Forecasted Annual Yield
This property investment opportunity involves both rental income and potential capital gains via an awarded winning block of 20 serviced apartments with an onsite concierge and gym. JaeVee has acquired the property for £2m with the operator, Estateducation, remaining in place.
A survey has recently been completed by Watsons Chartered Surveyors, showing the current market value as £2,340,000. This survey was instructed by the commercial mortgage lender, Hampshire Trust Bank, whom is providing the commercial mortgage loan of £1.425m towards the acquisition of this property. This demonstrates there is currently additional equity of £340,000 as of the 15th of January 2019. It also demonstrates the property is being acquired for 15.53% below it's current market value as of the survey date (15th of January 2019).
The rental income is generated by the 20 serviced apartments that have been in operation for over 12 months. Currently the operator is producing £320,000 per annum which, after deducting the mortgage cost and operational expenses, works out to a forecasted net yield per annum to investors of 10.76%.
The 10.76% is net of corporation tax with dividends to be paid quarterly. As investors own shares in the SPV that owns the property, you’ll also benefit from any potential uplift in both the annual income and sale of the property in 60 months time. For example, if the operator gets the annual income up to £360,000 per annum, your forecasted net return would be 14.40% per annum.
The plan is to sell the property in 60 months time for £2.5m, therefore you’d also be entitled to up to 40% of the net profit from that sale (after selling costs). Should we be successful with that exit, it would generate an additional forecasted return of 32.60%. This is in addition to the forecasted dividend annual yield of 10.76%. Therefore, when combining both the potential rental yields (over 5 years) and capital gain together, you’d be looking at a total forecasted return on capital of 86.40%.
Number 10 The Abbey is home to 20 serviced apartments and an onsite concierge and gym. It went through a heavy refurbishment in 2017 with the property developer spending £600,000 on the transformation.
It is located in Norfolk, UK which has a £3.1bn tourism economy thus making it ideal for serviced accommodation. The economy is supported by three main sectors - agricultural, public sector and tourism. in 2010, agriculture, forestry and shing enterprises made up 11% of all VAT and PAYE registered enterprises in Norfolk.
A lot of the economy is based on the tourism sector, with Norwich International Airport bringing many overseas tourists to the county. Over the last few years, the number of passengers has risen, indicating a growth in tourism within the area. They aim to increase passenger numbers to 930,000 by 2030.
The number of day visitors in 2018 to the region was an estimated 40,933,000 with 3,058,000 overnight stays as well, collectively staying a total of 12,339,000 nights. The most significant sector in Norfolk, in employment terms, is the Public Sector (public administration, defence, education and health), which in September 2010 employed 29.5% of the working population.
Nationally, serviced accommodation rates in the latest January 2018 Visit England report have found that, since last year, occupancy rates have increased by 1% and the demand for rooms have increased by 2.5%. Small town rooms in particular, had an occupancy increase of +1% to 58%. Over the last 3 years, the average occupancy rate in the East of England has increased by 1%, showing a healthy and steady growth.
The exit strategy is based on holding the asset over a 60 month period whilst working closely with the operator to increase the current annual income year on year. This would help to increase the value of the property when looking to sell at the end of the 60 month period.
The planned exit is to sell the property for £2.5m in 60 months time to another operator. As investors will hold redeemable shares, a share price is specified from the outset which determines the total share capital. Should we not achieve the planned exit of £2.5m after 60 months, then investor share prices will increase in value by 0.25% per month until the shares are redeemed.
Number 10 The Abbey is operated by Estateducation, a large scale property developer with a GDV of £50m in the pipeline.
The business has established a large number of corporate accounts whom regularly stay at Number 10 The Abbey. Due to the high standard of the finishings and furnishings, the property is considered a destination venue. It benefits from popular weekend getaway bookings as well as wedding seasons being to its prime location opposite Wymondham Abbey.
There is a Concierge desk based onsite which is operated by two employees. They work shift patterns so there is a presence on-site 7 days a week. The housekeeping and maintenance workers are appointed on a self-employed basis so the costs are ad hoc rather than fixed.
The plan is to continue to increase the number of corporate accounts for the Sun-Thurs business whilst attracting the tourism business via dynamic pricing and offers.
|The following financials are calculated against our Let & Hold model.|
|Surveys & Searches||£5,000.00|
|Boost Fund (0%)||£0.00|
|Equity Raise Fee (5%)||£25,450.00|
|Mortgage Amount (75% LTV)||£1,500,000.00|
|Management Fee (0%)||£0.00|
|Corporation Tax (19%)||-£33,725.03|
|Net Yield On Capital||10.76%|
Share Price (1%)
All the above figures are forecasted and subject to taxation based on personal circumstances. Corporation tax has been taken into account, based on a rate of 19%. Capital at risk: before investing please read the risk warning.
JaeVee is a trading name of Estateducation Ventures Ltd (FRN797322), which is an Appointed Representative of Prosper Capital LLP, which is authorised and regulated by the Financial Conduct Authority (FCA) (FRN453007). Estateducation Ventures Ltd is registered in England & Wales with company number 10172481. The registered office of the company is Studio 9 Netherconesford, 93-95 King Street, Norwich, NR1 1PW.
JaeVee © 2019 • All rights reserved.
Investing in JaeVee involves risk, including loss of capital and illiquidity and it should be done only as part of a diversified portfolio. Investments made through JaeVee are not covered by the Financial Services Compensation Scheme (FSCS). Please read our full risk warning before deciding to invest.
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