument with 100 chambers and living quarters, original gun carriages and armour plated walls” goes on to explain their decision to create a “Living Museum” and the works completed to date.
Propportunity:
It is true to say that this is not one for the faint hearted… In our opinion the first decision is residential or commercial? The property does have lapsed planning consent for 14 private apartments and a later application for 22 units was never taken to fruition (with local planning website simply quoting the application as “pending decision”. The natural alternative would be Leisure, in the form of a niche Hotel / Venue (perhaps Casino) or to do very little, but keep it in a ‘museum’ state and perhaps push for further venue use (film & TV, Music Videos and / or events.
Hotel & Leisure Facility:
Looking at each of these (broadly) three options in turn, we concluded that whilst the Hotel / Restaurant / Venue was likely to be the largest revenue producer, any developer would have to consider the competition and the fact that, quite frankly, the port would not be unique. Whilst summer months are understandably popular (and Cowes week likely to command terrific premiums) for much of the year, ample availability at either of the sister ports can be found. Considering the extensive refurbishment costs and on-going running costs that are naturally higher than those for mainland rivals, we are not convinced that demand would be consistently high enough to justify the high rates any new venue would need to charge.
Alternative ‘Venue’:
Sticking with the ‘venue’ theme, the alternative would perhaps be to undertake a more minimal schedule of works (much of which we understand has already been undertaken by the current owners) and to make the facility available for a different classification of events, left in its current form. Alternative uses, such as Film & TV, music videos and photo shoots all spring to mind. Considering the daily and weekly rates charged for such venue hires, this would probably be quite an appealing option…. at first look at least. However, such uses never have a consistent demand and it is very difficult to forecast what such demand (and thus revenue) might be. This is particularly relevant if requiring finance and overall considered too risky as an overall strategy (although it may be an option worth exploring whilst awaiting consents or commencements of an alternative strategy).
Residential:
Residential use is what we have considered as the third option and may well be the most appropriate. The consent for 14 units has set something of a precedent and it may be that the option to create up to 22 is still a practical answer. As a permanent residence, the property makes little sense and as second homes they are likely to be popular with only specific groups, after all there’s not that much to see after an initial exploration and whilst one weekend in fort maybe enjoyable, we suspect most would not be inclined to spend more than one or two weekends per year in residence. However, Airbnb and similar sites have opened up the second homes market and many more unusual or unique properties now not only pay for themselves, but generate good and consistent returns for their owners. Such advancement in this market really has increased the market for such properties and we feel that demand for high spec and larger units would likely exist.
The dream home of course, would be to convert the Fort into just one residential unit, fitted out with every luxury (there’s certainly space) creating the ultimate ‘Bond Villain’s Liar’… Whilst this may seem amusing at first thought, it could actually be the most straightforward and potentially profitable option. Removing the requirements of creating multiple units, and with the infrastructure for items such as a helipad and yacht berthing already in place, both must have options for the Billionaire (or at least multi-millionaire) target market, such plans may not be so far from reality as you might think. We would cautiously apply a £5-7m project budget.
Again, the market for short term exclusive private rental exists (and this time without anything comparable available) and for the price of a relatively small super yacht, which depreciates each year, the buyer would obtain a permanent and appreciating asset. Whilst the purchase price may quickly be dwarfed by the costs of conversion, when considering the unique nature and the comparable costs of a London Townhouse (or even a sizeable pad on nearby Sandbanks) is it really such a large risk?
What else does £5m buy you?
This (2007) 37m Sunseeker, owned by Eddie Jordan (F1) and later Chris Evans (DJ & Presenter).
A similar budget would struggle to get you on to the front line at Sandbanks (Dorset).
Next Steps:
Given the timescale (such properties are only made available to view two weeks prior to sale) we have not had the opportunity to view in person and have made no estimates or assumptions in regards to refurbishment costs (only that they are undoubtedly significantly higher than similar works on the mainland).
If any members are particularly interested in taking this one on, we would of course be more than happy to provide some further guidance in how to approach such a project, but would recommend opening talks with the sellers in the first instance. We have found through personal experience that sellers of more unusual propportunities have often spent many years and thousands of pounds undertaking tests, researching options and obtaining proposal for specific works. As the results of these actions are frankly worthless to anyone but the buyer is often open to selling on this information at considerable discounts. Not only can this result in significant cost savings, but the impact on a project timetable can be significant too!
Summary:
To be blunt, this project should only be considered by someone with significant experience and funding to match. Costs are likely to exceed estimates (a generous contingency is a must) and timescales need to be flexible enough to accommodate costal weather. It is very difficult to predict the likely sales price for a scheme of apartments, but this can be of befit to a developer. Almost all (sensible) interested parties will treat with extreme caution and factor in a greater than normal amount of risk, so it may actually go for a song.
With a guide price of £750,000, its looking to command a premium of 176% of its original costs (£425,000), but the that was 150 years ago!
Rating:
7 – (Option 1) Marked down to an 7 as its riddled with risk and unexpected difficulties but, if it works, it could potentially set a new bar in coastal apartments and what a project to have in your portfolio!.
Have you got an alternative suggestion – then please do tell
Update:
Well its seems like this was just a little too much for anyone in the room to take on – or perhaps the recent bad weather hindered pre-auction viewings! We even received notification days before the auction that the vendor was in a position to offer finance (up to 70% we understand) and invited prospective purchasers to make contact for further information.
Since the sale, the two sister ports (already converted into boutique hotels) have also been put up for sale with offers around £5m sought for the smaller unit and we understand £9m for the pair… This falls broadly in line with our own estimated values for the completed property but also raises questions over the suitability as a leisure venue, as highlighted in our own analysis. Check out rightmove for further details: https://www.rightmove.co.uk/news/articles/dream-properties/military-sea-fort-island-for-sale
