GENERAL
What is Assisted Living?
AssistedLivingservicesenablepeoplewitharangeofneedstolivehappyandfulfillinglives, independentlyandsafelyintheirlocalcommunities.WhenapersongoesintoAssistedLiving,theyhave theirownhomewiththeirowntenancyagreement.Atthetime,theyreceivesupportandcarewhichcan rangefromafewhoursaweektoone-to-onecare24hoursaday.
Manypeoplewithlearningdisabilities,severeautismandotherneeds,requiresomelevelofsupport,so thattheycanmaximisetheirindependenceandlivethelifethattheychoose.AnAssistedLivingservice canhelpifsomeonewhodoesnotwanttoliveinresidentialhospicecarebutwouldfinditdifficultto copeontheirownathome.AssistedLivinghelpspeopletomakechoicesabouthowtheywanttoliveand allowsthemtokeepdoingthethingsthatareimportanttothem.
What is the predicted state of the Assisted Living accommodation industry for the foreseeable future?
Agrowingdemandandshortageofpropertyinthemarketwillremainafixturefortheforeseeablefuture. Thelocalauthoritiesareburstingattheseamswithvulnerableadultsbeinghousedinhospitals,hostels andhotels,whichiscostingthegovernmentaninordinateamountofmoneywhilstsimultaneouslyfailing thevulnerableadultsbyprovidingthemwithinadequatecare
What is the expected occupancy in 2023/4?
Occupancylevelsinthisindustryremainat100%.Atthetimeofwritingthereisaqueueofover600 vulnerableadultsawaitingaccommodationwithYale,thecommunitybenefitsocietyresponsiblefor housingthesevulnerableadults.
Are there any other outstanding projects planned for release this year?
Yes,TheInvestmentRoomwillbereleasingseveralsupportedlivingdevelopments,locatedmostlyinthe northofEngland.
What is the total value of units that The Investment Room has sold during their 14-year history?
TheInvestmentRoomhasbecomeoneoftheleadingpropertydevelopersintheregion,currently delivering800-1,000apartmentsperyeartothenorthernpropertymarket.Theyhaveanimpressive portfolioofcompleteddevelopments,developmentsunderconstruction,anddevelopmentsinplanning. Currently,theyhavesoldover3,200units,worthinexcessof£350millionandhaveover£150million worthofpipelinedevelopmentseitherunderconstructionorinplanning.
Can the owner self-use their property or change the use from an Assisted Living accommodation property?
Nothetenancyagreementdoesnotallowself-use.Itisunlikelythataninvestorwouldwanttoself-use aftertheleaseagreementexpiresandwalkawayfromsuchahighincomewhilstlivinginadevelopment filledwithvulnerableadults,unlesstheythemselveshadbecomevulnerable.Professionallyspeakingthat wouldbetheonlyexception.
Who or what is the competition for this product?
Otherprovidersofsupportedorassistedlivingaccommodation.
What is the role of Yale Housing Association?
YaleisoneoftheUK'slargestandmostreputablehousingassociations.YaleHousingAssociationisa registeredCommunityBenefitSocietyandisregisteredandmonitoredbytherulesoftheFCA.Theirsole intentionistoprovidesafe,accessible,qualityaccommodationandsupportservicestailoredtomeetthe individualneedsanddesiresofeachvulnerablepersontheyhouse,enablingtheirpatientstolead independentandfulfillinglives.Theyaretheresponsibletenantontheleaseagreement.
Which party is responsible for the property insurance?
YaleHousingAssociationisresponsibleforinsuringtheproperty.
Will this property have insurance in place to protect against unforeseen acts of God?
ThereisinsuranceinplacebythedeveloperandalsothetenantintheformofaFRIlease(FullyRepaired andInsuredlease) Flooddamageforexampleiscovered Thebuildingstructureiscoveredetc.
Who is responsible for managing the development communal areas?
WatsonsPropertyManagement
GlendevonHouse,4HawthornPark,LeedsLS141PQ T:+44(0)1132738788W:watsonpm.co.uk
Can the property be sold anytime?
Thepropertycanbesoldatanytimeafter36months,whichiswhenthebuy-backagreementexpires.
Why is there a buy-back option?
Thereisanopportunityforthedevelopertore-sellthedevelopmentinanaggregationdealtoan institutionalinvestorsuchas Aviva or Canada Life.Theytypicallypurchaseclipsizesof$20-50million annually.
If the 3 years buyback provision is exercised, what is the appropriate amount of expense involved in such a transaction?
Alllegalchargesetc.arepaidforbythedeveloper.Thereisnocosttotheowner.
How will the buy-back option work?
Thebuy-backoptionislegislatedinaseparatecontracttothecontractofsale Itdeterminesthat,if withinthreeyears,thesellerorapurchaserwhichthesellerintroduces,offersover30%oftheoriginal purchaseprice,thenallownerswithinthedevelopmentwouldbecontractuallyrequiredtoresellbackto thedeveloper.Theprofitabove30%issharedequally50/50betweentheownerandthedevelopersside.
What is an aggregation?
Thisisthebringingtogetherofseveraldifferentblocksofpropertyandaligningtheminalargerdeal,that arethensoldinagroup(usuallytoapensionfund)tobenefitallowners.
Is there a recent example of an aggregation being effected?
TheVendorhascompletedanumberofsimilardealswithCanadaLife.Arecentexamplewasata3.25% capitalizedyield.Seethelinkbelow: www.canadalifeassetmanagement.co.uk/press-releases/canada-life-asset-management-announcesfinancing-agreement-for-specialised-supported-living-portfolio/
What is yield and how does this affect the value?
Theyieldisapercentageandiscalculatedbydividingtheannualrentpayablebythepurchaseprice The yieldinthisexampleis10.00% Forexample,withapropertypurchasedfor£175,000,theannualrentis £17,500.
Ifthissupportedlivingpropertyispurchasedbyaninstitutioninanaggregateddealatayieldof3.25% thenthevalueofthepropertywouldbeupliftedto£538,461.538(£17,500dividedby£538,461.538= 3.25%) Thiswouldresultinavalueincreaseto£363,461.54whichwouldthenbesharedinthemanner explainedabove.The30%increaseispaiddirecttothebuyer,thenanyoverageissplit50/50between theowneranddeveloper.Inthisexampletheownerwouldreceivetheinitialincreaseof30%at£52,500 andthen50%oftheremainingoverage:£155,480.76.Thus,bringingtheowners’totalprofitto £207,980.77.
2
If the property is sold in the market instead of the buyback provision, is the new buyer required to sign another agreement with the housing association, or anyone else?
Ifthepropertyispurchasedwiththeaccompanyingagreementsinplace,itwouldbereassigned. uponsalewiththebalanceoftheexistingleasecontinuing.
How does the 25-year management agreement affect the value of the property?
The25-yearmanagementagreementmeansthatthepropertycanbecommerciallyvaluedagainstthe yield,asaresulttheyareworthatleastthevalueofthesaleprice.Ifequated,arecentvaluationofa propertyinasimilardealshowsunitsvaluedata7%yield,bringingthepropertyboughtfor£175,000to asalepriceof£185,714.
Who is the freeholder of the property?
Thefreeholderofthebuildingisthedeveloper(TIR),whoarecurrentlyandwillcontinuetobe responsibleformaintainingthebuildingsexternals,suchastheroof.
Who is the head lease holder?
Theheadleaseholderisthedeveloper,TheInvestmentRoomandTheLettingRoom(TIRTLRLtd)
Which company is providing the lease and the supportive living for tenants?
YaleHousingAssociation-acharitablenot-for-profitCommunityBenefitSocietycompanywhoprovide safesupportiveandsustainablehousingtovulnerableadults. Theirsupportedaccommodationisfor peoplewhoneedcareandsupervisioninordertomanagetheirtenancies.
What is a Community Benefit Society?
CommunityBenefitSocieties(CBS)conductbusinessforthebenefitoftheircommunity.Profitsarenot distributedamongstmembersorexternalshareholdersbutreturnedtothecommunity.Itisregistered withtheFinancialConductAuthority(FCA)andownedbythemembers. Itisestablishedforthebenefit ofthecommunityandnotofitsmembers.ACBSmustbeestablishedwithasocialorenvironmental objective Inthiscase,supportivehousing
Importantly,aCommunityBenefitSocietymusthavean‘assetlock’.Thisisarulestatingthatifthe societyisdissolved,anyresidualassetsorcontractualobligationsmustbetransferredtoanothercharity withthesameorsimilarcharitablepurposes.
Has there been any history of default, delinquency in rental payment in the past? None.
What is a FRI Lease?
Afullrepairinginsuredlease(FRILease]isaleaseinwhichthetenanttakesonallofthecostsforrepairs andinternalinsuranceforthepropertybeingleasedfromthelandlord.
Does this mean that Yale will furnish the flat and refurbish it once the 25-year management agreement finishes?
Yes,ascheduleofsaleandinaninventorywillbothberegistereduponsale.Thepropertywillbefully furnishedbyYaletoprovidethenecessaryfacilitiesforcare.Then,afterthe25-yearmanagement agreementexpires,Yalearecontractuallyrequiredtoreturnittoitsoriginalcondition
What are the main terms of the Lease?
Itisafullyrepairinglease(FRI)whichrisesinlinewiththeConsumerPriceIndex(CPI)plus1%, reviewedonanannualbasis.IftheCPImovesinanegativedirectiontherentwillremainthesame.Thisis knownas‘capandcollar’. Thereisa5%‘ cap ’ .Thevulnerableadultlivinginthepropertyisprotected, irrespectiveofachangeofthetenant(Yale)orachangeingovernmentpolicy/governmentorachangeof landlord.
What is the Consumer Price Index? (CPI)
Acomprehensivemeasureusedfortheestimationofpricechangesinabasketofgoodsandservices, representativeofconsumptionexpenditureinaneconomy,iscalledConsumerPriceIndex.Itis commonlyusedtomeasureinflation.
The information within this document is merely for educational and informational purposes. It is not intended as a substitute for professional advice. While the information has been verified to the best of our abilities, we cannot guarantee that there are no mistakes or errors.
Who pays the service charge?
TheservicechargeofthebuildingispaidinfullbyYale
FINANCIAL / RISK REVIEW
Please provide materials to show the Tenant has sufficient capital. Thisinformationwillbeprovideduponrequest,aftersigninganNDA.
Under which circumstance could the property be void of a tenant?
Whilstthishasnoeffectontheassuredincome,ofcoursetenantscanchangeoccasionally.Itiswidely acknowledgedthatthisspectrumofvulnerableadultsrarelyrelocate,hencetherequirementforalongleasebythehousingassociation.
Can the assured rent be reduced for any reason?
No,forallcurrentSupportedLivingaccommodationthelong-termleaseisCPIlinkedandreviewed annually.TheROIisflooredattheoriginallevelandsoitcanneverdropbelowtheinitialagreedamount.
What comfort do I have that my returns will be paid?
RentsarecontractuallypaidautomaticallybytheDepartmentofWorksandPensionstoYaleHousing AssociationwhoarecharityregisteredasaCommunityBenefitSociety(CBS)withtheHMRCaswellas beingregisteredandmonitoredbytheFinancialConductAuthority(FCA) Anon-paymentcouldresultin YalelosingtheirstatusasaCBS.
What are the costs/outgoings of running a Supported Living apartment?
Costsincludeservicecharge,groundrent,insurance,maintenance Allsuchcostsarecontractuallyborne bythetenantintheleaseagreement
Will the investor be liable to pay any additional costs on an ongoing basis?
No.TherearenoadditionalcoststopayassociatedwiththepropertyfromtheHousingAssociation Operator.ThisiscontractuallywrittenintotheManagementAgreement.
How are the supported living properties valued?
Supportedlivingpropertiesaretypicallyvaluedbasedonacombinationoffactors,includinglocation, size,conditionandmostimportantly,therentalincomepotential Valuationsmayalsotakeintoaccount thespecificfeaturesandfacilitiesthatsupporttheneedsofindividualswithdisabilitiesorothersupport requirements Additionally,marketconditionsanddirectcomparablepropertysalesintheareacan influencethevaluation It'sbesttoconsultwithaqualifiedpropertyappraiserorrealestateprofessional whohasexperiencewithsupportedlivingpropertiestogetanaccuratevaluation.
What are the contractual terms of the lease agreement that I should be aware of before I commit?
RentsarereviewedannuallyinlinewiththeConsumerPriceIndex(CPI). Therentispaidmonthlyin arrearsbyYaleHousingAssociation.TheTermisfor25-years.
Can the property then be used for personal use at the end of the contractual agreement?
Thepropertyislocatedwithinapurpose-builtdevelopment,designedwithvulnerableadultsinmind.Itis notavailableforpersonaluseatanytime Attheendofthe25-yearlease,theinvestorwillhavethe optiontoextendandrenewtheleasewiththesameproviderfor10-25years Itisinthebestinterestof allpartiestorenewthelease,intermsofthepremiumrentonofferaswellasforthecareprovider. Shouldtheownerqualifyforcare,itcouldbeoccupiedforself-use.
How are the monthly rents calculated for Assisted Living properties?
Thereisnosetcalculation.AssistedLivingpropertiesbenefitfrombeinggovernmentexemptrent agreementswhicharegenerallyhigherthanthatofstandardtenancies.Rentsandongoingcostsare determinedbyaHousingOfficerandthecareproviderappointedbythelocalhousingauthority.
By how much do supported living properties increase in value over time?
SinceSupportedlivingpropertyisclassifiedasaquasi-residentialproperty,thecapitalization(orincome) approachisusedtodeterminethevalue.Typicallysupportedlivingpropertieswillatleastdoubleinvalue every10years.
Are there any estimated valuations on the unit(s) from an independent source?
Thereareseveralcompaniesthattradesupportedlivingaccommodationandtheywouldadviseyouof theirprofessionalopinionofthesaleablevalueoftheproperty.
Is there any protection for the investor if the housing association fails pay the 10% net return? YaleisanotforprofitCommunityBenefitSociety(CBS)andtheyareregisteredwiththeFinancial ConductAuthority(FCA) TheFCAhasarulingrelatingtoConsumerDutyintheirlegislativewhitepaper ‘PaymentServicesRegulations2017’,whichsetshigherandclearerstandardsofconsumerprotection acrossfinancialservicesandrequiresfirmstoputtheircustomers’needsfirst. Itisfurtherregulatedby theCo-operativeandCommunityBenefitSocietiesAct2014.Anysuchmisappropriationormisuseof fundswouldneedtobenotifiedtotheFCAandtheappropriaterulingwouldswiftlybeactionedresulting inimmediatecompensationtotheowner.
What is the investment risk?
Iftheclientagreestothepurchasethereisnorisktotheownerastheincomeisultimatelyguaranteedby lawintheformofatenancyagreementpaidbytheDepartmentforWorksandPensions(DWP).The tenantissecuredandisalsoprotectedfromchangesingovernmentorlegislationbylaw(Section117).A possiblerisktothepropertynotbeingoccupiedmightbeduetoapandemicduringwhichteexisting tenantpassedawayduringagovernmentordertorestrictpeoplerelocating.Otherreasonsmaybe relatedtoterrorism,economicoractsofGod,noneofwhichislikelynorrealisticgivenhistoricalcomparativeevidencefrommarketconditionsandexperiencefromtheCovid-19periodacrosstheUK, duringwhichallrentsforthesetypesofdwellingswerehonoured
What are the penalties if the developer cannot complete the property on time?
Allpropertiesareonlymarketedandsoldoncecompleted,furnishedandwithasignedtenancyinplace.
What are the penalties if the housing association doesn’t pay the rent to me on time?
Therearenocontractualpenaltiesforsuchascenario. RentsareissuedbytheDWPtotheHousing Associationwhointurnpaythelandlord.
What happens if housing association goes bust or cannot pay my returns?
Importantly,acharitableCommunityBenefitSocietymustlegallyhavean‘AssetLock’clauseintheir contractwiththeHousingAuthority.Thisisarulestatingthatifthesocietyisdissolved,anyresidual assetsorcontractualobligationsmustbetransferredtoanothercharitywiththesameorsimilar charitablepurposes,andapprovedbyHMRCandregisteredwiththeDWP Ifforanyreasonthehousing associationgoesbustaProtectedTenancyisinplace.Experiencedindustryauditorsareappointedtofind areplacementhousingassociation(calledaTransferofStock).Thetenantcannotberemoved.Unlessthe housingassociation(carer)companyisboughtbyanotherinstitution,itwouldberemoved.Thelandlord isissuedwithaletterexplainingthechange,confirmingleaseandrentswillallbehonouredbytheDWP andtheleaseistransferredtothenewhousingassociation
CONSTRUCTION
Which construction company is the developer of the property? TheInvestmentRoomisthedeveloper.
In case the property experiences a structural deficiency or collapse, say due to a natural disaster, who is responsible for the loss? Insurance company, Yale Housing Association or the owner?
(Aninsurancepolicyby)YaleHousingAssociationwouldberesponsible.A10-yearbuildwarrantyalso existsonallnewpropertiescoveringstructuralissues.
The information within this document is merely for educational and informational purposes. It is not intended as a substitute for professional advice. While the information has been verified to the best of our abilities, we cannot guarantee that there are no mistakes or errors.
FINANCING
Is there a financing option available?
Financingispossibleafterthebuy-backcontractexpires.Iffinanceisrequired,consenttolettoa supportedlivingprovideronacommercialleaseisrequiredfromthelender
What other funding options are available?
Therearemanyspecialistfinancebrokerswhoareabletohelpyouaccesscompliantalternativelending options
LEGAL / SECURITY
What’s the address of the head office and business registration number of Yale Housing Association?
21HareHillRoad,Littleborough,England,OL159AD
BusinessRegistrationNo.:09707430
Can we show complete transparency with the company ownership, subsidiaries etc.?
Yes,allinformationontheYaleHousingAssociationandsubsidiarycompaniesareaccessibleviaasigned NDAafterwhichaccesstotheDataRoomwillbeprovided.
When will the buyer be required to sign the Management (rental guarantee contract) Agreement?
Atthepointwhereasalesandpurchaseagreementissigned.Atthesametime,theManagement AgreementandBuyBackAgreementissignedaswell.
Can the contract between Yale Housing Association and the local government housing authority be provided?
Yes.OurDueDiligenceletterprovidedbyourUKSolicitorstatesthatanagreementexistandisinplace. Yourlegalrepresentativewillconfirmthesame.
Where will the buyer’s funds be held before completing?
Thereservationdepositisheldbytheseller’sagentuntilcompletionfundsarereceivedbyyour appointedlegalrepresentative.
Are there any restrictions or terms to resell?
Therearerestrictionsonsellingwithinthefirst36months Thereafter,YaleHousingAssociationneedsto beinformed.Thisisperformedbytheseller’slegalrepresentative.
Is a solicitor needed for the purchasing process?
Whilstitisnotalegalrequirementforcashpurchasers,weadviseyouseeklegaladvice.
Are there any reference or credit checks available for the tenant?
Yes,intheformofasolicitor’sreferenceletterand3-yearauditaccountsforYaleHousingAssociationand thisinformationmaybeaccessedafteranNDAhasbeensigned.
Regarding the property, is it a freehold or leasehold?
Thepropertiesareallleasehold.Usually,a125-250yearleaseisprovided.
Who is paying my returns? Which company receives the return and which company pays the returns to me?
AgovernmentbodycalledTheDepartmentforWorksandPensions(DWP),whichisadepartmentof HMRC,isresponsibleforrentalpayments.ItispaidtotheownerviatheCommunityBenefitSociety(Yale HousingAssociation).
TAX
Is there VAT applied to my purchase?
ThereisnoVATappliedtothepurchase.
What are my Stamp Duty responsibilities as an (overseas) investor?
StampDutyLandTax(SDLT)appliestoallbuyers,irrespectiveoflocation,andispayableupon completion Overseasinvestorswillpay5%.
Who pays the property taxes?
ThebuyerwillpayanyincomeandCGTtaxesdue.ThereisnoCouncilTaxpayable.
Is there any withholding of the 10% net return from overseas investors? Overseasinvestorsshouldcompleteanon-residentlandlordNRL1formwithHMRevenue&Customs, whichwillenableallreturnstobepaidinfull.WithouttheNRLform,paymentsmaybesubjecttoa20% withholdingfortaxpurposes.
Is there any tax implication for overseas investors in terms of income and capital gain?
Generallyspeaking,investinginSLisnodifferentfrominvestinginanyotherproperty. Taximplications arepersonalonacasebycasebasisanddependsonthepurchaser'staxposition.Pleaseseekadvicefrom aUKtaxadvisorforconfirmation.
OWNERSHIP / STRUCTURE
What is the investor’s legal ownership status?
InvestorsaregrantedfullownershipofthepropertyintheformofaTitleDeedissuedbytheHMLand Registry.
Can an Assisted Living property be purchased by a UK limited company?
Yes,manyofourclientschoosethisoptionshoulditsuittheirportfoliorequirements Wecanassistwith recommendingacompanytoassistandguideyouthroughtheprocessofsettingupalimitedcompany. Theprocessisefficientandcanbecompletedwithin3workingdays.
What are the advantages of buying an Assisted Living property by setting up a limited company?
Gettingtheownershipstructurerightcouldmakea huge differencetotheamountoftaxyoupay.Whilstit mightnotsuiteveryone,inthepast5yearsthemajorityofinvestorswillpurchasethroughalimited companystructure.Thereasonsaremany,butmostlyrelatedtotaxsavings.Ifyou’dliketoseekadvice fromareputablecompanywithasoundknowledgeofthesupportedlivinginvestmentproposition, pleaseask.
Can a property of this type be purchased as part of a pension?
Yes,aSASSpensioncompanystructurecanbeusedtofundthepurchaseofasupportedlivingproperty.
Can a buyer purchase more than one property and is shared ownership an option?
Yes,ourmodelallowsbuyerstopurchaseanynumberofproperties.Sharedownershipisallowed.
Can the property be passed to future generations?
Yes,supportedlivingpropertiescanbeexecutedbyawill,giftedorinherited
Can an overseas investor purchase an Assisted Living property?
Yes,manyofourinvestorsarefromoutsideoftheUKandarelookingforasecureincome-generating assetintheUK.Non-UKresidentsarerequiredtocompleteasimpleNon-ResidentLandlordform(NRL1) toregistertheirownershipandincomewithHMRC Ourafter-salesteamisonhandtoassistwiththis process.
What are my exit options?
Atanypointafterthreeyears,ownersmayselltheirpropertythroughaplethoraofavailablechannels. A strongsecondarymarketforsupportedlivingaccommodationexistsintheUKandalargenumberof housingassociations,charitiesandnichesupportedliving(SL)resellersareactivelypursuingSL accommodation
PURCHASE PROCESS
Please provide a timetable (end-to-end process) from complete reservation forms to completion of the transaction.
Thewholeprocessshouldtakenomorethan28days.
• Reservationformsubmittedandareservationdepositispaid
• BuyerpreparesAMLdocuments–onephotoandoneaddressproof.
• AMemorandumofSaleissenttoallpartiesinvolvedandtheirlegalrepresentative.
• Contractdocumentationissuedtobuyer’ssolicitorwithin72hours.
• Buyer’ssolicitorconductsAMLcheck–willbedonevirtuallythroughThirdfort.
• Lawyercompletesconveyanceprocessoflocalsearchesetc.
• Contractpackandreportissuedtobuyerwithareportandrequestforsourceoffunds.
• Buyersignscontractdocumentsandsendsfunds
• Exchangeandcompletioncantakeplacesimultaneously.
• HandovertoYale.Returnsaregeneratedimmediatelyandpaidmonthlyinarrearsonthefirst dayofeachcalendarmonth.
What Sales Reservation forms and AML/KYC reviews are required?
AstandardReservationFormisrequiredalongwiththeusualsupportingdocumentation.Acopyofthe buyer’spassport,proofofaddressandsourceoffunds(forexample,employment,savings).
Can an inspection be arranged before closing for the buyer?
Yes,thiscanbearrangeduponrequest.