CapitalStackers investors pledged the best part of £1 million in just a few days to part fund the development costs of 48 apartments for the Over-55s in Thornton Cleveleys, standing to make returns from 10.21% to 14.66% at a Loan to Value of 65.6% on the highest risk layer.
The scheme is targeted at downsizers who’d like to be part of a community, and the developers – Torsion Care Ltd – are creating a highly desirable “Silver Village”, with communal lounges, gardens, a twin-bed guest suite and 5-day concierge service. It’s appealingly sited next to a bowling green, playing fields and the Marsh Mill Shopping Village with all the amenities the residents might need close by. It’s the final segment of a larger development of forty 2-5 bedroom houses and is priced below a similar recently completed McCarthy & Stone project in Poulton-le-Fylde, two miles away which has already sold 44 out of 50 apartments.
The scheme comprises 32 one bed and 16 two bed apartments, and while the one acre site only allows for 26 car spaces, there’s ample free parking in the surrounding roads. It’s also very well connected – 5 miles from Blackpool, 17 miles from Preston and just 10 minutes from the M55, which links to the M6 and beyond.
Senior debt of £4,546,000 is being provided by United Trust Bank at a Loan to Value ratio of 50% at an interest rate of 6.5%. The borrower owns the site having put equity of almost £1.1 million into the scheme.
CapitalStackers invited bids for slices of the £960,000 loan, which were fully sold out in five days on Agreed Bids – meaning the investors offered the borrower a discount on its target rate.
The annualised returns were therefore agreed in the following risk bands:
Layer 3 – 14.66%
Layer 2 – 11.75%
Layer 1 – 10.21%
And the borrower benefits from the reduced rate of 14.05% instead of the 15.00% target.
Torsion Group’s credentials for this project are strong. They have a track record in building retirement apartment schemes for third parties such as Morgan Sindall Later Living and Cinnamon Care. Launching in 2015, they’ve grown quickly from a turnover of £19m to £50m with consistent profitability, cash reserves of £1.75m and no company debt. They employ 58 staff and will subcontract this project to a local builder, Melrose Construction Ltd who’ll put up a 10% performance bond. Melrose have sound experience of building in the area and have constructed 40 houses on the adjacent site.
The Loan to Value ratio at 65.6% for Layer 3 gives a comfortable cushion to investors and is based on the sensitivity assumption that 21 apartments will be sold in the 5 months after practical completion with a build period extended by one month to 18 months to allow for any construction delays. It means sales values would have to fall by more than 34.4% before impacting top layer investors. In the event that properties remain unsold, the net rental income should easily allow the borrower to refinance the completed scheme with a long term mortgage.