Below we explain how the buyback option works with the assisted living and supported living investment properties.

What is a buyback option?

Assisted Living Investment Property

The buy-back option is legislated in a separate contract to the contract of sale. It determines that, if within three years, the seller or a purchaser which the seller introduces, offers over 30% of the original purchase price, then all owners within the development would be contractually required to resell back to the developer. The profit above 30% is shared equally 50/50 between the owner and the developer's side.

What is an aggregation?

This is the bringing together of several different blocks of property and aligning them in a larger deal, which are then sold in a group (usually to a pension fund) to benefit all owners.

Is there a recent example of an aggregation being affected?

Canada Life

The Vendor has completed several similar deals with Canada Life. A recent example was at a 3.25% capitalized yield. See the link below: www.canadalifeassetmanagement.co.uk/press-releases/canada-life-asset-management-announces financing-agreement-for-specialised-supported-living-portfolio/

What is yield and how does this affect the value?

The yield is a percentage and is calculated by dividing the annual rent payable by the purchase price. The yield in this example is 10.00%. For example, with a property purchased for £175,000, the annual rent is £17,500. If this supported living property is purchased by an institution in an aggregated deal at a yield of 3.25% then the value of the property would be uplifted to £538,461.538 (£17,500 divided by £538,461.538 = 3.25%). This would result in a value increase to £363,461.54 which would then be shared in the manner explained above. The 30% increase is paid direct to the buyer, then any overage is split 50/50 between the owner and developer. In this example the owner would receive the initial increase of 30% at £52,500 and then 50% of the remaining overage: £155,480.76. Thus, bringing the owners’ total profit to £207,980.77.

What happens if the buy-back option is not triggered within the three years?

The developer will do everything in its power to form an aggregation, as this is the most profitable outcome for all parties. However, if this does not occur, every unit will continue to receive its 10% net rental assurance for the term of the 25-year lease. Furthermore, if the buy-back clause is not triggered then the property will be available for resale, finance or transfer of ownership under whichever conditions the owner determines. 

If the property is sold in the market instead of the buyback provision, is the new buyer required to sign another agreement with the housing association, or anyone else?

If the property is purchased with the accompanying agreements in place, it would be reassigned. upon sale with the balance of the existing lease continuing.

Which of your properties with an Assisted Living agreement offer the buyback option?

All the properties have the buyback option available which you can choose to be part of from the point of purchase. A list of our current properties can be viewed here.

How can I get more information, and who can I discuss Assisted Living investments with?

You can use our contact us page to get in touch