Retirement Living

The Retirement Living sector offers the opportunity for growth and allows us to deploy our real estate investment expertise.

  • Underlying demand is driven by demographics in the UK. The number of 75+ year old households is expected to increase by 77% in the 25 years from 2018 to 2043;
  • The older population owns in excess of 40% of
housing equity which can be released to finance retirement options and also free up stock for the wider family housing market;
  • The market is undersupplied, with relatively few developers or operators of scale and an increasing
interest from institutional capital

The investment in Castle View in 2023 represents the first step in developing an investment platform focussed on retirement living.

There are a variety of business models in the sector. Our
goal is initially to establish an investment platform based
around Integrated Retirement Communities (“IRC”), in which residents live independently in their own selfcontained home, with access to communal facilities and
amenities and the availability of optional support and care
services, if needed.

Castle View

LOCATION UK | YEAR DECEMBER 2023 | % HOLDING 100% | NAV £6.1 MILLION

Castle View comprises a development of 64 self‑contained one and two bedroom apartments close to Windsor town centre, completed in 2018. Communal facilities include 24 hour reception, library, lounges, roof terrace, bars, private dining room and a restaurant facility.

Residents acquire individual apartments on 250 year leases and pay an annual service charge, which covers the day to day running of the scheme, plus a deferred fee on resale of an apartment. Of the 64 apartments, 49 had been sold and 15 remained to be sold at acquisition in December 2023. Castle View generates investment returns in two ways:

Castle View

Sale of Apartments.

  • Construction was completed at the end of October 2018 and in the year from November 2018 to November 2019, 19 apartments were sold. The pandemic and lockdowns in 2020 and 2021 impacted the rate of sales, but rates have increased again in 2022 and 2023;
  • Sales rates for new developments in the sector are recognised to be slower than rates for regular market new build apartments and houses. We have taken a conservative view of sales rates for the remaining apartments in evaluating the investment but expect to maintain or improve upon the historic rates.
  • Under the current financing structure of Castle View, proceeds from apartment sales will first be used to pay down the Terido loan as noted above.

Deferred fees on resale of apartments.

  • The deferred fees are payable to Castle View, by the vendor, out of the proceeds of resale as and when an apartment is resold. The level of deferred fee depends on length of ownership starting at 4% and increasing to a maximum of 20% from the beginning of the fifth year of ownership. The deferred fee is designed to recover the costs of constructing the communal facilities, to cover their ongoing maintenance and updating and to provide a return on the capital invested.
  • The timing and amount of the investment return from the deferred fees will depend on the actual timing and value of resales and will inevitably be uneven year to year. The average period of ownership in independent retirement communities such as Castle View is eight years.

Once village occupancy is stabilised, meaning all units are sold and the pattern of occupancy established, on average, approximately 12.5% of the scheme would be expected to be resold each year. Allowing for the time for the village to achieve stabilised occupancy the base case investment appraisal model shows overall income returns in excess of 11%.