Investors paid 84.31p per share in the New Listing for this property, and it became available on the Resale market November 20th 2015.
Introducing our first 'higher-yielding' property. This represents an institutional grade investment opportunity, comprising 42 of the 48 apartments in this Grade II listed converted mill in Gainsborough. A truly compelling investment opportunity:
- We purchased 42 of the 48 flats in this Sandars Maltings converted mill, plus the Freehold for the entire building, at a discount to its break-up value and geared at 60% loan-to-value (LTV) of the purchase price. Gearing gives enhanced exposure to property price movements, and the potential for amplified returns; though investors must note amplified negative returns if prices fall.
- By purchasing the entire block at its investment value as opposed to its break-up value, investors benefit from a higher dividend yield than they would achieve by purchasing individual flats. Net income is further enhanced by a favourable mortgage rate relative to the net dividend yield.
- The property is located in Lincolnshire, in the East Midlands. The well-regarded research team at Savills estimate this region to enjoy a forecast capital growth of 16.5% over the next 5 years (2016: 5%, 2017: 3%, 2018: 3%, 2019: 2.5%, 2020: 2.5%). Gearing allows significant outperformance to this market growth however investors should note that gearing amplifies losses if prices fall.
Our exit strategy is to sell the investment as a single holding to an investor. This will preserve its value as an income producing freehold block, and ensure an efficient and timely sale.
You can read more on the investment case, here.
Property Partner does not provide advice and nothing in this Overview should be construed as investment or tax advice. The information which appears in this Overview is for general information purposes only and does not constitute specific advice.
The mortgage is being provided by a major high street bank and has a five-year fixed interest rate of 4.50%. Please refer to our blog post on geared property for further details.
We purchased 42 of the 48 flats in this Sandars Maltings converted mill, plus the Freehold for the entire building. The building was managed by an appointed receiver following repossession by a lending bank. Of the 48 flats, 6 have already been sold off on long leases, giving us the benefit of the ground rent. The remaining 42 are directly owned within the freehold and comprise of 22 two-bed and 20 one-bed flats.
The flats were acquired in good condition and the Chartered Surveyor's report identifies no material issues. We have made a provision of £30,000 for any remedial works that further testing reveals, immediate repair works required to two flats, and ongoing minor exterior works as identified in the surveyor's report. There is also a provision of £25,200 for furnishings.
The total forecast rent for the 42 flats is £190,000 per annum however the number of vacant flats will vary month to month. We have factored into our forecasts an annual void rate of 5.8%, which is based on historical performance for the property.
At the current level of rent, Gross Rental Yield would be 7.41% and the forecast Dividend Yield 4.74% (fully accounting for and after mortgage interest payments, purchase costs, furnishings, remedial cosmetic works, forecast maintenance, annual voids, corporate taxation and all fees). From April 2016 UK taxpayers are entitled to a £5,000 annual dividend allowance. See our FAQs here for more information.
For prudence, we have not included any growth in rental values in our forecasts - any growth in rent would be incremental to our forecasts.
This transaction was approved by our RICS qualified Director of Property.
The property is a four storey brick construction divided into 3 blocks within which we’re purchasing the following apartments:
• Block A: 7 two bedroom flats and 6 one bedroom flats
• Block B: 7 two bedroom flats and 10 one bedroom flats
• Block C: 8 two bedroom flats and 4 one bedroom flats
We present here floor plans for 6 of the flats as examples.
The Surveyor details the total Gross Internal floor area of the 42 flats we’re purchasing to be 24,862 sq. ft / 2,150 sq. m.
- Share Valuation
- House Price Index
- Rental Income Breakdown
- Latest Valuation
- Latest Share Valuation
- Latest Property Value
- Amortised Purchase Costs
- - £1,092,000
- Deferred Tax
- - £39,103
- Latest Valuation
Note: The estimates provided do not constitute valuation advice; it remains your responsibility to determine valuation.
The HPI is an official statistic that captures changes in the value of residential properties across England and Wales. It is published by the Land Registry, which is a UK government organisation.
Note: Past performance is not a reliable indicator of future results.
Residential property investment is a total returns product. This information is the income component only. Increasing capital values have historically driven most of the return.
- Gross Rent per year (E)
- Service Charges
- - £32,917
- Gross Rental Revenue
- = £157,083
- Gross Rental Yield
- - £105,526
- Annual Interest Payment
- Letting and Management
- Property Insurance
- Allowance for possible voids
- Maintenance Allowance
- Corporation Tax
- Dividends per year
- = £51,557
- Dividend Yield
Note: UK taxpayers are currently entitled to a £5,000 annual dividend allowance. This means that the total income related tax you pay is no greater than if you were to own the property directly. Gross rent and dividends may be lower than estimated. Tax treatment depends on individual circumstances and may be subject to change in future. See FAQs for more information on taxation. The Dividend Yield assumes an investment at the Latest Valuation.
42 Flats in Sandars Maltings, Gainsborough, DN21 1JA,