Investors paid 98.36p per share in the New Listing for this property, and it became available on the Resale market January 28th 2016.
St Catherines Mews is situated in a popular and leafy residential area walking distance from the heart of the historic city of Lincoln. This opportunity represents an institutional grade investment.
- The investment comprises all 21 flats in this property and is geared at 50% 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.
- There is a significant discount reflected in the purchase price of this property, which we have secured by purchasing the entire block at an RICS investment value of £1,865,000 versus the RICS break-up value of the individual flats of £2,255,000.
- By purchasing the unbroken block at its investment value as opposed to its break-up value, investors will benefit from a higher net 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 the Cathedral City of Lincoln, 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%).
You can read more on the investment case.
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 provided by a major high street bank and has a two-year fixed interest rate of 3.90%. After this two-year period, the interest rate will switch to a variable rate based on the bank's base rate. At that point, we will assess the situation and either continue with the variable rate or fix the interest rate for an additional period. We have assumed a constant cost of debt and no rental growth in our annual income forecast. Please refer to our blog post on geared property for further details.
Our investment comprises an unbroken block of 21 two-bedroom flats, as well as the Freehold interest for the building. We were able to secure this property prior to auction by offering the vendor speed and certainty. In the interests of prudence, and as per our valuation policy for blocks of over 10 units, we will value this property at RICS investment value on our platform. By purchasing the entire block at its investment value as opposed to its break-up value, investors will 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 flats were acquired in good condition. The Chartered Surveyor's report identifies no material issues. We have made a precautionary provision of £10,000 for tests that are required and any remedial works that the testing reveals. There is also a provision of £5,000 for furnishings.
The total rent forecast for the 21 flats is £136,560 per annum. However, the number of vacant flats may vary month to month. Therefore, we have factored into our forecasts an annual void rate of 3.8% for prudence.
At the current level of rent, Gross Rental Yield would be 7.26% and the forecast Dividend Yield 5.15% (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 will be incremental to our forecasts.
This transaction was approved by our RICS qualified Director of Property.
The property comprises 21 purpose built two-bedroom flats.
All the flats contain a living room, kitchen and bathroom. We present here floorplans for 4 of the flats as examples.
Each flat benefits from an allocated off-street parking space.
- Share Valuation
- House Price Index
- Rental Income Breakdown
- Latest Valuation
- Latest Share Valuation
- Latest Property Value
- Amortised Purchase Costs
- - £941,825
- 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
- - £0
- Gross Rental Revenue
- = £136,560
- Gross Rental Yield
- - £84,391
- Annual Interest Payment
- Letting and Management
- Property Insurance
- Allowance for possible voids
- Maintenance Allowance
- Corporation Tax
- Dividends per year
- = £52,169
- 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.
St Catherine's Mews, Lincoln, Lincoln, LN5 8JT,