Trafalgar Property Group PLC – Acquisition of site for assisted living scheme
The Board of Trafalgar (AIM: TRAF), the AIM quoted residential and assisted living property developer, is pleased to announce that Trafalgar Retirement+ Limited (“Retirement+”), through its new wholly owned subsidiary, Randell House Limited, has exchanged contracts to acquire its first site for the development of an assisted living scheme for £2.3 million.
The Acquisition is a 1.3 acre site in Camberley, Surrey, currently consisting of a former nursing home and with an estimated site value of £2.95 million. The site has planning permission for the demolition of all buildings and for the development of 37 two-bedroom units for an extra care and assisted living scheme, which Retirement+ estimates has a Gross Development Value (“GDV”) of £15.1 million, with a variation option for an additional 15 units (subject to planning permission), with a consequent GDVestimate of £21.2 million.
Randell House intends to develop the units for purchase by owners, who would then receive care in their own homes. Owners will also benefit from other on-site services such as catering, health and wellness, cleaning and communal living spaces. It is expected that the development would be ready to start receiving reservations towards the end of 2019, with the scheme ready for occupation in early 2021.
Randell House is paying £2.3 million in cash for the Acquisition, which together with costs will be financed by a loan to Randell House of £360,000 from Chris Johnson, CEO of the Company (the “CEO Loan”), and the balance being provided by a lending institution (the “Institution Loan”), for which offers have been received and the terms of which are due to be finalised during the eight week completion period for the Acquisition. The Acquisition is expected to complete on 21 June 2019 subject to, inter alia, Randell House satisfying the full cash consideration, which is dependent on terms being finalised on the Institution Loan.
The risk capital provided by the CEO Loan has been drawn in full and used in part to fund the non-refundable deposit for the Acquisition. The CEO Loan is unsecured, repayable within three years and bears interest after one year at a rate of 15% per annum, payable monthly in arrears. In addition, after repayment of the £360,000 principal and the Institution Loan, the CEO Loan will receive the first £500,000 of net profit achieved by Randell House on the development. The construction costs of the development will be funded by a further third party loan, which is also currently under negotiation.
The CEO Loan is a related party transaction under the AIM Rules for Companies. Accordingly, the directors of the Company independent of this transaction, consider, having consulted with the Company’s Nominated Adviser, that the terms of the CEO Loan are fair and reasonable insofar as the Company’s shareholders are concerned.
The Company has explored various methods of funding for the Acquisition and the Board believes the terms provided by the CEO Loan represent the best currently available for Retirement+ and Randall House to obtain a valuable asset and to execute the Group’s strategy of developing assisted living schemes.
Commenting on the acquisition, James Dubois, Chairman, said: “Having launched our assisted living strategy last year, it is a major milestone for the Group to acquire its first development site. Demand is growing in the UK for specialised retirement housing and this is particularly pertinent given the fast–growing aging population in the UK and current demographic trends. Indeed, the proportion of the UK population that is aged between 65 and 85 is forecast to grow sharply in coming years and by 2024, those in retirement will represent 20 per cent. of the UK’s population*. Furthermore, Trafalgar’s assisted living offering directly satisfies the increasing preference for retirees to maintain a level of independence. Trafalgar recognises this trend and with a development timeline now in place, we are focussed on having our first units ready for reservations in late 2019.”
* Source: House of Commons Library – “Housing an Aging Population (England). Projection from 2015 from ONS, National Population Projections, 2014-based projections, 29 October 2015