www.ereproperty.com +44 (0) 113 380 8930 Why is there a Potential Exit Option? How will the Potential Exit Option work? The exit option will be legislated in a separate contract from the contract of sale. It determines that if, within three years, the seller or a purchaser whom the seller introduces offers 30% of the original purchase price, then all buyers would be contractually required to resell back to the developer. There is a potential opportunity for the developer to re-sell the Castleview House development in an aggregation deal to an institutional investor such as Canada Life. They typically purchase clip sizes of £20 to £50 Million. What is an Aggregation? It is bringing together several different blocks of property and aligning them in a larger deal, that is then sold in a group to benefit all owners. How does the Potential Exit Option benefit me? The potential exit option can only be triggered if a price 30% above the original purchase price is offered. This 30% is profit paid entirely to the Landlord and, given that this option must happen within 3 years of the purchase, would equate to a 9.28% annualised capital uplift. Is there a recent example of an Aggregation? The Vendor recently completed a similar deal with Canada Life at a 3.25% capitalised yield. https://www.canadalifeassetmanagement.co.uk/press-res/canada-life-assetmanagement- announces-financing-agreement-for-specialised-supported-livingportfolio/ info@ereproperty.com www.ereproperty.com +44 (0) 113 380 8930
What is a Yield and how does this affect the value? In this building the Headlease holder is the developer ‘The Investment Room & The Letting Room’ (TIRTLR 7 Ltd). The yield is a percentage and is calculated by dividing the annual rent payable but the purchase price. The yield for these agreements is 9.28%, which is the annual rent (£13,500) divided by the purchase price (£145,500). If an institution triggers the exit option through an aggregation deal, then the buyer will receive a 30% Capital Uplift above their original purchase price resulting in a final sale price of £189,150 (£145,500 multiplied by 1.3 is £189,150). This equates to a profit of £43,650 for the investor. Who is the Head lease holder? The freeholder of the building is Wallace Partnership Reversionary Group, who are currently and will continue to be responsible for insuring the building's externals such as the roof. Who is the Freeholder of the property? The developer will do everything in its power to form an aggregation, as this is the most profitable outcome for all parties. However, if this does not occur, then every unit will continue to receive its 9.28% Net Rental Assurance for all 25-year management agreements. Furthermore, if the exit option clause is not triggered then the property will be available for resale, mortgage or transfer of ownership under conditions the landlord/client determines. What happens if the Exit option is not triggered within the three years? Do our clients get the title deed upon purchase? Yes, when the client purchases, they will be granted the Title Deed. Who does our client purchase the ownership & title from? The head leaseholder, TIRTLR, will act as the seller in this transaction transferring themselves as Landlords of the unit to our clients. How long will our clients’ leases be? Upon transfer of ownership, each client/landlord will be granted an individual 125- year lease. What is a rental assurance & is the yield gross or net? A rental assurance is an agreement between the leaseholder & sublease holder to pay a specified rent per annum. In this case our clients will receive a 9.28% ‘Net Rental Assurance’ paid in arrears full at the start of the month direct to the Landlord by Yale & funded by the council. The yield is net with no additional costs for the landlord. info@ereproperty.com www.ereproperty.com +44 (0) 113 380 8930
Community benefit societies conduct business for the benefit of their community. Profits are not distributed among members or external shareholders but returned to the community. It is a society registered with the Financial Conduct Authority and owned by the members. The society is established for the benefit of the community and not of its members, who do not need to be (though they can be) consumers or workers. A CBS must be established with a social or environmental objective, in this case, supportive housing. Yale Housing Association Limited – a Community Benefit Society company who provides safe, supportive and sustainable housing to vulnerable adults. Their supported accommodation is for people who need support and supervision in order to manage their tenancies. Yale Housing Association secures long-term management agreements with their superior landlords, enabling them to provide secure, stable homes to their customers; whilst also offering security to the landlords that their properties are in safe hands. https://yale-housingltd.org/ What is a Community Benefit Society? Which company are providing the management agreement & the supportive living for tenants? What is a Management Agreement? A management agreement is an agreement in which the tenant takes on all of the costs for repairs and internal insurance for the property. In the case of Castleview House, insurance and repairs of the externals are also covered through the Freeholder, Wallace Partnership Reversionary Group. Does this mean Yale will furnish the flat and refurbish it once the 25- year management agreement finishes? Yes, a schedule of sale and an inventory will both be registered upon sale. The flats will be fully furnished by Yale to provide the necessary facilities for care. Then, after the 25-year management agreement is completed, Yale is contractually required to return it to this state. What are the main terms of the agreement? It is a 25 Year Management Agreement that rises in line with the Consumer Price Index (CPI) on an annual basis. If the CPI moves in a negative direction, the rent will remain the same. This is known as “Cap and Collar.” There is no “cap.” A comprehensive measure used for the estimation of price changes in a basket of goods and services representative of consumption expenditure in an economy is called the consumer price index. It is commonly used to measure inflation. What is the Consumer Price Index? (CPI) info@ereproperty.com www.ereproperty.com +44 (0) 113 380 8930
The Service Charge of the building is paid in full by Yale. Supported/ Assisted living services enable people with a range of needs to live happy and fulfilling lives, independently and safely in their local communities. When a person goes into supported living, they have their own home with their own tenancy agreement. At the same time, they receive support and care, which can range from a few hours a week to one-to- one support 24 hours a day. Many people with learning disabilities, autism and other needs require some level of support so that they can maximise their independence and live the life that they choose. A supported living service can help if someone does not want to live in residential care but would find it difficult to cope on their own at home. Supported living helps people to make choices about how they want to live and to keep doing the things that are important to them. Who pays the Service Charge? What is Supported/ Assisted Living? Why does Yale Housing Association Limited not appear on the Char ity Register? This is because Yale Housing is a Charitable Community Benefit Society. Yale is registered with the FCA & with HMRC as having charitable tax status, but as they still make a profit for their community, they cannot be considered a charity. What if the Yale Housing Association ceases to trade? There is currently an acute shortage of suitable accommodation for Supported Living and the Local Authority (LA) have an extensive waiting list of applicants. In a scenario like this, it is understood that either; Another company would purchase Yale & its agreements or that the LA would provide finance to a new Registered Provider who would, in turn, establish a new agreement for the Landlords. What is the Planning Use Class? C3 Planning Use Class C3 includes dwelling houses, flats, apar tments etc (whether or not as the main residence) by a single person or by people is regarded as forming a single household. Not more than six residents. The property was built in 2001 and converted in 2017. When was the property built and converted? What is Planning Use Class C3? 'Exclusion of Liability The information contained within this brochure in connection with Yale Housing Association Limited’s (“Yale”) involvement in the property(ies) transaction(s) and any Lease/Agreement with Yale on completion, has been provided directly to us by Yale and we have had no involvement in relation to this information. We do not accept any liability, whether by way of Misinterpretation, fraudulent or not, for the information provided by Yale to us to market a property for sale containing Yale’s offer to enter into an Agreement/Lease with a Buyer on Completion is to be true and correct. info@ereproperty.com www.ereproperty.com +44 (0) 113 380 8930