Invest – Financials: Valuations and Forecasts
Valuations of Stockwood Business Park and Rush Farm were undertaken by Timothy Lea & Griffiths (Estate Agents and Chartered Surveyors) in May 2012. The market value of the freehold interest in Stockwood Business Park was judged to be £1,750,000. Rush Farm, comprising 190 acres and the farmhouse, was valued at £1,100,000. Stockwood CBS plans to purchase 160 acres thereof for £880,000, with 30 acres and farmhouse remaining in private ownership.
Our financial forecasts assume that gross rents and net income (after running costs and allowing for voids) will grow by around 7.5% over the next 3 years. As rents increase and debt interest declines, annual profit after all costs and tax is forecast to grow by 225% over the same period.
Source and application of funds
The agreed purchase price for the Business Park and 160 acres of farmland is £2,630,000. In addition, purchase costs including SDLT and fees are estimated at £180,850; a further £135,000 has been budgeted for sustainable energy interventions and a provision of 5% share capital has been allowed to provide liquidity for share withdrawals. Therefore the total funding requirement is approximately £3,000,000.
These funds are expected to derive from:
£1,700,000 bank debt
£1,000,000 share capital / junior debt
£300,000 interest-free loan from Elysia
£3,000,000 total requirement
In order for the project to be viable, the minimum investment required alongside the bank debt is £750,000 of share capital and/or junior debt. This lower level of investment would result in Elysia needing to increase their interest-free loan to £350,000 and the sustainable energy interventions being delayed until further capital was raised. If more debt is raised and less equity, this may have an impact on the level of returns to investors in the short term. level of returns to investors in the short term..