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IMPORTANT NOTICE
NOT FOR DISTRIBUTION TO ANY U.S. PERSON OR TO ANY PERSON OR ADDRESS IN THE U.S.
IMPORTANT: You must read the following before continuing. The following applies to the prospectus (the prospectus) following this page, and you are therefore advised to read this carefully before reading, accessing or making any other use of the prospectus. In accessing the prospectus, you agree to be bound by the following terms and conditions, including any modifications to them any time you receive any information from us as a result of such access.
NOTHING IN THIS ELECTRONIC TRANSMISSION CONSTITUTES AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY THE SECURITIES OF THE ISSUER IN THE UNITED STATES OR ANY OTHER JURISDICTION WHERE IT IS UNLAWFUL TO DO SO. THE SECURITIES HAVE NOT BEEN, AND WILL NOT BE, REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE SECURITIES ACT), OR THE SECURITIES LAWS OF ANY STATE OF THE U.S. OR OTHER JURISDICTION AND THE SECURITIES MAY NOT BE OFFERED OR SOLD WITHIN THE U.S. OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS (AS DEFINED IN REGULATION S UNDER THE SECURITIES ACT), EXCEPT PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND APPLICABLE STATE OR LOCAL SECURITIES LAWS.
THE FOLLOWING PROSPECTUS MAY NOT BE FORWARDED OR DISTRIBUTED TO ANY OTHER PERSON AND MAY NOT BE REPRODUCED IN ANY MANNER WHATSOEVER, AND IN PARTICULAR, MAY NOT BE FORWARDED TO ANY U.S. PERSON OR TO ANY U.S. ADDRESS. ANY FORWARDING, DISTRIBUTION OR REPRODUCTION OF THIS DOCUMENT IN WHOLE OR IN PART IS UNAUTHORISED. FAILURE TO COMPLY WITH THIS DIRECTIVE MAY RESULT IN A VIOLATION OF THE SECURITIES ACT OR THE APPLICABLE LAWS OF OTHER JURISDICTIONS.
This prospectus has been delivered to you on the basis that you are a person into whose possession this prospectus may be lawfully delivered in accordance with the laws of the jurisdiction in which you are located. By accessing the prospectus, you shall be deemed to have confirmed and represented to us that (a) you have understood and agree to the terms set out herein, (b) you consent to delivery of the prospectus by electronic transmission, (c) you are not a U.S. Person (within the meaning of Regulation S under the Securities Act) or acting for the account or benefit of a U.S. Person and the electronic mail address that you have given to us and to which this e-mail has been delivered is not located in the United States, its territories and possessions (including Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa, Wake Island and the Northern Mariana Islands) or the District of Columbia and (d) if you are a person in the United Kingdom, then you are a person who (i) has professional experience in matters relating to investments or (ii) is a high net worth entity falling within Article 49(2)(a) to (d) of the Financial Services and Markets Act (Financial Promotion) Order 2005.
This prospectus has been sent to you in an electronic form. You are reminded that documents transmitted via this medium may be altered or changed during the process of electronic transmission and consequently none of TCHG Capital plc or TradeRisks Limited nor any person who controls any of them nor any director, officer, employee nor agent of any of them or affiliate of any such person accepts any liability or responsibility whatsoever in respect of any difference between the prospectus distributed to you in electronic format and the hard copy version available to you on request from TradeRisks Limited.
Preliminary Prospectus dated 26 June, 2014 Subject to completion and amendment
TCHG CAPITAL PLC (Incorporated in England and Wales with limited liability under the Companies Act 2006, registered number 8971695)
£80,000,000 4.665 per cent. Secured Bonds due 2045 Issue Price: 100 per cent. payable in full on the Issue Date
The £80,000,000 4.665 per cent. Secured Bonds due 2045 (the Bonds) are to be issued by TCHG Capital plc (the Issuer) on 3rd July, 2014 (the Issue Date).
Application has been made to the Financial Conduct Authority in its capacity as competent authority (the UK Listing Authority) for the Bonds to be admitted to the Official List of the UK Listing Authority and to the London Stock Exchange plc (the London Stock Exchange) for the Bonds to be admitted to trading on the London Stock Exchange's regulated market. The London Stock Exchange's regulated market is a regulated market for the purposes of Directive 2004/39/EC (the Markets in Financial Instruments Directive). An investment in the Bonds involves certain risks. For a discussion of these risks see Risk Factors.
Subject as set out below, the net proceeds from the issue of the Bonds will be advanced by the Issuer to Town and Country Housing Group (the Original Borrower) pursuant to a loan agreement made between the Issuer and the Original Borrower to be dated on or around the Issue Date (the Original Loan Agreement) to be applied in accordance with the Original Borrower's constitution. The Aggregate Funded Commitment (being, on the Issue Date, the amount of the Original Borrower's Original Commitment (as defined below)) may be drawn in one or more drawings, each in a nominal amount up to an amount which corresponds to the sum of (a) the Minimum Value of the Initial Properties (as defined below) and (b) the Minimum Value of any Additional Properties (as defined below) which have been charged in favour of the Issuer and the Security Trustee (the Additional Properties) less the nominal amount of all previous drawings in respect of the Aggregate Funded Commitment (subject, in the case of each Borrower (as defined below), to the maximum of its respective Commitment (as defined below)).
For so long as (1) insufficient security has been granted (or procured to be granted) by the Borrowers in favour of the Issuer and the Security Trustee to permit the drawing of the Aggregate Funded Commitment in full or (2) the Borrowers have not otherwise drawn any part of the Aggregate Funded Commitments, the amount of the Aggregate Funded Commitment that remains undrawn shall be retained in a charged account (the Initial Cash Security Account) of the Issuer in accordance with the terms of the Account Agreement (and may be invested in Permitted Investments (as defined below)) (the Retained Proceeds, which will include any prepayments under a Loan Agreement which are not applied in or towards redemption of the Bonds). Any Retained Proceeds and any Further Proceeds (being any net issue proceeds from a further issue of Bonds pursuant to Condition 19 (Further Issues)), to the extent that Properties of a corresponding value have been charged in favour of the Issuer, may be advanced at a later date pursuant to the Original Loan Agreement or an Additional Loan Agreement (as defined below) to the Original Borrower and/or any other Additional Borrower (being a person which (a) is a charity, (b) is a Registered Provider of Social Housing, (c) is a member of the Group (such requirements in (a), (b) and (c) being the Borrower Minimum Requirements) and (d) is a borrower under the Original Loan Agreement or under an additional loan agreement between the Issuer (as lender), the Additional Borrower and the Security Trustee where all the liabilities of such Additional Borrower are secured by the Security Agreements (as defined below) (each an Additional Loan Agreement and, together with the Original Loan Agreement, the Loan Agreements and each a Loan Agreement)).
As described in Condition 7 (Interest), interest on each Bond is payable semi-annually in arrear on 3rd July and 3rd January in each year (each an Interest Payment Date) on its Outstanding Principal Amount (as defined below), commencing on 3rd January, 2015, at the rate of 4.665 per cent. per annum in respect of the period from (and including) the Issue Date to (but excluding) the Maturity Date. Payments of principal of, and interest on, the Bonds will be made without withholding or deduction on account of United Kingdom taxes unless required by law. In the event that any such withholding or deduction is so required, the Issuer may opt to gross up payments due to the Bondholders in respect thereof as described in Condition 10 (Taxation).
Unless previously redeemed, or purchased and cancelled, the Bonds will be redeemed at their Outstanding Principal Amount in 20 equal instalments of £50 per £1,000 in original nominal amount on each Interest Payment Date from, and including, 3rd January, 2036 to, and including 3rd July, 2045 (the Maturity Date) (each such date an Instalment Redemption Date). The Bonds may be redeemed at any time prior to the Maturity Date, in whole or in part, as the case may be, upon the optional prepayment by a Borrower of its loan (each a Loan) in whole or in part or the Loan otherwise becoming repayable in whole or in part in accordance with the terms of the Loan Agreement at the higher of their Outstanding Principal Amount and an amount calculated by reference to the sum of (1) the yield on the relevant outstanding UK Government benchmark conventional gilt having the nearest average maturity to that of the Bonds and (2) 0.20 per cent., together with accrued interest (or, in respect of a prepayment of a Loan following an event of default thereunder, at their Outstanding Principal Amount, together with accrued interest). The Bonds will also be redeemed (a) at their Outstanding Principal Amount, plus accrued interest, in an aggregate Outstanding Principal Amount equal to the nominal amount outstanding of the relevant Loan in the event of a mandatory prepayment of a Loan following a Borrower ceasing to satisfy each of the Borrower Minimum Requirements (other than if such Borrower complies with the Borrower Minimum Requirements within 180 days) or a Loan becoming repayable as a result of a Borrower Default (as defined in each Loan Agreement) or (b) at their Outstanding Principal Amount, plus accrued interest, in full in the event of any withholding or deduction on account of United Kingdom taxes being required and the Issuer not opting to pay (or having so opted to pay notifying the Bond Trustee (as defined below) of its intention to cease to pay) additional amounts in respect of such withholding or deduction.
The Original Borrower has been assigned a credit rating of "AA-", and it is expected that the Bonds will be rated "AA-", by Standard & Poor’s Credit Market Services Group Limited (S&P). A rating is not a recommendation to buy, sell or hold securities and may be subject to revision, suspension or withdrawal at any time by the assigning rating organisation. S&P is established in the European Union and is registered under Regulation (EC) No. 1060/2009 (as amended). As such S&P is included in the list of credit rating agencies published by the European Securities and Markets Authority on its website in accordance with such Regulation.
The Bonds will be issued in denominations of £100,000 and integral multiples of £1,000 in excess thereof.
The Bonds will be initially represented by a temporary global bond (a Temporary Global Bond) without principal receipts or interest coupons and which will be deposited on or about 3rd July, 2014 (the Closing Date) with a common safekeeper for Euroclear Bank S.A./N.V. (Euroclear) and Clearstream Banking, société anonyme (Clearstream, Luxembourg). On or after 12 August, 2014 (the Exchange Date), upon certification as to non-U.S. beneficial ownership, interests in the Temporary Global Bond will be exchangeable for interests in a permanent global bond without principal receipts or interest coupons (the Permanent Global Bond and, together with the Temporary Global Bond, the Global Bonds). Interests in a Permanent Global Bond will be exchangeable for definitive Bonds only in certain limited circumstances. See Form of the Bonds and Summary of Provisions relating to the Bonds while in Global Form.
The Issuer shall also be at liberty from time to time with the prior consent of the Bondholders, granted by way of Extraordinary Resolution, and of the Original Borrower to create and issue further bonds having terms and conditions (and backed by the same assets) the same as the Bonds or the same in all respects save for the amount and date of the first payment of interest thereon and so that the same shall be consolidated and form a single series with the outstanding Bonds. See Condition 19 (Further Issues).
Arranger and Dealer
TradeRisks Limited
The date of this Prospectus is 1st July, 2014.
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2
This Prospectus comprises a prospectus for the purposes of Directive 2003/71/EC (the Prospectus Directive).
The Issuer accepts responsibility for the information contained in this Prospectus. To the best of the knowledge of the Issuer (having taken all reasonable care to ensure that such is the case) the information contained in this Prospectus is in accordance with the facts and does not omit anything likely to affect the import of such information.
The Original Borrower accepts responsibility for the information relating to it under the heading Factors which may affect the Borrowers' ability to fulfil their obligations under the Loan Agreements in the section Risk Factors, the information under the heading Guarantee and Indemnity in the sections Overview and Description of the Loan Agreements and the information relating to it contained under the headings Material or Significant Change and Litigation in the section General Information and, to the best of its knowledge (having taken all reasonable care to ensure that such is the case), such information is in accordance with the facts and does not omit anything likely to affect the import of such information.
The Original Borrower also accepts responsibility for the information under the heading The Original Borrower in the section Description of the Original Borrower and the Group and the financial statements relating to the Original Borrower in Appendix 1 - Financial Statements of the Original Borrower and for the information contained in this Prospectus relating to the security created by it pursuant to its Security Agreements (as defined below) under the heading Underlying Security in the section Overview, under the heading Considerations relating to the Issuer Security and the Underlying Security in the section Risk Factors and in the section Description of the Issuer Security, the Security Agreements and the Security Trust Deed and, to the best of its knowledge (having taken all reasonable care to ensure that such is the case), such information is in accordance with the facts and does not omit anything likely to affect the import of such information.
Savills Advisory Services Limited (the Valuer) accepts responsibility for the information contained in the section Valuation Report and in Appendix 2 - Valuation Report and, to the best of its knowledge (having taken all reasonable care to ensure that such is the case), such information is in accordance with the facts and does not omit anything likely to affect the import of such information. The figures and data:
(a) referred to in paragraphs 1.8 and 9.4 of the Valuation Report were obtained from the Volume 26, No. 4 edition of Social Housing published in April 2014,
(b) referred to in paragraph 8.1 of the Valuation Report were obtained from the May 2014 edition of the HCA Monthly Housing Market Bulletin published by the Homes and Communities Agency,
(c) referred to in the section entitled "The Nationwide House Price Index May 2014 reported" in Appendix 5 of the Valuation Report were obtained from the May 2014 edition of the Nationwide House Price Index published by Nationwide Building Society, and
(d) referred to in the section entitled "Savills Residential Property Focus Bulletin Q2 2014 reported the following" in Appendix 5 of the Valuation Report were obtained from the Q2 2014 edition of the Savills Residential Property Focus Bulletin published by Savills plc.
The Valuer confirms that such figures and data have been accurately reproduced and that, as far as the Valuer is aware and is able to ascertain from information published by Social Housing, the Homes and Communities Agency, Nationwide Building Society and Savills plc, no facts have been omitted which would render the reproduced figures and data inaccurate or misleading. For the avoidance of doubt, with the exception of the information contained in the section Valuation Report and in Appendix 2 - Valuation Report, the Valuer does not accept any responsibility in relation to the information contained in this Prospectus or any other
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information provided by the Issuer or the Original Borrower connection with the issue of the Bonds.
Save for the Issuer, the Original Borrower and (solely in respect of the section Valuation Report and in Appendix 2 - Valuation Report) the Valuer, no other person has independently verified any information contained herein. No representation, warranty or undertaking, express or implied, is made and no responsibility or liability is accepted by TradeRisks Limited in its role as arranger (the Arranger) or in its role as dealer (the Dealer) or Prudential Trustee Company Limited (the Bond Trustee) as to the accuracy or completeness of the information contained in this Prospectus or any other information provided by the Issuer or the Original Borrower in connection with the offering of the Bonds. None of the Arranger, the Dealer and the Bond Trustee accepts any liability in relation to the information contained in this Prospectus or any other information provided by the Issuer in connection with the issue of the Bonds.
No person is or has been authorised by the Issuer, the Arranger, the Dealer or the Bond Trustee to give any information or to make any representation not contained in or not consistent with this Prospectus or any other information supplied in connection with the offering of the Bonds and, if given or made, such information or representation must not be relied upon as having been authorised by the Issuer, the Arranger, the Dealer or the Bond Trustee.
To the fullest extent permitted by law, none of the Arranger, the Dealer and the Bond Trustee accepts any responsibility for the contents of this Prospectus or for any other statement made or purported to be made by it or on its behalf in connection with the Issuer, the Original Borrower or the issue and offering of the Bonds. Each of the Arranger, the Dealer and the Bond Trustee accordingly disclaims all and any liability whether arising in tort or contract or otherwise (save as referred to above) which it might otherwise have in respect of this Prospectus or any such statement.
Neither this Prospectus nor any other information supplied in connection with the Bonds should be considered as a recommendation by the Issuer, the Arranger, the Dealer or the Bond Trustee that any recipient of this Prospectus or any other information supplied in connection with the Bonds should purchase any Bonds. Each investor contemplating purchasing any Bonds should make its own independent investigation of the financial condition and affairs, and its own appraisal of the creditworthiness, of the Issuer and the Original Borrower. Neither this Prospectus nor any other information supplied in connection with the offering of the Bonds constitutes an offer or invitation by or on behalf of the Issuer, the Arranger, the Dealer or the Bond Trustee to any person to subscribe for or to purchase the Bonds.
Neither the delivery of this Prospectus nor the offering, sale or delivery of the Bonds shall in any circumstances imply that the information contained herein concerning the Issuer or the Original Borrower is correct at any time subsequent to the date hereof or that any other information supplied in connection with the offering of the Bonds is correct as of any time subsequent to the date indicated in the document containing the same. The Arranger, the Dealer and the Bond Trustee expressly do not undertake to review the financial condition or affairs of the Issuer or the Original Borrower during the life of the Bonds or to advise any investor in the Bonds of any information coming to their attention.
The Bonds have not been and will not be registered under the United States Securities Act of 1933, as amended (the Securities Act) and are subject to U.S. tax law requirements. Subject to certain exceptions, the Bonds may not be offered, sold or delivered within the United States or to, or for the account or benefit of, U.S. persons (see Purchase and Sale).
This Prospectus does not constitute an offer to sell or the solicitation of an offer to buy any Bonds in any jurisdiction to any person to whom it is unlawful to make the offer or solicitation in such jurisdiction. The distribution of this Prospectus and the offer or sale of Bonds may be restricted by law in certain jurisdictions. The Issuer, the Arranger, the Dealer and the Bond Trustee do not represent that this Prospectus may be lawfully distributed, or that the Bonds may
4
be lawfully offered or sold, in compliance with any applicable registration or other requirements in any such jurisdiction, or pursuant to an exemption available thereunder, or assume any responsibility for facilitating any such distribution or offering. In particular, no action has been taken by the Issuer, the Arranger, the Dealer or the Bond Trustee which is intended to permit a public offering of the Bonds or the distribution of this Prospectus in any jurisdiction where action for that purpose is required. Accordingly, no Bonds may be offered or sold, directly or indirectly, and neither this Prospectus nor any advertisement or other offering material may be distributed or published in any jurisdiction, except under circumstances that will result in compliance with any applicable laws and regulations. Persons into whose possession this Prospectus or any Bonds may come must inform themselves about, and observe, any such restrictions on the distribution of this Prospectus and the offering and sale of Bonds. In particular, there are restrictions on the distribution of this Prospectus and the offer or sale of Bonds in the United States and the United Kingdom (see Purchase and Sale).
Prospective purchasers of Bonds should ensure that they understand the nature of the Bonds and the extent of their exposure to risk, that they have sufficient knowledge, experience and access to professional advisers to make their own legal, tax, accounting and financial evaluation of the merits and the risks of investment in the Bonds and that they consider the suitability of the Bonds as an investment in light of their own circumstances and financial condition.
All references in this Prospectus to Sterling and £ refer to pounds sterling.
5
CONTENTS
OVERVIEW.......................................................................................6 Structure diagram of the transaction..........................................6 Issuer ..........................................................................................6 Description of the Bonds ...........................................................6 Issue Price ..................................................................................7 Use of Proceeds .........................................................................7 Form of Bonds ...........................................................................7 Interest........................................................................................7 Instalment Redemption..............................................................7 Early Redemption ......................................................................7 Early Redemption for Tax Reasons...........................................8 Mandatory Early Redemption ...................................................8 Purchase .....................................................................................9 Events of Default .......................................................................9 Issuer Security............................................................................9 Initial Cash Security Account..................................................10 Ongoing Cash Security Account .............................................10 Permitted Investments .............................................................11 Account Agreement and Custody Agreement.........................12 Guarantee and Indemnity.........................................................12 Underlying Security.................................................................13 Addition, substitution and release of Charged Properties .......14 Enforcement of the Underlying Security and the Issuer
Security..............................................................................17 Priorities of Payments..............................................................17 Status of the Bonds ..................................................................19 Covenants.................................................................................19 Taxation ...................................................................................19 Meetings of Bondholders.........................................................19 Risk Factors .............................................................................19 Listing and admission to trading .............................................20 Ratings .....................................................................................20 Arranger ...................................................................................20 Dealer .......................................................................................20 Principal Paying Agent ............................................................20 Account Bank ..........................................................................20 Custodian .................................................................................20 Bond Trustee............................................................................20 Security Trustee .......................................................................20 Original Borrower....................................................................20 Borrowers.................................................................................20 Eligible Group Member...........................................................20 Corporate Services Provider ....................................................21 Selling Restrictions ..................................................................21 Governing Law ........................................................................21
RISK FACTORS...............................................................................22 Factors which may affect the Issuer's ability to fulfil its
obligations under the Bonds..............................................22 Factors which may affect the Borrowers' ability to fulfil
their obligations under the Loan Agreements ...................22 Factors which are material for the purpose of assessing the
market risks associated with the Bonds ............................30 Risks Relating to the Security of the Bonds............................33 Risks Relating to the Market Generally ..................................35
FORM OF THE BONDS AND SUMMARY OF PROVISIONS
RELATING TO THE BONDS WHILE IN GLOBAL FORM................36 Form of the Bonds ...................................................................36 Summary of Provisions relating to the Bonds while in
Global Form.......................................................................37 USE OF PROCEEDS .........................................................................39 DESCRIPTION OF THE LOAN AGREEMENTS...................................40
Facility .....................................................................................40 Purpose.....................................................................................42 Interest......................................................................................42 Commitment Fee......................................................................42 Repayment, Purchase and Prepayment....................................43 Warranties and Covenants .......................................................44 Guarantee and Indemnity.........................................................45 Asset Cover Test ......................................................................45 Substitution and Release of Charged Properties and
Statutory Disposals............................................................46 Valuations ................................................................................48 Loan Events of Default and Enforcement ...............................48 Taxes ........................................................................................51
Governing Law........................................................................ 51 DESCRIPTION OF THE ISSUER SECURITY, THE SECURITY
AGREEMENTS AND THE SECURITY TRUST DEED .................... 52 Security framework................................................................. 52 Security Agreements ............................................................... 54 Security Trust Deeds............................................................... 55 Enforcement of security and application of proceeds ............ 56
DESCRIPTION OF THE ACCOUNT AGREEMENT AND THE
CUSTODY AGREEMENT ........................................................... 58 Account Agreement ................................................................ 58 Custody Agreement................................................................. 60
DESCRIPTION OF THE CORPORATE SERVICES AGREEMENT......... 62 Corporate Services Provider ................................................... 62 Corporate Services Agreement ............................................... 62
TERMS AND CONDITIONS OF THE BONDS..................................... 63 1. Definitions ........................................................................ 63 2. Form, Denomination and Title ......................................... 68 3. Status................................................................................. 69 4. Security ............................................................................. 69 5. Order of payments ............................................................ 69 6. Covenants.......................................................................... 70 7. Interest .............................................................................. 71 8. Payments ........................................................................... 72 9. Redemption and Purchase ................................................ 73 10. Taxation ............................................................................ 76 11. Prescription ....................................................................... 76 12. Events of Default and Enforcement ................................. 77 13. Replacement of Bonds, Receipts, Coupons and Talons... 78 14. Exchange of Talons .......................................................... 79 15. Notices .............................................................................. 79 16. Substitution ....................................................................... 79 17. Meetings of Bondholders, modification and waiver ........ 79 18. Indemnification and protection of the Bond Trustee
and Bond Trustee contracting with the Issuer .................. 81 19. Further Issues.................................................................... 81 20. Contracts (Rights of Third Parties) Act 1999................... 82 21. Governing law .................................................................. 82 22. Submission to Jurisdiction................................................ 82
DESCRIPTION OF THE ISSUER........................................................ 83 Incorporation and Status ......................................................... 83 Principal Activities.................................................................. 83 Directors .................................................................................. 83 Share Capital and Major Shareholders ................................... 84 Operations ............................................................................... 84
DESCRIPTION OF THE ORIGINAL BORROWER AND THE GROUP ... 85 The Group ............................................................................... 85 The Original Borrower............................................................ 86 Financial Statements of the Original Borrower ...................... 88
VALUATION REPORT .................................................................... 89 Summary of valuations ........................................................... 89
TAXATION..................................................................................... 90 United Kingdom Taxation ...................................................... 90 The Proposed Financial Transactions Tax.............................. 92
PURCHASE AND SALE ................................................................... 93 GENERAL INFORMATION .............................................................. 94
Authorisation........................................................................... 94 Listing of Bonds...................................................................... 94 Documents Available.............................................................. 94 Clearing Systems..................................................................... 94 Characteristics of underlying assets........................................ 94 Material or Significant Change............................................... 95 Litigation ................................................................................. 95 Auditors................................................................................... 95 Post-issuance information ....................................................... 95 Arranger and the Dealer transacting with the Issuer or the
Borrowers.......................................................................... 95 Yield ........................................................................................ 96
GLOSSARY .................................................................................... 97 APPENDIX 1 - FINANCIAL STATEMENTS OF THE ORIGINAL
BORROWER.............................................................................. 99 APPENDIX 2 - VALUATION REPORT............................................ 100
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OVERVIEW
The following overview does not purport to be complete and is taken from, and is qualified in its entirety by, the remainder of this Prospectus.
This overview must be read as an introduction to this Prospectus and any decision to invest in the Bonds should be based on a consideration of this Prospectus as a whole.
Words and expressions defined in Form of the Bonds and Summary of Provisions relating to the Bonds while in Global Form, Terms and Conditions of the Bonds and Description of the Loan Agreements shall have the same meanings in this overview.
Structure diagram of the transaction
Note: On the Issue Date, the Original Borrower will be the only Borrower. However, Additional Borrowers and/or Additional Eligible Group Members may accede to the structure at a future date.
Issuer TCHG Capital plc
Description of the Bonds £80,000,000 4.665 per cent. Secured Bonds due 2045 (the Bonds), to be issued by the Issuer on 3rd July, 2014 (the Issue Date).
The Bonds will be issued in denominations of £100,000 and integral multiples of £1,000 in excess thereof.
I-A8.3.1
I-A8.3.1
I-A8.3.2
I-A7.5.2
I-A7.4.2
I-LR2.2.7(1)
I-A13.4.1
I-A13.4.2
I-A13.4.5 I-A13.4.13
Bondholders
Loan Agreement(s)
Issuer TCHG Capital plc
Bond Trustee Prudential Trustee Company Limited
Additional Borrower(s)
Security Trustee Prudential Trustee Company Limited
Eligible Group Member
Bond Trust Deed
Security Trust Deeds and Security Agreements
Benefit of Issuer Security
Benefit of Underlying Security
Bonds
Cashflows
Security
Original Borrower 1 Town and Country Housing
Group
7
Issue Price 100 per cent.
Use of Proceeds Subject as described in Initial Cash Security Account below, the net proceeds of the issue of the Bonds will be on-lent by the Issuer to the Original Borrower or (to the extent that the Original Borrower hasreduced the Original Commitment) to an Additional Borrower to beapplied in accordance with the constitution of the relevant OriginalBorrower or Additional Borrower, as the case may be.
The Issuer may from time to time invest the funds held in the InitialCash Security Account and the Ongoing Cash Security Account inPermitted Investments (as defined below) until such time as suchfunds are on-lent, or returned, to the relevant Borrower pursuant to the relevant Loan Agreement.
Form of Bonds The Bonds will be issued in bearer form as described in Form of the Bonds and Summary of Provisions relating to the Bonds while inGlobal Form.
Interest Each Bond will bear interest on its Outstanding Principal Amountfrom (and including) 3rd July, 2014, payable semi-annually in arrear on 3rd July and 3rd January in each year subject to adjustment in accordance with Condition 8.5 (Payment Day) (each, an Interest Payment Date) at the rate of 4.665 per cent. per annum in respect of the period from (and including) the Issue Date to (but excluding) theMaturity Date.
Instalment Redemption Unless previously redeemed or purchased and cancelled in accordance with Condition 9 (Redemption and Purchase), the Bonds will be redeemed in 20 equal instalments on each Interest Payment Date from, and including, 3rd January, 2036 to, and including, 3rd July, 2045 (the Maturity Date).
Early Redemption Subject as described in Mandatory Early Redemption below theBonds may be redeemed at any time prior to the Maturity Date, in each case in whole or in part, as the case may be, if:
(1) a Borrower elects to prepay its Loan in whole or in part priorto the repayment date specified in the relevant LoanAgreement and cancels an amount of the Commitment equal to all or any part of the prepaid amount (and no replacementCommitment is put in place with another Borrower); or
(2) the relevant Loan otherwise becomes repayable in whole orin part prior to the repayment date specified in the relevantLoan Agreement (other than as a result of the Bondsbecoming due and repayable including, for the avoidance ofdoubt, as a result of a repayment pursuant to Clause 5.6 (Mandatory Prepayment – Change of status) of the relevant Loan Agreement),
the Issuer shall redeem the Bonds in whole or, in respect of a prepayment in part, in an aggregate Outstanding Principal Amountequal to (in the case of (1) above) the relevant nominal amount of theCommitment cancelled and not replaced or (in the case of (2) above)the nominal amount of the relevant Loan to be repaid on the datewhich is two Business Days after that on which payment is made by
I-A8.1.1
I-A13.3
I-A13.4.4
I-A13.4.8
I-A13.4.9
I-A13.4.9
8
the relevant Borrower under the relevant Loan Agreement (the Loan Prepayment Date).
Redemption of the Bonds pursuant to Condition 9.2 shall be made at the higher of the following:
(a) their Outstanding Principal Amount (or, in the case of a partialredemption, the relevant proportion of their Outstanding PrincipalAmount calculated in accordance with Condition 9.5 (Notice of Early Redemption and Partial Redemptions)); and
(b) the amount (as calculated by a financial adviser nominated by the Issuer and approved by the Bond Trustee (the Nominated Financial Adviser) and reported in writing to the Issuer and the Bond Trustee) which is equal to the amount under (a) abovemultiplied by the price (expressed as a percentage and calculatedby the Nominated Financial Adviser) (rounded to three decimalplaces (0.0005 being rounded upwards)) at which the GrossRedemption Yield on the Bonds (if the Bonds were to remainoutstanding until their original maturity) on the DeterminationDate would be equal to the sum of (i) the Gross RedemptionYield at 3:00 pm (London time) on the Determination Date of theBenchmark Gilt and (ii) 0.20 per cent.,
together with any interest accrued up to (but excluding) the Loan Prepayment Date.
See Condition 9.2 (Early Redemption) and Condition 9.5 (Notice of Early Redemption and Partial Redemptions).
Early Redemption for Tax Reasons
The Issuer shall redeem the Bonds in whole, but not in part, at theirOutstanding Principal Amount, together with any interest accrued, if, as a result of any actual or proposed change in tax law, the Issuerdetermines that it would be required to make a withholding ordeduction on account of tax in respect of payments to be made by it inrespect of the Bonds and the Issuer does not opt to pay additional amounts pursuant to Condition 10.2 (No obligation to pay additional amounts) or, having so opted, notifies the Bond Trustee of itsintention to cease paying such additional amounts.
Mandatory Early Redemption
The Bonds shall be redeemed in an aggregate Outstanding PrincipalAmount equal to the nominal amount of the relevant Loan upon themandatory prepayment of a Loan following the relevant Borrower ceasing to satisfy each of the Borrower Minimum Requirements (otherthan if such Borrower complies with the Borrower MinimumRequirements within 180 days), plus accrued interest.
In addition, if a Loan becomes repayable as a result of a Borrower Default the Bonds shall be redeemed in an aggregate OutstandingPrincipal Amount equal to the nominal amount of the relevant Loan,plus accrued interest.
A Borrower Default includes non-payment, breach of other obligations, cross-acceleration, winding-up, cessation of business, insolvency, unlawfulness and breach of the Asset Cover Test set out inClause 14 (Borrower Default) of the Original Loan Agreement (or as will be set out in the corresponding clause of each Additional Loan Agreement) and described further in Description of the Loan
I-A13.4.9
I-A13.4.9
9
Agreements – Loan Events of Default and Enforcement.
See Condition 9.4 (Mandatory Early Redemption).
Purchase The Issuer, any Borrower and any other member of the Group maypurchase Bonds at any time in the open market or otherwise at anyprice.
Any Bonds so purchased by a Borrower or any other member of theGroup may be surrendered to the Issuer for cancellation inconsideration for an amount equal to the Outstanding PrincipalAmount of the Bonds being surrendered being deemed to be prepaid under the Loan Agreement specified by such Borrower or othermember of the Group or, to the extent that the relevant Loan is notthen outstanding, an amount of the Undrawn Commitment (as definedbelow) in respect of such Loan Agreement equal to the Outstanding Principal Amount of the Bonds surrendered being deemed to becancelled.
Events of Default Following an Event of Default, the Bond Trustee may, and if sorequested by the holders of at least one-fourth in Outstanding Principal Amount of the Bonds then outstanding shall (subject to it being secured and/or indemnified and/or pre-funded to its satisfaction and, upon certain events, the Bond Trustee having certified to theIssuer that such event is, in its opinion, materially prejudicial to theinterests of the Bondholders), give notice to the Issuer and the Bondsshall become immediately due and repayable.
The Events of Default include, inter alia, non-payment of any principal and interest due in respect of the Bonds, failure of the Issuerto perform or observe any of its other obligations under the Conditionsand the Bond Trust Deed, insolvency, unlawfulness and acceleration,or non-payment, in respect of other indebtedness in an aggregateamount equal to or in excess of £10,000,000 (or its equivalent).
Upon the Bonds becoming repayable prior to the Maturity Date (otherthan as a result of a prepayment or termination of a Loan Agreement),each Borrower is required to prepay its Loan in full together withaccrued interest and commitment fee to and including the date of redemption. Each Borrower is also required to pay to the Issuer,within three Business Days of demand, its pro rata share of the Issuer's reasonable costs, expenses and liabilities throughout the life ofthe Bonds.
Issuer Security The Issuer's obligations in respect of the Bonds are secured pursuantto the Bond Trust Deed in favour of the Bond Trustee for the benefitof itself and the Bondholders and the other Secured Parties by thefollowing (the Issuer Security):
(a) an assignment by way of security of the Issuer's rights, title andinterest arising under each Loan Agreement, the SecurityAgreements, the Security Trust Deed, the Agency Agreement, theAccount Agreement and the Custody Agreement, in each case tothe extent they relate to the Bonds;
(b) a charge by way of first fixed charge over all moneys and/orsecurities from time to time standing to the credit of theTransaction Account, the Ongoing Cash Security Account, the
I-A8.3.3
10
Initial Cash Security Account and the Custody Account and all debts represented thereby;
(c) a charge by way of first fixed charge over all sums held fromtime to time by the Paying Agents for the payment of principal orinterest in respect of the Bonds; and
(d) a first floating charge over all of the Issuer's property, assets, rights and revenues (whether or not the subject of fixed securityas aforesaid).
Initial Cash Security Account
For so long as (a) insufficient security has been granted (or procuredto be granted) by the Borrowers in favour of the Issuer to permit the drawing of the Aggregate Funded Commitment in full or (b) theBorrowers have not otherwise drawn any part of the AggregateFunded Commitment, the amount of the Aggregate FundedCommitment that remains undrawn shall be retained in a charged account (the Initial Cash Security Account) of the Issuer (and may be invested in Permitted Investments) in accordance with the terms ofthe Account Agreement and the Custody Agreement (the Retained Proceeds, which will include any prepayments under a LoanAgreement which are not applied in or towards redemption of theBonds).
Any Retained Proceeds may be advanced to one or more Borrowers ata later date pursuant to the relevant Loan Agreement to the extent that Properties of a corresponding value have been charged in favour ofthe Issuer.
Funds standing to the credit of the Initial Cash Security Account may:(a) be held on deposit, in which case it shall accrue interest at the rate (which may be positive, negative or zero) notified from time to timeby the Account Bank to the Issuer pursuant to the Account Agreementor (b) be invested in Permitted Investments in accordance with theCustody Agreement. See Permitted Investments below.
Pursuant to the Loan Agreements, each Borrower shall pay, on eachLoan Payment Date, to the Issuer a commitment fee in respect of itsUndrawn Commitment during the relevant Loan Interest Period in anamount equal to its pro rata share of (a) the aggregate of the interest payable by the Issuer under the Bonds on the following InterestPayment Date less (b) the aggregate amount of interest received fromthe Borrowers under the Loan Agreements on such Loan Payment Date and the interest otherwise received by the Issuer in respect of theRetained Proceeds during that period (including, but not limited to,any income received in respect of any Permitted Investments in whichany Retained Proceeds are, for the time being, invested).
See Description of the Loan Agreements below.
Ongoing Cash Security Account
Pursuant to the Loan Agreements, each Borrower is (or will be)required to procure that the specified Asset Cover Test is complied with (see Description of the Loan Agreements below). In the event that the value of any Charged Property is insufficient to maintaincompliance with the relevant Asset Cover Test, the Borrowers may deposit moneys into the Ongoing Cash Security Account. Such
I-A8.3.4.4
I-A8.3.4.4
11
moneys will be charged in favour of the Bond Trustee pursuant to theterms of the Bond Trust Deed.
Funds standing to the credit of the Ongoing Cash Security Accountmay: (a) be held on deposit, in which case it shall accrue interest at the standard rate (which may be positive, negative or zero) set by theCustodian in its deposit terms and conditions, as may be issued by itfrom time to time pursuant to the Custody Agreement or (b) beinvested in Permitted Investments in accordance with the CustodyAgreement. See Permitted Investments below.
Moneys standing to the credit of the Ongoing Cash Security Accountmay be withdrawn (a) to be applied in the acquisition of Property to be charged in favour of the Security Trustee for the benefit of theIssuer or (b) to the extent that the relevant Asset Cover Test would notbe breached immediately after such withdrawal.
Permitted Investments Permitted Investments shall consist of:
(a) triple-A rated money market funds,
(b) direct obligations of the United Kingdom or of any agency orinstrumentality of the United Kingdom which are guaranteed bythe United Kingdom,
(c) demand and time deposits in, certificates of deposit of and bankers' acceptances issued by any depositary institution or trustcompany with a maturity of no more than 360 days subject to,inter alia, such debt obligation having a long term debt creditrating of not less than "AA" from S&P and "Aa2" from Moody's Investors Service Limited (Moody's) or a short term debt or issuer (as applicable) credit rating of not less than "A-1" from S&P and "P-1" from Moody's (or, in each case, any other equivalent rating given by a credit rating agency registered under the CRA Regulation (an Equivalent Rating)),
(d) securities bearing interest or sold at a discount to the face amountthereof issued by any corporation having a long term credit ratingof not less than "AA" from S&P and "Aa2" from Moody's (or an Equivalent Rating), and/or
(e) commercial paper or other short-term obligations which, inter alia, have a short term credit rating of not less than "A-1" from S&P and "P-1" from Moody's (or an Equivalent Rating),
provided that, in the case of (b) to (e) above, such investment shall be an investment which is an obligation of the United Kingdom or acompany incorporated in the United Kingdom, and in all cases, suchinvestment shall be an investment (i) the maturity of which is no later than the Maturity Date and (ii) which is denominated in Sterling.
In the event that any Permitted Investments are sold to fund a drawingby a Borrower pursuant to a Loan Agreement and such sale results ina loss realised by the Issuer, such drawing to be made by the Issuer to such Borrower pursuant to such Loan Agreement shall be advanced ata discount in an amount equal to the Actual Advance Amount (asdefined in each Loan Agreement).
In the event that any Permitted Investments are sold to fund anadvance to a Borrower pursuant to a Loan Agreement and such sale
I-A8.3.4.4
12
results in a gain realised by the Issuer (such gain, the Permitted Investment Profit), the Issuer shall advance monies to such Borrower at the nominal amount requested and shall make a gift aid payment to a charitable member of the Group (a Charitable Group Member) in an amount equal to the Permitted Investment Profit.
Immediately prior to the end of each accounting period, to the extent that the Issuer would otherwise be required to recognise a profit fortax purposes in respect of its Permitted Investments as a result of themovement in the fair value recognised in its accounts of suchPermitted Investments for that accounting period, the Issuer shall sell Permitted Investments in an aggregate amount equal to theAccounting Profit (as defined in each Loan Agreement) and shall, inthe same accounting period, make a gift aid payment to any CharitableGroup Member in an amount equal to the Accounting Profit.
See Description of the Loan Agreements – Facility.
Account Agreement and Custody Agreement
The Issuer has appointed The Bank of New York Mellon, London Branch as its Account Bank and its Custodian pursuant to the AccountAgreement and the Custody Agreement, respectively.
Pursuant to the Account Agreement, the Account Bank shall maintain three accounts for the Issuer in respect of the Bonds: the TransactionAccount, the Initial Cash Security Account and the Ongoing CashSecurity Account. Pursuant to the Account Agreement and the BondTrust Deed, the Issuer has entered into certain covenants in respect of the monies which may be credited to and debited from each Account.
Pursuant to the Custody Agreement, the Custodian shall, subject toreceipt of such documents as it may require, open the CustodyAccount (consisting of the Ongoing Cash Security Custody Sub-Account, the Initial Cash Security Custody Sub-Account, the Ongoing Cash Security Cash Sub-Account and the Initial Cash Security Cash Sub-Account). The Issuer has authorised the Custodian to makepayments and delivery out of the Custody Account only for the purpose of any acquisition or sale of Permitted Investments or as setout therein.
See Description of the Account Agreement and the CustodyAgreement below.
Guarantee and Indemnity Pursuant to the Loan Agreement, the Original Borrower has (and eachAdditional Borrower will have) irrevocably and unconditionally:
(a) guaranteed to the Issuer the punctual performance by each otherBorrower of all such Borrowers' obligations under, inter alia, their respective Loan Agreements, the Security Trust Deed (ifapplicable) and their respective Security Agreements (ifapplicable), other than each other Borrower's obligations to repayprincipal and any Prepayment Premium thereon pursuant to their respective Loan Agreements (such amounts being, theGuaranteed Interest and Fee Amounts);
(b) undertaken with the Issuer that, whenever any other Borrowerdoes not pay any Guaranteed Interest and Fee Amounts when due under its respective Loan Agreement, the Security Trust Deed orits respective Security Agreement(s), it must, immediately on
I-A8.3.3
I-A8.3.8
I-A8.3.4.4
G-A6.2
G-A6.2
13
demand by the Security Trustee and/or the Issuer, pay theGuaranteed Interest and Fee Amounts as is if it were the principal obligor;
(c) undertaken with the Issuer that, to the extent that the proceeds ofthe enforcement of the Underlying Security are insufficient tosatisfy the Borrowers' obligations under their respective LoanAgreements in full (the shortfall being, the Guaranteed Principal Amount), it must, immediately on demand by the Security Trustee and/or the Issuer, pay the Guaranteed PrincipalAmount as if it were the principal obligor; and
(d) agreed to indemnify the Issuer immediately on demand against any loss or liability suffered by the Issuer if any obligationguaranteed by it is or becomes illegal or invalid.
Underlying Security Pursuant to a Security Trust Deed originally dated 6 November 2000(and having been amended and restated on 1 March 2005 and 19August 2008) between, inter alios, the Original Borrower and the Security Trustee (as amended from time to time, the Original Borrower Security Trust Deed) a security trust was established pursuant to which the Security Trustee holds for the benefit ofdesignated beneficiaries security created by the Original Borrowerfrom time to time in favour of the Security Trustee. On the IssueDate, the Issuer has been designated as a beneficiary under the Original Borrower Security Trust Deed.
The Original Borrower has entered into Fixed Charges and MortgageDeeds (the Original Security Agreements), in each case substantially in the form set out in the Security Trust Deed, pursuant to which theOriginal Borrower has created the following security in favour of theSecurity Trustee for the benefit of itself and the Beneficiaries (asdefined in the Security Trust Deed):
(a) a charge by way of first legal mortgage of all the Original Borrower's right, title and interest from time to time in the InitialProperties;
(b) an assignment of the following, in each case as held by theOriginal Borrower:
(1) the personal agreements and covenants (still subsisting and capable of being enforced) entered into by tenants, lessees,licensees or other parties under letting and tenancydocuments in respect of the Initial Properties and relatedsecurity and rights; and
(2) all agreements, now or from time to time entered into or to be entered into to enable the charging of the Security Assetsand for the sale, letting or other disposal or realisation of thewhole or any part of the Initial Properties and including anydevelopment agreements, contracts or warranties in relation to the Initial Properties the benefit of which is or will bevested in the Original Borrower (so far as such areassignable); and
(c) a first fixed charge over the benefit of the Insurances and thebenefit of all present and future licences, consents and
I-A8.3.3
G-A6.1
G-A6.2
14
authorisations (statutory or otherwise) held in connection with theSecurity Assets.
Following the accession of the Issuer as a Beneficiary and theallocation of the Initial Properties to the Issuer pursuant to the securityTrust Deed the Security Trustee shall hold the above security on trust for itself and the Issuer as security for Borrowers' liabilities under theLoan Agreements (the Original Borrower Secured Liabilities).
See Valuation Report for further information in relation to the Initial Properties, being residential properties of a type and nature that areusually owned by Registered Providers of Social Housing.
The Issuer and Security Trustee may from time to time agree to another Borrower or Eligible Group Member acceding to the OriginalBorrower Security Trust Deed or entering into one or more othersecurity trust deeds (each an Additional Security Trust Deed and, together with the Original Borrower Security Trust Deed, the Security Trust Deeds and each a Security Trust Deed) which establish a security trust similar to the Original Borrower Security Trust Deed, ineach case with the effect that security created by such Borrower orEligible Group Member from time to time in favour of the SecurityTrustee is held by the Security Trustee on trust for the benefit of theIssuer.
From time to time a Borrower or an Eligible Group Member may enter into one or more additional security agreements in favour of theSecurity Trustee (each an Additional Security Agreement and, together with each Original Security Agreement, the Security Agreements) in accordance with the terms of a Security Trust Deedpursuant to which (1) such Borrower provides security in respect of its liabilities under the relevant Loan Agreement or (2) such EligibleGroup Member provides security in respect of one or more Borrowers' liabilities under one or more Loan Agreements, in each case includingfixed charges, legal mortgages and assignments having substantiallythe same nature and effect in relation to the relevant ChargedProperties as the fixed charges, legal mortgages and assignments created by the Original Borrower in relation to the Initial Propertiesunder the Original Security Agreements.
The security subsisting from time to time under the SecurityAgreements and Security Trust Deeds and held by the Security Trustee on trust for the Issuer constitutes the Underlying Security.
The Issuer has secured its rights, title and interest in respect of theUnderlying Security in favour of the Bond Trustee pursuant to the Bond Trust Deed.
See Description of the Issuer Security, the Security Agreements andthe Security Trust Deed below.
Addition, substitution and release of Charged Properties
Pursuant to each Security Trust Deed, on or prior to entering into a Security Agreement in respect of any Property for the benefit of theIssuer, the relevant Borrower or Eligible Group Member must, inrespect of such security, provide the conditions precedent documentsspecified therein. In addition, pursuant to the Loan Agreements, therelevant Borrower or Eligible Group Member must provide acompleted Additional Property Certificate confirming that, inter alia,
I-A8.2.2.9
15
the proposed Charged Properties are residential properties of a type and nature that are usually owned by Registered Providers of SocialHousing, Full Valuation Reports in respect of each such Property anda Certificate of Title in respect of each tranche of Properties charged.
At the request and expense of a Borrower or an Eligible Group Member, the Security Trustee shall (subject to receiving an amendedSecurity Certificate from the Borrowers and the Issuer in accordancewith the Security Trust Deed) release from the relevant SecurityDocuments (and/or reallocate, if applicable) such of the Properties forming part of the Issuer's Designated Security and substitute such ofthe Properties as may be selected by such Borrower or Eligible GroupMember, provided that such Borrower or Eligible Group Membersatisfies the conditions precedent specified in the Loan Agreements in relation to the Substitute Properties. Such conditions precedentinclude, inter alia, a completed Substitute Property Certificate certifying, inter alia, that the relevant Substitute Property is a residential property of a type and nature that is usually owned byRegistered Providers of Social Housing, that, immediately followingsuch release (and/or reallocation, if applicable) and substitution, theAsset Cover Test will not be breached as a result of the substitution of the relevant Charged Properties and that no Event of Default orPotential Event of Default has occurred and is continuing, andprovision of a Full Valuation Report in respect of each SubstituteProperty and a Certificate of Title in respect of the Substitute Properties.
At the request and expense of a Borrower or an Eligible GroupMember, the Security Trustee shall release (subject to receiving anamended Security Certificate from the Borrowers and the Issuer inaccordance with the Security Trust Deed) from the relevant Security Documents (and/or reallocate, if applicable) such Charged Propertiesas may be selected by such Borrower or Eligible Group Memberprovided that such Borrower or Eligible Group Member delivers to theIssuer and the Security Trustee a completed Property Release Certificate (as defined in each Loan Agreement), certifying that,immediately following such release (and/or reallocation, ifapplicable), the Asset Cover Test will not be breached as a result ofthe release (and/or reallocation, if applicable) of such part of the security and that no Event of Default or Potential Event of Default hasoccurred and is continuing.
Notwithstanding the above, where any disposal is a Statutory Disposala Borrower or an Eligible Group Member shall have the right to withdraw such Property from the Issuer's Designated Security. In suchcircumstances such Borrower or Eligible Group Member is obliged todeliver (or procure the delivery), as soon as reasonably practicableafter it has received notice of such Statutory Disposal, a completed Statutory Disposal Certificate to the Issuer and the Security Trusteeconfirming that the relevant withdrawal relates to a Statutory Disposaland, if the Statutory Disposal would result in a breach of the Asset Cover Test, confirming that it shall procure that additional Propertiesare charged pursuant to a Security Trust Deed and/or moneys aredeposited into the Ongoing Cash Security Account, in accordancewith the Loan Agreements, such that any breach of the Asset Cover Test will be cured.
16
Statutory Disposal means a Shared Ownership Sale, the exercise of a Right-to-Buy, a Social HomeBuy disposal or any other disposal of aProperty (where such disposal is not part of a transaction involving the simultaneous disposal of more than one Property or Unit) where it isrequired that some or all of the relevant disposal proceeds be creditedto the disposal proceeds fund (as defined in section 177 of theHousing and Regeneration Act) of a Borrower or any Eligible Group Member.
Shared Ownership Sale means the disposal of the whole or any interest in a Unit of residential accommodation by the relevantBorrower or Eligible Group Member (or of the retained interest of the relevant Borrower or Eligible Group Member in any Unit ofresidential accommodation) which, immediately before the disposal,was comprised in a Shared Ownership Property (where such disposalis not part of a transaction involving the simultaneous disposal of more than one Unit or Property).
Shared Ownership Property means any Properties acquired by a Borrower or Eligible Group Member then being occupied on sharedownership terms or in respect of which such Borrower or Eligible Group Member grants a lease on shared ownership terms so that suchBorrower or Eligible Group Member holds, or is intending to holdupon disposal on shared ownership terms, less than 100 per cent. ofthe beneficial (or heritable) interest in that Property and the purchaser of the balance of that beneficial (or heritable) interest has the right toacquire a further portion of such Borrower's or Eligible GroupMember's retained beneficial (or heritable) interest.
Right-to-Buy mean the right of a tenant of a Property:
(A) to buy that property from the relevant Borrower or EligibleGroup Member under section 180 of the Housing andRegeneration Act or under Part V of the Housing Act 1985 (orany similar right replacing those rights) or under any contract conferring such a right and including, without limitation, suchrights preserved notwithstanding any previous transfers of thatproperty to such Borrower or Eligible Group Member from anylocal authority;
(B) to acquire an interest in that property from the relevant Borrower or Eligible Group Member by means of a shared-ownership lease where the terms of any such lease comply with the regulatoryrequirements of the Regulator or have been approved by theLender; or
(C) to buy or acquire an interest in that property from the relevant Borrower or Eligible Group Member under any voluntary schemeapproved by the Lender.
Social HomeBuy has the meaning given to it in the Local Authorities (Capital Finance and Accounting) (Amendment) (England) Regulations 2006.
17
Unit means, at any time, a Charged Property or part thereof in relationto which there is or, when let, there would be, a separate rentalcontract entered into with a Borrower or an Eligible Group Member.
Enforcement of the Underlying Security and the Issuer Security
Following a Borrower Default, the Issuer may declare the UnderlyingSecurity immediately enforceable and/or declare the relevant Loanimmediately repayable. Pursuant to the Security Trust Deed, theSecurity Trustee shall only be required to take action to enforce orprotect the security in respect of the Loan Agreements if so instructedby the Issuer (and then only if it has been indemnified and/or securedto its satisfaction).
The Issuer has assigned its rights under, inter alia, the Security Agreements and the Security Trust Deeds, and, pursuant toCondition 6.3, has covenanted not to take any action or direct theSecurity Trustee to take any action pursuant thereto except with the prior consent of the Bond Trustee. The Bond Trustee may seek theconsent of the Bondholders in accordance with the Bond Trust Deedprior to giving any such consent.
In enforcing the Issuer Security (including the Issuer's rights, title and interests in the Security Agreements and the Security Trust Deedsinsofar as they relate to the Bonds) the Bond Trustee may act in itsdiscretion. It is, however, required to take action, pursuant toCondition 12.2, where so directed by the requisite majority of theBondholders provided, however, that it is secured and/or indemnifiedand/or pre-funded to its satisfaction.
See Description of the Issuer Security, the Security Agreements andthe Security Trust Deed below.
Priorities of Payments Prior to the enforcement of the Issuer Security, the Issuer shall applythe monies standing to the credit of the Transaction Account on eachInterest Payment Date and such other dates on which a payment is due in respect of the Bonds in the following order of priority (thePre-enforcement Priority of Payments):
(a) first, in payment of any taxes due and owing by the Issuer to any taxing authority (insofar as they relate to the Bonds);
(b) second, in payment of any unpaid fees, costs, charges, indemnitypayments (if any), expenses and liabilities incurred by or due tothe Bond Trustee (including remuneration payable to it and any Appointee) in carrying out its functions under the TransactionDocuments;
(c) third, in payment of any unpaid fees, expenses and liabilities(including indemnity payments, if any, due from the Issuer) ofthe Issuer owing to the Corporate Services Provider under the Corporate Services Agreement, the Paying Agents under theAgency Agreement, the Account Bank under the AccountAgreement and the Custodian under the Custody Agreement on apro rata and pari passu basis;
(d) fourth, in payment of any other unpaid fees, expenses and liabilities of the Issuer (in so far as they relate to the Bonds) on apro rata and pari passu basis;
I-A8.3.4.6
18
(e) fifth, in payment, on a pro rata and pari passu basis, to the Bondholders of any interest due and payable in respect of theBonds;
(f) sixth, in payment, on a pro rata and pari passu basis, to the Bondholders of any principal due and payable in respect of theBonds;
(g) seventh, in payment, on a pro rata and pari passu basis, to the Borrowers of any amounts due and payable under the terms of theLoan Agreements; and
(h) eighth, in payment of any Permitted Investment Profit orAccounting Profit, as the case may be, to any Charitable GroupMember.
Following the enforcement of the Issuer Security, all monies standingto the credit of the Transaction Account, the Ongoing Cash Security Account and the Initial Cash Security Account and the net proceeds ofenforcement of the Issuer Security shall be applied in the followingorder of priority (the Post-enforcement Priority of Payments):
(a) first, in payment or satisfaction of any unpaid fees, costs, charges,indemnity payments (if any), expenses and liabilities incurred byor due to the Bond Trustee, any Appointee or any receiver inpreparing and executing the trusts and/or in carrying out their respective functions under the Transaction Documents (includingthe costs of realising any Issuer Security and the Bond Trustee'sand such receiver's remuneration);
(b) second, in payment of all amounts owing to the CorporateServices Provider under the Corporate Services Agreement, the Paying Agents under the Agency Agreement, the Account Bankunder the Account Agreement and the Custodian under theCustody Agreement on a pro rata and pari passu basis;
(c) third, in payment, on a pro rata and pari passu basis, to the Bondholders of any interest due and payable in respect of theBonds;
(d) fourth, in payment, on a pro rata and pari passu basis, to the Bondholders of any principal due and payable in respect of theBonds;
(e) fifth, in payment of any other unpaid fees and expenses of the Issuer (in each case insofar as they relate to the Bonds) on a pro rata and pari passu basis;
(f) sixth, in payment on a pro rata and pari passu basis, to the Borrowers of any amounts due and payable under the terms of theLoan Agreements; and
(g) seventh, in payment of any Permitted Investment Profit orAccounting Profit, as the case may be, to any Charitable GroupMember.
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Status of the Bonds
The Bonds, Receipts and Coupons will constitute direct, secured,unsubordinated obligations of the Issuer and will rank pari passuamong themselves.
Covenants Pursuant to Condition 6 (Covenants), the Issuer has covenanted not to engage in any activity or do anything other than carry out the business of a company which has as its purpose raising finance and on-lending such finance to or for the benefit of the Borrowers or perform any actincidental to or necessary in connection with the aforesaid, without the consent of the Bond Trustee.
The Issuer has also covenanted to deliver to the Bond Trustee and anyBondholder that has requested the same of the Issuer (and continues tobe a Bondholder) a copy of the Compliance Certificates received fromthe Borrowers pursuant to the terms of the Loan Agreements and acopy of the annual reports of each Borrower following publication ofthe same. In addition, unless such requirement is waived by theBondholders, the Issuer shall hold an annual meeting of theBondholders to discuss the financial position of the Issuer and theGroup.
In addition, the Issuer has covenanted that, for so long as any of theBonds remain outstanding, it shall not consent to any waiver,amendment or modification of, or take any action or direct the Security Trustee to take any action pursuant to, the Loan Agreements,the Security Agreements or the Security Trust Deed except with theprior consent of the Bond Trustee. The Bond Trustee may seek theconsent of the Bondholders in accordance with the Bond Trust Deed prior to giving any such consent.
Taxation All payments in respect of the Bonds will be made withoutwithholding or deduction for or on account of any taxes unless a taxdeduction is required by law. In the event that any such withholding or deduction is required, the Issuer may at its option, but will not beobliged to, pay to Bondholders such additional amounts as may benecessary in order that the net amounts received by the Bondholdersafter such withholding or deduction will equal the amounts of principal and interest which would have been received in respect ofthe Bonds in the absence of such withholding or deduction. In theevent that the Issuer does not opt to pay, or opts to pay and thereafternotifies the Bond Trustee and the Bondholders of its intention to cease paying, such additional amounts the Bonds shall be redeemed at theirOutstanding Principal Amount, together with any accrued interest, inaccordance with Condition 9.3 (Early Redemption for Tax Reasons).
Meetings of Bondholders The Terms and Conditions of the Bonds and the Bond Trust Deedcontain provisions for calling meetings of Bondholders to considermatters affecting their interests generally. These provisions permit defined majorities to bind all Bondholders including Bondholders whodid not attend and vote at the relevant meeting and Bondholders whovoted in a manner contrary to the majority.
See Condition 17 (Meetings of Bondholders, modification and waiver).
Risk Factors There are certain factors that may affect the Issuer's ability to fulfil itsobligations under the Bonds. These are set out under Risk Factors
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below and include factors which may affect the Issuer's and/or aBorrower's and/or an Eligible Group Member's ability to fulfil theirobligations under the Bonds, the Loan Agreements and/or SecurityAgreements, respectively, factors which are material for the purposeof assessing the market risks associated with the Bonds, risks relatingto the security for the Bonds and risks relating to the market generally.See Risk Factors below.
Listing and admission to trading
Application has been made to the UK Listing Authority for the Bondsto be admitted to the Official List and to the London Stock Exchangefor the Bonds to be admitted to trading on the London StockExchange's regulated market.
Ratings The Original Borrower has been assigned a credit rating of "AA-", and it is expected that the Bonds will be rated "AA-" by S&P. S&P is established in the European Union and is registered under Regulation (EC) No. 1060/2009 (as amended). As such S&P is included in thelist of credit rating agencies published by the European Securities andMarkets Authority on its website in accordance with such Regulation.
Pursuant to the Bond Trust Deed, the Issuer has covenanted with theBond Trustee that it will, to the extent possible, maintain a creditrating for the Bonds with a credit rating agency established in the European Union and registered under Regulation (EC) No. 1060/2009 (as amended).
Arranger TradeRisks Limited
Dealer TradeRisks Limited
Principal Paying Agent The Bank of New York Mellon, London Branch
Account Bank The Bank of New York Mellon, London Branch
Custodian The Bank of New York Mellon, London Branch
Bond Trustee Prudential Trustee Company Limited
Security Trustee Prudential Trustee Company Limited
Original Borrower Town and Country Housing Group
Borrowers The Original Borrower and each other entity (being an Additional Borrower) which (a) is a charity; (b) is a Registered Provider of SocialHousing; (c) is a member of the Group (such requirements in (a), (b)and (c) being the Borrower Minimum Requirements) and (d) is a borrower under a loan agreement between the Issuer (as lender) andthe Security Trustee where all its liabilities as such borrower aresecured by the Security Agreements.
Eligible Group Member Any entity (a) which, unless otherwise approved by the Security Trustee, is (i) a member of the Group; and (ii) a Registered Providerof Social Housing and (b) which, in each case, has created (and whichis subsisting) or will create security pursuant to a Security Agreement.
I-LR2.2.9(1)
I-A13.5.1
I-A13.7.5
I-A7.5.2
I-A8.3.2
I-A13.5.2
I-A8.3.8
I-A8.3.4.4
I-A7.5.2
I-A8.3.2
I-A13.4.11
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Corporate Services Provider
Law Debenture Corporate Services Limited
Selling Restrictions There are restrictions on the offer, sale and transfer of the Bonds in theUnited States and the United Kingdom, see Purchase and Sale.
Governing Law The Bonds and any non-contractual obligations arising out of or in connection with them shall be governed by, and construed inaccordance with, English law.
I-LR2.2.4(1) I-A13.4.14
I-LR2.2.2(1)
I-A13.4.3
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RISK FACTORS
The Issuer believes that the following factors (which include factors which may affect the ability of the Borrowers to fulfil their obligations under the Loan Agreements) may affect its ability to fulfil its obligations under the Bonds. Most of these factors are contingencies which may or may not occur and the Issuer is not in a position to express a view on the likelihood of any such contingency occurring.
In addition, factors which are material for the purpose of assessing the market risks associated with the Bonds issued are also described below.
The Issuer believes that the factors described below represent the principal risks inherent in investing in the Bonds, but the inability of the Issuer to pay interest, principal or other amounts on or in connection with the Bonds may occur for other reasons which may not be considered significant risks by the Issuer based on information currently available to it or which it may not currently be able to anticipate. This section is not intended to be exhaustive and prospective investors should also read the detailed information set out elsewhere in this Prospectus and reach their own views prior to making any investment decision. If any of the following risks actually materialise, the Issuer's and/or the Borrowers' business, financial condition and prospects could be materially and adversely affected.
Factors which may affect the Issuer's ability to fulfil its obligations under the Bonds
Special Purpose Vehicle Issuer
The Issuer is a special purpose finance entity with no business operations other than the incurrence of financial indebtedness, including the issuance of the Bonds, and lending under the Loan Agreements. As such the Issuer is entirely dependent upon receipt of funds received from the Borrowers in order to fulfil its obligations under the Bonds.
Credit Risk
The Issuer, and therefore payments by the Issuer in respect of the Bonds, will be subject to the credit risk of the Borrowers. The Issuer will be subject to the risk of delays in the receipt, or risk of defaults in the making, of payments due from the Borrowers in respect of the Loan Agreements. Delays in the receipt of payments due from the Borrowers under the Loan Agreements could adversely affect the ability of the Issuer to fulfil its payment obligations under the Bonds. In the circumstances and subject to the conditions described under Guarantee and Indemnity, where a Borrower does not make payments when due under its Loan Agreement, the other Borrowers have undertaken (or, the case of an Additional Borrower, will undertake) with the Issuer to make payment as if it were principal debtor.
Effect of Losses on Loan on Interest Payments and Repayments on the Bonds
There can be no assurance that the levels or timeliness of payments of collections received in respect of the Loans will be adequate to ensure fulfilment of the Issuer's obligations in respect of the Bonds on each Interest Payment Date or any Instalment Redemption Date (including the Maturity Date). In addition, a default under a Loan Agreement could ultimately result in the enforcement of the Underlying Security. The proceeds of any such enforcement may be insufficient to cover the full amount due from the Borrowers resulting in a shortfall in funds available to repay the Bonds.
Factors which may affect the Borrowers' ability to fulfil their obligations under the Loan Agreements
Rental Income Risk
The tenants of a Borrower's properties are personally responsible for the rental payments on the relevant occupied properties. In the event that some of such tenants fail to pay rent in full on a timely basis, this could also affect the ability of a Borrower to meet its payment obligations on a timely basis under the relevant Loan Agreement, which in turn would impact the Issuer's ability to fulfil its obligations under the Bonds.
There is currently a greater risk of non-payment for those tenants who are not in receipt of full or partial housing benefit or housing credit.
I-A7.3.1
I-A13.2
A-A9.3.1
I-A8.3.4.7
I-A8.3.4.7
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In the financial year 2013 to 2014, 54.1 per cent. of the rent received by the Original Borrower and its subsidiary, TCHG Living Limited, from their social and affordable rent tenants was derived from housing benefit payable by local authorities. The Original Borrower currently has systems in place which would identify any non-payment by tenants in a timely manner. If tenants fail to pay rent in full on a timely basis, the Original Borrower takes action initially to assist the tenant (for example to ensure all benefits to which they are entitled are claimed) and to make arrangements for arrears to be paid. If necessary, legal action is taken to prevent further arrears accruing and to recover the debt, up to and including eviction.
Limits on amount of available benefit
The Welfare Reform Act 2012 sets out significant changes in the provision of welfare benefits. The Act provides for the introduction of a number of reforms including a total household benefit cap, which has been set at £26,000 per year for couples and lone parents, and £18,200 per year for single people without children. A new occupation size criterion for working age tenants occupying social housing and in receipt of housing benefit has also been introduced.
The under occupation penalty reduces the amount of housing benefit (or the housing element of Universal Credit which will replace it) received by those who are deemed to be under occupying their home, by 14 per cent. where a household has one extra bedroom, and 25 per cent. where there are two or more extra bedrooms. As at 5 February 2014, on the information available to the Original Borrower, there were 439 households with one extra bedroom and 120 where the household had two or more extra bedrooms. The Government's impact assessment published in mid-2012 indicated that around 660,000 claimants were expected to be affected by the new measure and press reports indicate that households are going into arrears as a result of this reduction in housing benefit entitlement, which may have a knock-on effect on levels of rent arrears for Registered Providers of Social Housing.
Caps have also been introduced to the Local Housing Allowance, which applies to those living in the private rented sector. Although these caps currently do not apply to tenants living within social housing, Registered Providers of Social Housing are anticipating that in practice, local authorities may not pay out benefit above the level of the caps (despite not being applicable) and Registered Providers of Social Housing are setting their Affordable Rent (as described below) accordingly. The Original Borrower's policy is to set affordable rents at the Local Housing Allowance where this is lower than the rent which would otherwise be charged. The Original Borrower has 363 “intermediate” and 15 market rented properties where a similar policy does not apply. It is possible that some of these dwellings’ rents will be higher than Local Housing Allowance. Tenants in the intermediate dwellings are selected for their ability to pay higher rents, and in many cases this is intended as a step towards home ownership.
A reduction or termination by the Government of housing benefit may have an adverse impact on the payment of rent, as the tenants would have to pay a higher proportion of the rent themselves and this may have a corresponding effect on the ability of a Borrower to meet its payment obligations under its Loan Agreement on a timely basis which in turn would impact the Issuer's ability to fulfil its obligations under the Bonds.
Arrangements for payment of benefit
Universal Credit is expected to be phased in and will be a single means-tested benefit paid directly to those of working age (in and out of work) (UC tenants) which will include an amount in respect of housing costs which will replace housing benefit. Currently housing benefit can be paid directly to Registered Providers of Social Housing as long as tenant consent has been obtained. It has been acknowledged by the Government that some households may go into rent arrears as a consequence of the introduction of Universal Credit and the related plans to introduce direct payment of housing benefit to UC tenants as the default position. The implementation of Universal Credit has been delayed, and it is not yet clear when it will commence for the geographical areas in which the Original Borrower operates.
In order to allay the concerns of Registered Providers of Social Housing and their lenders, the Department of Work and Pensions (the DWP) has agreed to safeguard landlords' income by putting in
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place protection mechanisms to allow for the payment of rent direct to landlords if UC tenants are vulnerable or fall into arrears of rent. These could include direct payment to landlords where two months of rent has accrued, or bi-monthly (instead of monthly) payments to the UC tenants. On 30th May, 2012 Moody's issued a special comment relating to direct payments of housing benefit to working age tenants. Moody's view the direct payment of housing benefit to UC tenants as a "manageable" risk.
It is estimated that around 41 per cent. of the Original Borrower's tenants will be affected by Universal Credit when introduced. The Original Borrower has implemented a number of measures in the last two years to deal with the anticipated effects of the changes in policies described above. The Original Borrower's internal audit service is provided by an external firm with over 60 housing association clients. Their view in December 2013 was that it was clear that the Group had put effort into meeting the challenges presented by welfare reform and that risks in this area were being appropriately managed.
Changes to the structure of the benefit system (including a system of direct payments of the housing component of Universal Credit to UC tenants which may result in a failure to pass on the housing benefit payments to the landlord) may result in tenants who claim housing benefit not paying their rent in full and on a timely basis and this may have a corresponding effect on the ability of a Borrower to meet its payment obligations under its Loan Agreement on a timely basis which in turn would impact the Issuer's ability to fulfil its obligations under the Bonds.
Aside from the risks associated with Welfare Reform set out above, payments of Universal Credit by local authorities may be delayed as a result of, among other things, the need to establish a tenant's entitlement thereto as a new claimant. The Original Borrower has increased staffing levels to provide additional support to tenants in financial difficulty and to enhance its arrears recovery capacity. It has made provision in the current year’s budget and its business plan for future years for an increased level of arrears and bad debts none of which have had, or are expected to have, a material impact on the financial position of the Original Borrower. The Original Borrower does not anticipate a material increase in arrears levels for the financial year 2014/15 due to the small numbers of residents who will be impacted by Universal Credit if introduced during the year (as it will initially only affect new claimants).
Level of rent payable
Whilst existing social tenancies and rent levels remain unchanged, the Localism Act 2011, together with the Regulatory Framework for social housing in England from April 2012 issued by the Homes and Communities Agency in its capacity as social housing regulator, introduced a form of social housing rent level that allows Registered Providers of Social Housing to charge rents up to a maximum of 80 per cent. of the local market rent level on both newly developed stock and on new lettings of a proportion of existing stock as long as a framework agreement is in place with the Homes and Communities Agency. This rent policy is known as Affordable Rent. There is a risk that those tenants on Affordable Rent will find it harder to pay their rent and that this may have a corresponding effect on the ability of a Borrower to meet its payment obligations under its Loan Agreement on a timely basis which in turn would impact the Issuer's ability to fulfil its obligations under the Bonds. 5.9 per cent. of the Original Borrower's turnover was derived from affordable rents in the year ended 31st March, 2014.
The charge to the Income and Expenditure account of the Original Borrower for doubtful debts in each of the last three years has been 0.68 per cent. (year ended 31st March, 2013), 0.72 per cent. (31st March, 2012) and 0.57 per cent (31st March, 2011) of gross rent including service charge.
Rental Growth Risk
Levels of rental income are currently impacted each year by the Retail Price Index (RPI) which refers back to the figure published in the October (for the year to September) of the preceding year. Following consultation, the Government announced on 14 May 2014 that for the 10-year period from 2015-16 to 2024-25, social and affordable rents will rise annually by the Consumer Price Index (CPI) plus 1 per cent. The previous position where rents were allowed to rise by up to £2 per week to allow convergence towards target rents has been ended. Ten years of certainty on the future rent regime is
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of considerable value to Registered Providers of Social Housing in developing their business. However, the CPI is typically lower than RPI and does not currently include housing costs. Historic and forecast future differences between the old and new rent setting regimes does not suggest that rental income will fall when the new regime is introduced in April 2015. The impact of the removal of the provision to charge an extra £2 per week to allow convergence towards target rents will differ between Registered Providers of Social Housing, depending upon the number of tenancies where target rents will not be reached by March 2015. 81 per cent. of the Original Borrower's social rented tenancies were at or above target rent as at 31st March, 2014. It is estimated that 88 per cent. of the Original Borrower's social rented tenancies will be at or above target rent as at 31st March, 2015. The Original Borrower's business plan reflects the revised Government rent policy, including the ending of rent convergence.
The Borrowers will apply future rent increases, or decreases in the case of negative CPI, in accordance with the Government rent regimes (if any) in place at that time. The current regime for regulated rents allows for increases at RPI plus 0.5 per cent. until March 2015 and CPI plus 1 per cent. for each of the 10 years thereafter. The Original Borrower's regulated rental income sensitivity to a 1 per cent. increase or decrease in RPI and CPI is circa £500,000 per annum based on the current year's budgeted rental income, which the Original Borrower does not deem material to its ability to meet its obligations under the Original Loan Agreement.
The Original Borrower has a number of mechanisms in place to mitigate the scenario of negative inflation including control over their cost base. In addition, the Original Borrower considers the correlation between inflation and interest rates when managing its variable interest rate bill.
Shared Ownership and Outright Sales Risk
The Original Borrower also generates revenue from its housing for sale programme which is principally shared ownership through the Original Borrower and outright sales through its subsidiary Monson Homes Limited and is therefore exposed to market risk in relation to housing sales, including both demand and pricing risks.
Shared ownership income is generated (a) on the initial sale of the property (known as the "first tranche") to the "shared owner"; (b) on subsequent sales of further "tranches" or portions of the property to the shared owner (known as "staircasings"); and (c) in the form of subsidised rent on the part of the property which the shared owner does not own, which is payable by the shared owner until such time as the property is fully owned by the shared owner.
There is a risk that if a tenant of a shared ownership property borrows monies through a mortgage from a commercial lender (having obtained consent from a Borrower) then that lender's mortgage may take priority ahead of any security arrangements that are in place under a Security Trust Deed. However, if that commercial lender were to enforce its security following a tenant defaulting on its mortgage, such lender could staircase (i.e. purchase a portion of the leasehold property) up to 100 per cent. in order to be able to sell the whole leasehold interest in which case the Borrower as landlord would receive such staircasing payments from the commercial lender. If the price for the full 100 per cent. receivable on sale is not sufficient to meet the principal outstanding (plus 12 months interest and other statutorily permitted costs) then the shortfall will remain as a debt due to the Borrower as landlord from the defaulting tenant. Under the current rules of the Homes and Communities Agency (the HCA), any shortfall not recovered is borne first by the provider of any grant in respect of the property, and thus a Borrower is only affected to the extent that the shortfall cannot be covered by grant monies. This only applies where shared ownership units are grant-funded. If a commercial lender did enforce its security by staircasing up to 100 per cent. and there was such a shortfall, a Borrower would no longer receive rent for its retained share of the property which could have an impact upon its rental income. At 31 March 2013, shared ownership units comprised 3.5 per cent. of unit numbers and 3.3 per cent. in terms of value of the Original Borrower's housing stock.
Housing Grant Risk
The Borrowers receive grant funding from a variety of sources, including the HCA. Due to the nature of grant funding, there is a risk that the amount of funding available and the terms of grants will vary over time. Following approval of a grant there is a risk that the HCA may revise the terms of a grant
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by reducing the entitlement or suspending or cancelling any instalment of such grant. In certain circumstances set out in the HCA regulatory framework, including, but not limited to, failure to comply with conditions associated with the grant or a disposal of the property funded by a grant, the grant may be required to be repaid or reused. Any such reduction in, withdrawal of, repayment or re-use of grant funding could adversely impact the future development of a Borrower.
Since 2005 bids for social housing grants to supply new affordable housing have been accepted from unregistered bodies in addition to Registered Providers of Social Housing. This includes private developers and arm's length management organisations established by local authorities. One of the aims of the measure was to increase competition. In September 2008, as part of a package of measures announced to stimulate the housing market and deliver new social housing, the previous Government announced that local authorities who directly manage houses will also be invited to bid for grants.
In 2010 the Government announced a new funding framework – the 2011-2015 Affordable Homes Programme (the Framework). The Framework largely replaced the previous social housing grant programme, although outstanding grants agreed under the previous arrangements will be paid to Registered Providers of Social Housing. The Framework is designed to offer more flexibility to registered housing providers, enabling them to use existing assets to support new development programmes, and to offer a wider range of housing options to people accessing social housing.
Under the Framework, the level of Government grant has been reduced significantly. To compensate for this, Registered Providers of Social Housing are able to charge Affordable Rents which are capped at 80 per cent. of market rents and, as such, are generally higher than existing target social housing rents. This additional rental income is used to service the additional funding requirements as a result of the reduced grant levels. The consequence of this for Registered Providers of Social Housing is an increase in debt and gearing levels, the scale of which varies depending on the areas of operation.
In addition to the changes to the rent setting regime noted above, the Government also announced, in the spending review announcement made in June 2013, a £3 billion capital investment in affordable housing whereby 165,000 new affordable homes are to be provided over three years from 2015.
The 2015-2018 Affordable Homes Programme (the New Framework) was launched in January 2014. Under the New Framework, up to 75 per cent of the total available funding will be available for allocation at the beginning of the process. Any funding remaining can be bid for by providers to fund development opportunities arising during the period in which the New Framework is in place where these can be delivered within the timescales expected under the New Framework. This represents a change from former programmes where all funding allocations were made at the outset. The increased competition and the increased need for bidders to provide evidence regarding timescale compliance is likely to result in a reduced overall amount of grant funding being allocated to Registered Providers of Social Housing between 2015 and 2018.
The reduced amount of grant available means that more of the cost of providing new dwellings must be met from within a Borrower's own resources (including conversion of social rents to affordable rents), either directly or with additional debt serviced from them. There is therefore increased exposure to rental income and housing benefit risk which could affect its ability to meet its payment obligations on a timely basis under the relevant Loan Agreement.
Existing loan covenants of the Original Borrower include measures for minimum interest cover on an annual basis, minimum asset security cover and a limit in debt expressed as a percentage of net worth. Business planning and scenario testing show that none of these requirements are threatened by existing changes made to grant rates.
Housing Market Downturn Risk
As at 31 March 2013, 93.4 per cent. of the Original Borrower's properties were social rented (general needs, sheltered housing and affordable rented housing), all of which have a limited exposure to housing market downturn risk. Rental income from these properties provides the major source of the Original Borrower's income.
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The remaining properties were let at higher rents, including 0.2% at market rents. The ability of tenants to pay these higher rents creates a risk. However, in many cases these properties are let on assured shorthold tenancies, allowing the borrower to obtain possession quickly should tenants fall into arrears.
The Original Borrower has exposure to housing market downturn risk through shared ownership sales, open market housing sales activity and redemptions and staircasings of shared equity and shared ownership properties.
Housing Market and Development Risk
Residential property investment is subject to varying degrees of market and development risk. Market risks which may impact upon both the rental market and the development of residential properties include the economic environment, the risk of changes to Government regulation, including, but not limited to, regulation relating to planning, taxation, landlords and tenants and welfare benefits which could affect positively and negatively tenant trends in the United Kingdom. Furthermore, the maintenance of existing properties, development of existing sites and acquisition of additional sites may be subject to economic and political conditions, the availability of finance facilities and the cost of facilities where interest rates and inflation may also have an effect.
Among other things, these market risks may impact upon the expenses incurred by each Borrower associated with existing residential properties, rental income produced by these properties, the value of its existing investments, its ability to develop land that it has acquired, its ability to sell properties and its ability to acquire additional sites. This could, in turn, impact upon such Borrower's cash flow and its ability to satisfy any covenants which it is required to maintain pursuant to the terms of any financing arrangements.
Operational Risk
Operational risks may result from major systems failure or breaches in systems security (although, in the case of the Original Borrower, it has prepared detailed business continuity plans in order to mitigate against this, it is dependent upon its technology in order to deliver business processes) and the consequences of theft, fraud, health and safety and environmental issues, natural disaster and acts of terrorism. These events could result in financial loss to the Borrowers and hence the Issuer.
Notwithstanding anything in this risk factor, this risk factor should not be taken as implying that the Issuer will be unable to comply with its obligations as an entity with securities admitted to the Official List.
Regulatory Risk
The Housing and Regeneration Act 2008 as amended by the Localism Act 2011 (the Act) makes provision for the regulation of social housing provision in England.
Pursuant to the Act, the HCA acts as the regulator of Registered Providers of Social Housing (the Regulator). The HCA exercises its functions as Regulator acting through a separate committee established to undertake this regulatory role (the Regulation Committee). This arrangement came into force on 1st April, 2012. The statutory powers available to the Regulator are largely unchanged from those previously in place between April 2010 and April 2012, during which time the Tenant Services Authority (TSA) acted as the regulator of Registered Providers of Social Housing. The Regulator continues to provide economic regulation for Registered Providers of Social Housing in order to ensure they are financially viable and well governed and to support the confidence of private lenders to provide funds at competitive rates. It is intended that there will be a greater role for tenants' panels, councillors, MPs and the Ombudsmen in dealing with consumer issues than prior to 1st April, 2012.
The Regulator regulates Registered Providers of Social Housing in accordance with the publication entitled "The regulatory framework for social housing in England from April 2012" (the Regulatory Framework), setting out the standards which apply to Registered Providers of Social Housing from 1st April, 2012. The standards cover: governance and financial viability; value for money; rent; quality of accommodation; repairs and maintenance; allocations, mutual exchanges and tenure;
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neighbourhood management, local area co-operation and anti-social behaviour; and tenant involvement and empowerment. Registered Providers of Social Housing are expected to comply with the standards and to establish arrangements to ensure that they are accountable to their tenants, the Regulator and relevant stakeholders. The Group has been allocated the highest V1 and G1 ratings, indicating full compliance with the standards.
The enforcement by the Regulator of the standards other than those relating to governance and financial viability, rent and value for money is restricted to cases in which there is, or there is a risk of, serious detriment to tenants. The Regulatory Framework includes guidance as to how the Regulator will assess whether serious detriment may arise. Each Registered Provider is allocated two ratings by the regulator, a Viability rating and a Governance rating.
On 27 May 2014 the Regulator published a formal consultation paper on changes to the regulatory framework. Key changes to the Governance and Financial Viability Standard are proposed. The standard will add the protection of social housing assets to the list of matters which the governance arrangements of Registered Providers of Social Housing are required to address. This falls short of the potential “ring-fencing” of social housing assets which had been considered in a discussion document published by the regulator as a precursor to these formal proposals. There will be a new requirement to ensure that RPs manage their affairs “with an appropriate degree of skill, independence, diligence, effectiveness and foresight”. The formal consultation document makes it clear that this will include a clear requirement to demonstrate that RPs’ boards and executives have a suitable mix of skills and capability to manage the activities which the RP engages in. There will also be more detailed requirements for the business planning, risk and control framework, including a requirement to demonstrate that detailed and robust stress testing has taken place, and mitigation strategies developed. There will be a specific requirement to maintain thorough, accurate and up to date records of assets and liabilities, especially those with recourse to social housing assets. It is also proposed that there will be a specific requirement not to enter into arrangements which “inappropriately advance the interests of third parties”. Registered Providers of Social Housing will be under a duty to communicate with the Regulator on matters which relate to non-compliance or potential non-compliance with the standards. The final major proposed change applying to all Registered Providers of Social Housing is a requirement for boards to certify their compliance with all the regulatory standards on an annual basis.
In addition to these proposed changes applying to all Registered Providers of Social Housing, there are proposals for Registered Providers of Social Housing which are parents of other Registered Providers of Social Housing, which would apply to the Original Borrower. The proposal is that the parent should “support or assist” their subsidiaries with ensuring compliance. There are proposed changes to the standard which apply to profit making Registered Providers of Social Housing and Registered Providers of Social Housing with non registered parents, neither of which is relevant to the Original Borrower.
A revised rent standard will implement the Government rent policy described in “rental growth risk” above. The regulator has a statutory duty to act on instructions from Government in setting the rent standard.
In the opinion of the Original Borrower, these proposed changes would have the effect of strengthening the regulatory regime. The Original Borrower believes it is already able to demonstrate compliance with the proposed regime. It therefore does not believe that the proposals in themselves are likely to give rise to any risk to the ability of any Borrower to fulfil its obligations under any Loan Agreement which in turn would impact the Issuer's ability to fulfil its obligations under the Bonds.
Capital Resources and Treasury Risk
To mitigate liquidity risk and augment its capital resources, the Original Borrower relies on secured term and revolving credit facilities from major banks and building societies and this may also apply to any Additional Borrower. However, a Borrower could find itself unable to access sources of financing if bank or building society lines become unavailable to such Borrower (for example, if banks and building societies are unable to provide new facilities, or extend existing facilities, or are unable to meet commitments to provide funds under existing committed lines).
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The Original Borrower is also subject to interest rate risk in respect of variable rate borrowing although its hedging strategy seeks to reduce interest rate risk volatility and uncertainty by allowing for a balance of fixed and floating rate debt. As at 31st March, 2014, approximately 73 per cent. of the Original Borrower's debt pays interest at a fixed rate. Accessing the capital markets through the issue of the Bonds will reduce the reliance of the Borrowers on funding from banks and building societies and increase the proportion of fixed rate debt.
Pensions Risk
The Original Borrower participates in the following pension schemes:
(a) the Kent County Council Superannuation Scheme (KCC Scheme) a Local Government Pension Scheme, closed to new entrants since 31st March, 2003; and
(b) the Aviva defined contribution scheme (Aviva Scheme).
The KCC scheme is a public sector pension scheme independently administered by Kent County Council. The KCC scheme is a defined benefit scheme which is currently based on final pensionable salary and is closed to new members. It is contracted out of the State Second Pension. Employer participation in the KCC scheme is subject to the rules of the scheme which are set out in legislation.
As a result of the legislation governing the KCC scheme, there is a potential debt due from the Original Borrower when it ceases to employ active members. The debt due on departure from the Original Borrower would be calculated by comparing the liabilities of the Original Borrower with the assets of the Original Borrower as at the date the Original Borrower leaves the scheme. If the Original Borrower is unable to meet its debt on leaving the scheme, Kent County Council would not be able to claim that debt from the Issuer.
The Original Borrower contributes to the Aviva Scheme which is a defined contribution scheme. The assets of this scheme are held separately from those of the Original Borrower. Employer contributions in respect of the Aviva Scheme are charged to the income and expenditure account as incurred. During the year ended 31st March, 2014 contributions totalling £209,436 were made into the Aviva Scheme.
In accordance with the UK Government's regulations, all eligible employees will soon have to be auto-enrolled into a qualifying pension scheme. Each qualifying scheme must meet minimum standards in respect of the benefits it provides or the amount of contributions paid to it. The scheme must also provide auto-enrolment for all eligible new workers. The Original Borrower voluntarily commenced auto enrolment with effect from 1 November 2012. The Original Borrower’s employees choose their personal contribution level to the Aviva scheme. The Original Borrower contributes to the Aviva scheme on a sliding scale referenced to the employee’s contribution rate from 5% up to a maximum of 8% of salary. If all of the Original Borrower's employees not currently in a scheme joined the Aviva scheme, and the maximum employer contributions were paid for all employees in the Aviva scheme, costs (for the Aviva scheme) would increase from £209,436 in 2013/14 to an estimated £347,586 in 2014/15. The Original Borrower has prudently budgeted for £321,685 of this potential cost in 2014/15.
As the Original Borrower does not participate in an occupational pension scheme which is not a public sector pension scheme, there is no risk of the Pensions Regulator issuing a contribution notice or a financial support direction against the Issuer in relation the Original Borrower's pension arrangements.
Legal and Compliance Risk
The Original Borrower knows the significance to its operations of, and is focused on, adhering to all legal and compliance legislation. The Original Borrower is not currently aware of any material failure to adhere to applicable health and safety or environmental laws, litigation or breach of regulatory laws, or failure to comply with corporate, employee or taxation laws. If any of this were to occur in the future, this could have an adverse impact on the Borrowers' results of their operations.
To date, claims made against the Original Borrower have not had a material impact on the revenue or business of the Original Borrower, although there can be no assurance that Borrowers will not, in the future, be subject to a claim which may have a material impact upon their revenue or business.
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Furthermore, the Original Borrower has the benefit of insurance for, among others, employer's liability, public liability and directors' and officers' liability at levels which the management of the Original Borrower considers to be prudent for the type of business in which the Original Borrower is engaged and commensurate with Registered Providers of Social Housing of a similar size.
Permitted Reorganisations
The Original Loan Agreement permits, and each Additional Loan Agreement will permit, the Borrowers to undertake Permitted Reorganisations. In such circumstances, the resulting entity's credit risk may change.
Factors which are material for the purpose of assessing the market risks associated with the Bonds
Liability under the Bonds
The Bonds are obligations of the Issuer only and do not establish any liability or other obligation of any other person mentioned in this Prospectus. The Bonds will constitute direct, general, secured obligations of the Issuer and will rank equally among themselves.
Interest rate risks
The Bonds bear interest at a fixed rate and therefore involve the risk that subsequent changes in market interest rates may adversely affect the value of the Bonds.
Redemption prior to maturity
In the event that the Bonds become repayable prior to maturity either following a Loan becoming repayable as a result of a Borrower Default (which includes, inter alia, failure by the relevant Borrower to make payments of interest under the relevant Loan Agreement), a Borrower ceasing to satisfy the Borrower Minimum Requirements (unless such Borrower Minimum Requirements are complied with within 180 days) or an Event of Default (as defined in Condition 12 (Events of Default and Enforcement)) or due to taxation (pursuant to Condition 9.3 (Early Redemption for Tax Reasons)), the Issuer will be obliged to redeem the Bonds in full at their Outstanding Principal Amount, plus accrued interest. In such circumstances it may not be possible for an investor to reinvest the redemption proceeds at an effective rate of interest as high as the interest rate on the Bonds. Furthermore, the optional redemption feature of the Bonds is likely to limit their market value as the market value generally will not rise substantially above the price at which they can be redeemed.
Modification, waivers and substitution
The Conditions of the Bonds and the Bond Trust Deed contain provisions for calling meetings of Bondholders to consider matters affecting their interests generally. These provisions permit defined majorities to bind all Bondholders, including Bondholders who did not attend and vote at the relevant meeting and Bondholders who voted in a manner contrary to the majority.
The Conditions of the Bonds and the Bond Trust Deed also provide that the Bond Trustee may, without the consent of Bondholders (i) agree to any modification (except as stated in the Bond Trust Deed) of, or to the waiver or authorisation of any breach or proposed breach of, any of the provisions of Bonds or any Transaction Document (to which it is a party) or (ii) determine without the consent of the Bondholders that any Potential Event of Default or Event of Default shall not be treated as such or (iii) agree to the substitution of another company, industrial and provident society or other entity as principal debtor under the Bonds in place of the Issuer, in the circumstances described in the Conditions, provided, in each case, that the Bond Trustee is of the opinion that to do so would not be materially prejudicial to the interest of Bondholders.
Denominations involve integral multiples: definitive Bonds
The Minimum Denomination means at any time the minimum denomination in which the Bonds are issued and/or transferable at that time. The Bonds will be issued in Minimum Denominations of £100,000 and integral multiples of £1,000 in excess thereof.
I-A8.1.1
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It is possible that the Bonds may be traded in amounts that are not integral multiples of the Minimum Denomination. In such a case a holder who, as a result of trading such amounts, holds an amount which is less than the Minimum Denomination in his account with the relevant clearing system at the relevant time may not receive a definitive Bond in respect of such holding (should definitive Bonds be printed) and would need to purchase a nominal amount of Bonds such that its holding amounts to the applicable Minimum Denomination.
Denominations of definitive Bonds
If definitive Bonds are issued, they will be issued in Minimum Denominations of £100,000 plus one or more higher integral multiples of £1,000. Definitive Bonds issued in a denomination which is not an integral multiple of £100,000 may be illiquid and difficult to trade.
Change in Law
The structure of the issue of the Bonds is based on English law, regulatory and administrative practice in effect as at the date of this Prospectus, and has due regard to the expected tax treatment of all relevant entities under United Kingdom tax law and the published practice of HM Revenue & Customs in force or applied in the United Kingdom as at the date of this Prospectus. No assurance can be given as to the impact of any possible change to English law, regulatory or administrative practice in the United Kingdom, or to United Kingdom tax law, or the interpretation or administration thereof, or to the published practice of HM Revenue & Customs as applied in the United Kingdom after the date of this Prospectus.
European Monetary Union
It is possible that, prior to the repayment in full of the Bonds, the United Kingdom may become a participating member state in the European Economic and Monetary Union and that the Euro will become the lawful currency of the United Kingdom. The introduction of the Euro could be accompanied by a volatile exchange rate and/or interest rate environment which could adversely affect holders of the Bonds. It cannot be said with certainty what effect the adoption of the Euro by the United Kingdom (if it occurs) would have on the holders of the Bonds.
Potential Conflicts of Interest
Each of the Transaction Parties (other than the Issuer) and their affiliates in the course of each of their respective businesses may provide services to other Transaction Parties and to third parties and in the course of the provision of such services it is possible that conflicts of interest may arise between such Transaction Parties and their affiliates or between such Transaction Parties and their affiliates and such third parties. Each of the Transaction Parties (other than the Issuer) and their affiliates may provide such services and enter into arrangements with any person without regard to or constraint as a result of any such conflicts of interest arising as a result of it being a Transaction Party.
Taxation
Under the Conditions of the Bonds (see Condition 10 (Taxation) below), the Issuer may, but will not be obliged to, gross up payments in respect of the Bonds if any deduction or withholding on account of tax is imposed. In the event that any deduction or withholding on account of tax is imposed and the Issuer does not opt to gross up payments in respect of the Bonds (or, if having previously opted to gross up notifies the Bond Trustee and the Bondholders of its intention to cease grossing up payments in respect of the Bonds), the Bonds will be redeemed in accordance with Condition 9.3 (Early Redemption for Tax Reasons). In such circumstances an investor may not be able to reinvest the redemption proceeds in a comparable security at an effective interest rate as high as that of the Bonds. In addition, any amounts in respect of accrued interest which fall due on any such redemption of the Bonds (and, where the redemption follows the next following Interest Payment Date, such Interest Payment Date) shall be paid subject to the required withholding or deduction and the Issuer shall not be obliged to pay any additional amounts in respect thereof. The Bondholders will therefore bear the risk of any such withholding or deduction in respect of the period from the previous Interest Payment Date to the date of redemption.
I-A8.1.1
I-LR2.2.2(1)
I-A13.3
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The Original Loan Agreement requires, and each Additional Loan Agreement will require, that if any withholding or deduction is required by law to be made by the relevant Borrower thereunder, the amount of the payment due from such Borrower shall be increased to an amount which (after making the tax deduction) leaves an amount equal to the payment which would have been due if no tax deduction had been required.
For a description of the current United Kingdom law and practice relating to withholding tax treatment of the Bonds, see below in Taxation.
EU Savings Directive
Under EC Council Directive 2003/48/EC (the Directive) on the taxation of savings income, Member States are required to provide to the tax authorities of another Member State details of payments of interest (or similar income) paid by a person within its jurisdiction to an individual resident in that other Member State or to certain limited types of entities established in that other Member State. However, for a transitional period, Luxembourg and Austria are instead required (unless during that period they elect otherwise) to operate a withholding system in relation to such payments (the ending of such transitional period being dependent upon the conclusion of certain other agreements relating to information exchange with certain other countries). A number of non-EU countries and territories including Switzerland have adopted similar measures (a withholding system in the case of Switzerland). In April 2013, the Luxembourg Government announced its intention to abolish the withholding system with effect from 1st January, 2015, in favour of automatic information exchange under the Directive.
The European Commission has proposed certain amendments to the Directive, which may, if implemented, amend or broaden the scope of the requirements described above.
If a payment were to be made or collected through a Member State which has opted for a withholding system and an amount of, or in respect of, tax were to be withheld from that payment, neither the Issuer nor any Paying Agent nor any other person would be obliged to pay additional amounts with respect to any Bond as a result of the imposition of such withholding tax. The Issuer is required to maintain a Paying Agent in a Member State that is not obliged to withhold or deduct tax pursuant to the Directive.
Exchange rate risks and exchange controls
The Issuer will pay principal and interest on the Bonds in Sterling. This presents certain risks relating to currency conversions if an investor's financial activities are denominated principally in a currency or currency unit (the Investor's Currency) other than Sterling. These include the risk that exchange rates may significantly change (including changes due to devaluation of Sterling or revaluation of the Investor's Currency) and the risk that authorities with jurisdiction over the Investor's Currency may impose or modify exchange controls. An appreciation in the value of the Investor's Currency relative to Sterling would decrease (1) the Investor's Currency-equivalent yield on the Bonds, (2) the Investor's Currency-equivalent value of the principal payable on the Bonds and (3) the Investor's Currency-equivalent market value of the Bonds.
Government and monetary authorities may impose (as some have done in the past) exchange controls that could adversely affect an applicable exchange rate. As a result, investors may receive less interest or principal than expected, or no interest or principal.
Legal investment considerations may restrict certain investments
The investment activities of certain investors are subject to legal investment laws and regulations, or review or regulation by certain authorities. Each potential investor should consult its legal advisers to determine whether and to what extent (1) the Bonds are legal investments for it, (2) the Bonds can be used as collateral for various types of borrowing and (3) other restrictions apply to its purchase or pledge of the Bonds. Financial institutions should consult their legal advisers or the appropriate regulators to determine the appropriate treatment of the Bonds under any applicable risk-based capital or similar rules.
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Risks Relating to the Security of the Bonds
Considerations relating to the Issuer Security and the Underlying Security
The Bonds will be secured by the Issuer Security granted in favour of the Bond Trustee for the benefit of itself, the Bondholders and the other Secured Parties. Such Issuer Security will include security over the Loan Agreements, the Security Trust Deed and the Security Agreements. The Underlying Security created and to be created pursuant to the Security Trust Deed and the Security Agreements will include first legal mortgages, first fixed charges and assignments over the property and rights set out in the relevant Security Agreement given by the Borrowers and the Eligible Group Members in favour of the Security Trustee for the benefit of itself and, inter alios, the Issuer.
The validity of any security given by the Borrowers and the Eligible Group Members in connection with additions and substitutions of Charged Properties may depend on the solvency of the relevant Borrower or Eligible Group Member at the time of the grant.
Environmental Considerations
Under relevant UK environmental legislation, liability for environmental matters can be imposed on the "owner" or "person in control" of land. The term "owner" is not specifically defined and could include anyone with a proprietary interest in a property, which could include a representative of a trustee as a mortgagee in possession (in respect of which see the risk factor entitled Mortgagee in Possession Liability below). Environmental laws may impose liability on the owner for clean-up costs if a property is or becomes contaminated. A Borrower or an Eligible Group Member may therefore be liable for the entire amount of the clean-up and remediation costs for a contaminated site regardless of whether the contamination was caused by it or not. These costs may be significant and may affect the ability of the Borrowers to meet their payment obligations under their respective Loan Agreements.
In addition, the presence of hazardous or toxic substances, or the failure to adequately remedy adverse environmental conditions at a Charged Property, may adversely affect the market value of the Charged Property, as well as the Borrowers' or the Eligible Group Members' ability to sell, lease or refinance the Charged Property. Any environmental liability imposed on the Borrowers could also affect the ability of the Borrowers to meet their payment obligations under the relevant Loan Agreement.
Sufficiency of Insurance
Although each Charged Property is required to be insured at appropriate levels and against customary risks, there can be no assurance that any loss incurred will be of a type covered by such insurance, nor can there be any assurance that the loss will not exceed the limits of such insurance. Any reduction in income or any loss or damage caused to a Charged Property not adequately covered by insurance could result in a shortfall in funds available to meet the Borrowers' payment obligations under the Loan Agreements.
Investment of Retained Proceeds in Permitted Investments
For so long as any part of the net proceeds of the issue of the Bonds remains undrawn pursuant to the Loan Agreements, the Issuer may invest such amounts in Permitted Investments in accordance with the Custody Agreement. The Issuer may also invest the Charged Cash in Permitted Investments in accordance with the Custody Agreement.
Although Permitted Investments are limited to highly rated securities which satisfy certain specified criteria, the Issuer may be required to liquidate such Permitted Investments (a) prior to the enforcement of the Issuer Security (in the case of the Permitted Investments purchased with Retained Proceeds), to fund advances to a Borrower pursuant to a Loan Agreement or to fund redemptions of the Bonds in accordance with the Conditions or (b) following the enforcement of the Issuer Security, to make payments in accordance with the Post-enforcement Priority of Payments, in either case at a time when the disposal proceeds of such Permitted Investments is less than the price paid by the Issuer upon the acquisition thereof.
Prior to the enforcement of the Issuer Security, any losses realised by the Issuer in respect of a sale of Permitted Investments purchased with Retained Proceeds is passed on to the Borrowers pursuant to the terms of the Loan Agreements as a result of (i) the Issuer's obligation to fund a nominal amount of an
I-A8.3.4.7
I-A8.3.4.4
34
advance being such that it may be satisfied by funding such advance at a discount in proportion to any such losses and (ii) each Borrower's obligation to make further payments to the Issuer in respect of any prepayment of the loan in full to enable the Issuer to fund any shortfall on a redemption of the Bonds. However, following the enforcement of the Issuer Security, any losses in respect of the Permitted Investments will reduce the amounts available to the Issuer to satisfy its payment obligations in respect of the Bonds. For the purpose of calculating the Borrowers' compliance with the Asset Cover Test, the value of such Permitted Investments will be the purchase price thereof and the Borrowers shall not be required to monitor the market value of such Permitted Investments. Consequently, the value attributed to the Permitted Investments for this purpose may be more than the realisable value from time to time.
In the event that the enforcement of the Issuer Security takes place prior to sufficient Charged Properties being charged, with an aggregate Minimum Value equal to the Outstanding Principal Amount of the Bonds, and/or at a time when the Permitted Investments have been acquired with the Disposal Proceeds or otherwise charged by a Borrower as security, the value of the proceeds of enforcement of the Underlying Security, together with such amounts, may be insufficient to enable the Issuer to pay its obligations under the Bonds in full.
The Issuer's ability to meet its obligations under the Bonds after enforcement under a Loan
Following default by a Borrower, the Security Trustee shall be entitled to call for payments of any unpaid amounts of interest owing by such Borrower to be made by one or more of the other Borrowers (if any) under and in accordance with the guarantee and indemnity given by such other Borrowers pursuant to their respective Loan Agreement (subject to the limitations of the relevant guarantee and indemnity). If there are no other Borrowers or the other Borrowers do not make payment (or are not required to make payment as a result of the limitation of the relevant guarantee and indemnity) of such amounts to the Issuer pursuant to their respective Loan Agreements, the Security Trustee may enforce the Underlying Security and appoint a receiver pursuant to its powers under the Security Trust Deed.
The Issuer's ability to continue to pay principal and interest on the Bonds following default by a Borrower under a Loan is dependent upon the ability of the Issuer to receive sufficient funds from the Security Trustee pursuant to the collection of rental income or a disposal of the Underlying Security or from enforcement action against one or more of the Borrowers in respect of their covenants under the Loan Agreements, to enable it to make such payment.
Fixed charges may take effect under English law as floating charges
Pursuant to the Bond Trust Deed, the Issuer has purported to grant fixed charges over, amongst other things, all rights and benefits under the Transaction Account, the Ongoing Cash Security Account and the Initial Cash Security Account. The law of England and Wales relating to the characterisation of fixed charges is unsettled. The fixed charges purported to be granted by the Issuer (other than assignment of security) may take effect under English law only as floating charges if, for example, it is determined that the Bond Trustee does not exert sufficient control over the charged assets for the security to be said to "fix" over those assets. If the charges take effect as floating charges instead of fixed charges, then the claims of the Bond Trustee will be subject to claims which are given priority over a floating charge by law, including, amongst other things, prior charges, certain subsequent charges, the expenses of any winding up or administration and the claims of preferential creditors.
Claims of Creditors of the Issuer other than Secured Parties
Under English law, any creditor (who has not entered into non-petition clauses) would (save where an administrator has been appointed) be able to commence insolvency or winding up proceedings against the Issuer in respect of any unpaid debt.
Mortgagee in Possession Liability
There is a risk that the Security Trustee may be deemed to be a mortgagee in possession if it physically enters into possession of a Charged Property or performs an act of control or influence which may amount to possession, such as submitting a demand direct to tenants requiring them to pay rents to the Security Trustee. The consequence of being a mortgagee in possession would be that the Security Trustee may be obliged to account to a Borrower or an Eligible Group Member for the
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income obtained from the Charged Property, be liable for any damage to the Charged Property, have a limited liability to repair the Charged Property and, in certain circumstances, be obliged to make improvements or incur financial liabilities in respect of the Charged Property. A mortgagee in possession may also be liable to a tenant for any mismanagement of the relevant property and may incur liabilities to third parties in nuisance and negligence and, under certain statutes (including environmental legislation), the liabilities of a property owner. Pursuant to the relevant Security Trust Deed the Borrowers and the Eligible Group Members are (or will be) required to indemnify the Security Trustee against all liabilities and expenses suffered or incurred by it and pursuant to the Loan Agreements, the Borrowers are (or will be) required to indemnify the Issuer and the Security Trustee on demand against any loss or liability incurred in connection with their respective Loan Agreements. The obligation to indemnify the Security Trustee may mean that there is a shortfall in funds available to pay all amounts due and owing under the Bonds and/or the Loan Agreements.
Moratorium
In order to protect the interest of tenants and to preserve the housing stock of a Registered Provider of Social Housing within the social housing sector and within the regulatory regime, a 28 working day moratorium on the disposal of land (including the enforcement of any security) by an insolvent non-profit Registered Provider of Social Housing will apply, upon certain steps being taken in relation to that provider such as presenting a winding up petition or appointing an administrator. The Regulator will then seek to agree proposals about the future ownership and management of the provider's land with its secured creditors. The moratorium procedure may adversely affect the Security Trustee's ability to enforce its security over the Charged Properties, as the procedure stipulates actions that must be taken by a secured creditor prior to that secured creditor being able to enforce its security and gives powers to the Regulator in respect of certain secured assets. This, in turn, could affect the Bond Trustee's ability to enforce its security against the Issuer under the Bond Trust Deed.
Risks Relating to the Market Generally
Potential limited liquidity
The Bonds may not have an established market when issued. There can be no assurance of a secondary market for the Bonds or the continued liquidity of such market if one develops. The development or continued liquidity of any secondary market for the Bonds will be affected by a number of factors such as the state of credit markets in general and the creditworthiness of the Group, as well as other factors such as the time remaining to the maturity of the Bonds.
Global economic disruption
In addition, Bondholders should be aware of the prevailing and widely reported global credit market conditions (which continue at the date hereof), whereby there is a general lack of liquidity in the secondary market for instruments similar to the Bonds, concerns over the liquidity of major banks and building societies and the consequent effects on the general economy and the housing market. The Issuer cannot predict when these circumstances will change and, if and when they do, whether conditions of general market illiquidity for the Bonds and instruments similar to the Bonds will be available in the future.
Credit ratings may not reflect all risks
It is expected that the Bonds will be rated "AA-" by S&P. This rating may not reflect the potential impact of all risks related to the structure, market and other factors that may affect the value of the Bonds. A credit rating is not a recommendation to buy, sell or hold securities and may be revised, suspended, qualified or withdrawn by the assigning rating agency at any time.
As with any rated entity, the rating of the Original Borrower (and, accordingly, the rating of the Bonds) may be susceptible to further adjustments (whether upward or downward) and, in particular, any adjustments which may be made as a result of a rating agency's methodology as applied to the Original Borrower.
I-A8.3.4.7
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FORM OF THE BONDS AND SUMMARY OF PROVISIONS RELATING TO THE BONDS WHILE IN GLOBAL FORM
The following includes a summary of certain provisions of the Bond Trust Deed and the Agency Agreement and is qualified by reference to the detailed provisions thereof. The Bond Trust Deed and the Agency Agreement are not, however, incorporated by reference into, and therefore do not form part of, this Prospectus.
Definitions used in this section but not otherwise defined in this Prospectus have the meanings given to them in the Bond Trust Deed and the Agency Agreement.
Form of the Bonds
Form, Exchange and Payments
The Bonds will be in bearer new global note (NGN) form. The Bonds will be initially issued in the form of a temporary global bond (a Temporary Global Bond), which will be delivered on or prior to the Issue Date to a common safekeeper for Euroclear Bank S.A./N.V. (Euroclear) and/or Clearstream Banking, société anonyme (Clearstream, Luxembourg).
The Bonds are intended to be held in a manner which will allow Eurosystem eligibility. This means that the Bonds are intended upon issue to be deposited with Euroclear or Clearstream, Luxembourg as common safekeeper but does not necessarily mean that the Bonds will be recognised as eligible collateral for Eurosystem monetary policy and intra-day credit operations by the Eurosystem either upon issue or at any or all times during their life. Bondholders should note that the European Central Bank has applied a temporary extension of Eurosystem eligibility to Sterling denominated securities, the effective date for this temporary extension being 9th November, 2012. However, should this extension cease at any time during the life of the Bonds, the Bonds will not be in a form which can be recognised as eligible collateral.
Whilst the Bonds are represented by a Temporary Global Bond, payments of principal, interest (if any) and any other amount payable in respect of the Bonds due prior to the Exchange Date (as defined below) will be made only to the extent that certification (in a form to be provided) to the effect that the beneficial owners of interests in the relevant Temporary Global Bond are not U.S. persons or persons who have purchased for resale to any U.S. person, as required by U.S. Treasury regulations, has been received by Euroclear and/or Clearstream, Luxembourg and Euroclear and/or Clearstream, Luxembourg, as applicable, has given a like certification (based on the certifications it has received) to the Principal Paying Agent.
On and after the date (the Exchange Date) which is 40 days after the Temporary Global Bond is issued, interests in the Temporary Global Bond will be exchangeable (free of charge) upon a request as described therein for interests recorded in the records of Euroclear or Clearstream, Luxembourg, as the case may be, in a permanent global bond (the Permanent Global Bond and, together with the Temporary Global Bond, the Global Bonds) in each case against certification of beneficial ownership as described above unless such certification has already been given. The holder of a Temporary Global Bond will not be entitled to collect any payment of interest, principal or other amount due on or after the Exchange Date unless, upon due certification, exchange of that Temporary Global Bond for an interest in the relevant Permanent Global Bond is improperly withheld or refused.
Payments of principal, interest (if any) or any other amounts on the Permanent Global Bonds will be made through Euroclear and/or Clearstream, Luxembourg without any requirement for certification.
On each occasion of a payment in respect of a Global Bond the Principal Paying Agent shall instruct Euroclear and Clearstream, Luxembourg to make appropriate entries in their records to reflect such payment.
The Global Bonds will be exchangeable (free of charge), in whole but not in part, for definitive Bonds with principal receipts, interest coupons and talons attached only upon the occurrence of an Exchange Event. For these purposes, Exchange Event means that (i) the Issuer has been notified that both Euroclear and Clearstream, Luxembourg have been closed for business for a continuous period of 14
I-A13.4.4
I-LR2.2.4(1)
I-A13.4.14
I-A13.4.9
I-A13.4.8
I-LR2.2.4(1)
I-A13.4.4
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days (other than by reason of holiday, statutory or otherwise) or have announced an intention permanently to cease business or have in fact done so and no successor clearing system satisfactory to the Bond Trustee is available or (ii) the Issuer has or will become subject to adverse tax consequences which would not be suffered were the Bonds represented by the relevant Global Bond in definitive form. The Issuer will promptly give notice to Bondholders in accordance with Condition 15 (Notices) if an Exchange Event occurs. In the event of the occurrence of an Exchange Event, Euroclear and/or Clearstream, Luxembourg (acting on the instructions of any holder of an interest in such Permanent Global Bond) or the Bond Trustee may give notice to the Principal Paying Agent requesting exchange and, in the event of the occurrence of an Exchange Event as described in (ii) above, the Issuer may also give notice to the Principal Paying Agent requesting exchange. Any such exchange shall occur not later than 45 days after the date of receipt of the first relevant notice by the Principal Paying Agent.
Legend concerning United States persons
The following legend will appear on all Bonds, principal receipts and on all interest coupons relating to the Bonds:
"ANY UNITED STATES PERSON WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO LIMITATIONS UNDER THE UNITED STATES INCOME TAX LAWS, INCLUDING THE LIMITATIONS PROVIDED IN SECTIONS 165(j) AND 1287(a) OF THE INTERNAL REVENUE CODE."
The referenced sections of the Internal Revenue Code provide that United States holders, with certain exceptions, will not be entitled to deduct any loss on the Bonds, principal receipts or interest coupons and will not be entitled to capital gains treatment of any gain on any sale, disposition, redemption or payment of principal in respect of the Bonds, principal receipts or interest coupons.
Summary of Provisions relating to the Bonds while in Global Form
Denominations
The Bonds will be issued in denominations of £100,000 and integral multiples of £1,000 in excess thereof.
If definitive Bonds are issued in exchange of the relevant Global Bond(s), they will be issued in denominations of £100,000 plus integral multiples of £1,000 in excess thereof.
Notices
For so long as all of the Bonds are represented by one or both of the Global Bonds and such Global Bond(s) is/are held on behalf of Euroclear and/or Clearstream, Luxembourg, notices to Bondholders (which includes, for this purpose, any Compliance Certificate or annual reports required to be made available pursuant to a request by any of the Bondholders pursuant to Condition 6.2 (Information Covenants)) may be given by delivery of the relevant notice to Euroclear and/or Clearstream, Luxembourg (as the case may be) for communication to the relative Accountholders (as defined below) rather than by publication as required by Condition 15 (Notices). Any such notice shall be deemed to have been given to the holders of the Bonds on the second day after the day on which such notice was delivered to Euroclear and/or Clearstream, Luxembourg (as the case may be) as aforesaid.
For so long as all of the Bonds are represented by one or both of the Global Bonds and such Global Bond(s) is/are held on behalf of Euroclear and/or Clearstream, Luxembourg, notices to be given by any Bondholder may be given to the Principal Paying Agent through Euroclear and/or Clearstream, Luxembourg and otherwise in such manner as the Principal Paying Agent and Euroclear and/or Clearstream, Luxembourg, as the case may be, may approve for this purpose.
Accountholders
For so long as any of the Bonds is represented by a Global Bond held on behalf of Euroclear and/or Clearstream, Luxembourg, each person (other than Euroclear or Clearstream, Luxembourg) who is for the time being shown in the records of Euroclear or of Clearstream, Luxembourg as the holder of a particular nominal amount of such Bonds (the Accountholder) (in which regard any certificate or
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other document issued by Euroclear or Clearstream, Luxembourg as to the nominal amount of such Bonds standing to the account of any person shall be conclusive and binding for all purposes save in the case of manifest error) shall be treated as the holder of such nominal amount of such Bonds for all purposes other than with respect to the payment of principal or interest on such nominal amount of such Bonds, for which purpose the bearer of the relevant Global Bond shall be treated as the holder of such nominal amount of such Bonds in accordance with and subject to the terms of the relevant Global Bond and the expressions Bondholder and holder of Bonds and related expressions shall be construed accordingly. In determining whether a particular person is entitled to a particular nominal amount of Bonds as aforesaid, the Bond Trustee may rely on such evidence and/or information and/or certification as it shall, in its absolute discretion, think fit and, if it does so rely, such evidence and/or information and/or certification shall, in the absence of manifest error, be conclusive and binding on all concerned.
Bonds which are represented by a Global Bond will be transferable only in accordance with the rules and procedures for the time being of Euroclear and Clearstream, Luxembourg, as the case may be.
Instalment Redemption
Reduction of the Outstanding Principal Amount of any Global Bond following its redemption in one or more instalments will be effected by entry in the records of Euroclear or Clearstream, Luxembourg, as the case may be.
Prescription
Claims against the Issuer in respect of principal and interest on the Bonds represented by a Global Bond will be prescribed after 10 years (in the case of principal) and five years (in the case of interest) from the Relevant Date.
Cancellation
Cancellation of any Bond represented by a Global Bond and required by the Conditions of the Bonds to be cancelled following its redemption or purchase will be effected by entry in the records of Euroclear or Clearstream, Luxembourg, as the case may be.
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USE OF PROCEEDS
Subject as set out below, the net proceeds from the issue of the Bonds, after deduction of expenses payable by the Issuer, will be advanced by the Issuer to one or more Borrowers pursuant to the Loan Agreements to be applied in accordance with the relevant Borrower's constitution (including, for the avoidance of doubt, in furtherance of its charitable objects including the repayment of any existing indebtedness of such Borrower and any other amounts due and payable thereunder).
For so long as insufficient security has been granted (or procured to be granted) by the Borrowers in favour of the Issuer to permit the drawing of the Aggregate Funded Commitment in full, the amount of the Aggregate Funded Commitment that remains undrawn (the Retained Proceeds, which will include any prepayments under a Loan Agreement which are not applied in or towards redemption of the Bonds) shall be retained in the Initial Cash Security Account in accordance with the terms of the Account Agreement and the Custody Agreement (and may be invested in Permitted Investments).
Any Retained Proceeds (which include any prepayments under a Loan Agreement which are not applied in or towards redemption of the Bonds) may be advanced to the Borrowers at a later date pursuant to the Loan Agreements to the extent that Properties of a corresponding value have been charged in favour of the Security Trustee and allocated as Designated Security and/or held by the Security Trustee for the benefit of the Issuer. In addition, in the event that any losses are made in respect of any Retained Proceeds which have been invested in Permitted Investments, each drawing to be made by a Borrower from the Issuer pursuant to a Loan Agreement shall be advanced at a discount in accordance with the terms of such Loan Agreement.
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DESCRIPTION OF THE LOAN AGREEMENTS
The following description of the Loan Agreements consists of a summary of certain provisions of the Loan Agreements and is subject to the detailed provisions thereof. The Loan Agreements are not, however, incorporated by reference into, and therefore do not form part of, this Prospectus.
Definitions used in this section but not otherwise defined in this Prospectus have the meanings given to them in the Loan Agreements.
Facility
Original Loan Agreement and Original Commitment
Subject to the provisions of the loan agreement (the Original Loan Agreement) dated on or around the Issue Date between the Issuer, the Original Borrower and the Security Trustee, the Issuer shall commit to make a loan to the Original Borrower in the nominal amount of £80,000,000 (together with any further lending commitments to the Original Borrower under the Original Loan Agreement, the Original Commitment).
The Original Commitment shall be funded by the proceeds of the issuance of the Bonds.
Additional Borrowers and Additional Loan Agreements
The Issuer (as lender) and Security Trustee may from time to time:
(a) agree to another person acceding to the Original Loan Agreement as an additional borrower, and/or
(b) to the extent that a Further Commitment can be given by the Issuer as described below, enter into one or more further loan agreements on substantially the same terms as the Original Loan Agreement (each an Additional Loan Agreement and, together with the Original Loan Agreement, the Loan Agreements and each a Loan Agreement) with another person as the Borrower,
in each case where such person satisfies each of the Borrower Minimum Requirements and all such person's liabilities as such borrower are secured by the Security Agreements (each such person being an Additional Borrower and together such persons being the Additional Borrowers and, together with the Original Borrower, being the Borrowers). Not later than the seventh day following the date upon which a person becomes an Additional Borrower, the Issuer shall give notice to Bondholders in accordance with Condition 15 (Notices).
Further Commitments
Upon:
(a) receipt by the Issuer of proceeds (the Further Proceeds) in respect of the issue by the Issuer of any further bonds pursuant to Condition 19 (Further Issues); and/or
(b) cancellation of one or more existing Commitments by one or more Borrower(s),
the Issuer may commit pursuant to one or more of the Loan Agreements to making a loan to one or more of the Borrowers in a principal amount which reflects such Further Proceeds and/or cancelled Commitment(s) (each a Further Commitment and, together with the Original Commitment, the Commitments). Undrawn Commitment means at any time, in respect of a Borrower, the Commitment relating to such Borrower which at that time is not advanced to such Borrower pursuant to the relevant Loan Agreement.
Drawings of Commitment
Each Commitment may be drawn in one or more drawings, and the maximum nominal amount of each drawing shall be an amount which corresponds to the Minimum Value of any Charged Properties which have, on or before the date of such drawing, been charged in favour of the Security Trustee, for the benefit of the Issuer, less the aggregate amount of all Commitments which have previously been drawn.
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No Commitment may be drawn until the relevant Borrower has satisfied the conditions set out in Clause 2.4 (Facility) (or any such corresponding clause in any Additional Loan Agreement) in respect of the first drawing in respect of a Loan Agreement, and the conditions set out in Clause 11.1 (Additional Properties) (or any such corresponding clause in any Additional Loan Agreement) in respect of any subsequent drawings of amounts of the relevant Commitment which exceed the Minimum Value of the Initial Properties.
Each of the Issuer and the Original Borrower have acknowledged (and each Additional Borrower will be required to acknowledge) that any drawing of a Commitment shall be subject to (a) the Security Trustee being satisfied that the value of the Issuer's Designated Security (based solely on the relevant confirmation from the Original Borrower and each Additional Borrower of the Minimum Value of the Properties forming part of the Issuer's Designated Security (which itself shall be evidenced by the relevant Valuation), which the Security Trustee is entitled to rely upon without further enquiry or investigation in respect thereof) is such that the Asset Cover Test is satisfied immediately following such drawing, and (b) in respect of any part of a Commitment which is to be funded by the Issuer from Further Proceeds, the receipt by the Issuer of such Further Proceeds.
The Original Borrower has acknowledged (and each Additional Borrower will be required to acknowledge) that the Issuer may invest all or any part of the Retained Proceeds in Permitted Investments in accordance with the Custody Agreement and that, as a result of (i) any losses made by the Issuer in respect of such Permitted Investments and/or (ii) any issue or sale of Bonds by the Issuer made at a discount to the nominal amount of such Bonds, the amount of Retained Proceeds held by the Issuer, at the time of any drawdown request, may be less than the Undrawn Commitment which is to be funded from such Retained Proceeds. In such circumstances, each drawing to be funded from the Retained Proceeds shall be advanced at a discount in an amount equal to the Actual Advance Amount. For this purpose, Actual Advance Amount means, in respect of each drawing funded from Retained Proceeds, the nominal amount of such drawing multiplied by the result of dividing (i) the amount of Retained Proceeds held by the Issuer at the time of the drawdown request (for the avoidance of doubt, excluding any Permitted Investment Profit) by (ii) the Undrawn Commitment which is to be funded from such Retained Proceeds.
For the avoidance of doubt:
(a) no Borrower shall be required to monitor the market value of any Permitted Investments;
(b) a Borrower's Undrawn Commitment is reduced by the nominal amount of its drawdown request and any difference between the nominal amount of a drawing and the relevant Actual Advance Amount shall be ignored in determining the amount of the relevant Loan and, inter alia, the calculation of interest, principal and premium payments payable in respect thereon shall be based on the nominal amount; and
(c) any income received by the Issuer in respect of Permitted Investments shall not be credited to the Initial Cash Security Account but shall instead be credited to the Transaction Account in accordance with the Account Agreement.
The Issuer and the Original Borrower have agreed (and each Additional Borrower shall agree) that:
(a) where the Issuer is required to sell any Permitted Investments to fund a drawing under a Loan Agreement and such sale results in a Permitted Investment Profit, the Issuer shall make a gift aid payment to a Charitable Group Member in an amount equal to the Permitted Investment Profit and, for the avoidance of doubt, such drawing shall be advanced at the nominal amount requested;
(b) immediately prior to the end of each accounting period, to the extent that the Issuer would otherwise be required to recognise a profit for tax purposes in respect of its Permitted Investments as a result of the movement in the fair value recognised in its accounts of such Permitted Investments for that accounting period, the Issuer shall sell Permitted Investments in an aggregate amount equal to the Accounting Profit and shall, in the same accounting period or, where the Issuer makes a valid claim under section 199 of the Corporation Tax Act 2010 as long as the Original Borrower has previously exercised the Share Option, within nine months of the end of
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that accounting period, make a Gift Aid Payment to a Charitable Group Member in an amount equal to the Accounting Profit; and
(c) immediately prior to the end of each accounting period, to the extent that the Issuer has made a profit for tax purposes for that accounting period, the Issuer shall, in the same accounting period or, where the Issuer makes a valid claim under section 199 of the Corporation Tax Act 2010 as long as the Original Borrower has previously exercised the Share Option, within nine months of the end of that accounting period, make a Gift Aid Payment to a Charitable Group Member in an amount equal to such profit.
Subject to the conditions precedent set out in Clause 4.2 (Conditions to the Making of Further Commitments) of the Original Loan Agreement and any corresponding clause in any Additional Loan Agreement, the Issuer may make Further Commitments to each Borrower, each in an amount to be agreed between the Issuer, the relevant Borrower and the Security Trustee, following the issuance of further bonds pursuant to Condition 19 (Further Issues).
The Loan:
(a) in respect of a Borrower at any time is the nominal amount of the Commitment that has been advanced (or deemed to have been advanced and ignoring, for these purposes, any Actual Advance Amount) to that Borrower under the relevant Loan Agreement which remains outstanding at that time; and
(b) in respect of a Loan Agreement at any time is the aggregate nominal amount of the Commitment that has been advanced (or deemed to have been advanced and ignoring, for these purposes, any Actual Advance Amount) to Borrowers under that Loan Agreement which remains outstanding at that time.
Purpose
The proceeds of each Loan may only be used by a Borrower, as permitted by its constitution including, for the avoidance of doubt, the repayment of any existing indebtedness of such Borrower and any other amounts due and payable thereunder.
Interest
Rate of Interest
Following its advance, each Loan will carry interest from (and including) the date of its initial advance, payable in arrear by half yearly instalments on each Loan Payment Date (being four Business Days prior to each Interest Payment Date), at the rate of 4.665 per cent. per annum.
Interest Periods
Notwithstanding the fact that interest is payable on each Loan Payment Date, interest will accrue on each Loan from (and including) an Interest Payment Date (or, in the case of the first interest period of a Loan, the date of its initial advance ) to (but excluding) the immediately following Interest Payment Date (each, a Loan Interest Period).
Commitment Fee
On each Loan Payment Date, each Borrower shall pay to the Issuer a commitment fee in respect of any Undrawn Commitment in respect of the relevant Loan Interest Period in an amount equal to its pro rata share (based on the aggregate amount of all Undrawn Commitments of all Borrowers) of the aggregate of the interest payable by the Issuer under the Bonds on the following Interest Payment Date less (a) the aggregate of the interest received from the Borrowers under all Loan Agreements on such Loan Payment Date and (b) the interest otherwise received by the Issuer in respect of the Retained Proceeds in the relevant Loan Interest Period (including, but not limited to, any income received by the Issuer in respect of any Permitted Investments in which any Retained Proceeds are, for the time being, invested). Should the calculation of a Borrower’s commitment fee, after having deducted the
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requisite amounts under (a) and (b) be negative, the Issuer shall pay an amount equal to such negative result to such Borrower. The commitment fee shall accrue on a daily basis.
Repayment, Purchase and Prepayment
Repayment
Each Borrower must repay its Loan in 20 equal instalments of £50 per £1,000 of the nominal amount of the Commitment that has been advanced (or deemed to have been advanced and ignoring any Actual Advance Amount) four Business Days prior to each Interest Payment Date from, and including, 3rd January, 2036 to, and including 3rd July 2045 (the Loan Maturity Date).
Bond Purchase
Each Borrower or any other member of the Group may at any time purchase Bonds on the London Stock Exchange, by tender (available to all Bondholders alike) or by private treaty at any price. Following any such purchase, such Borrower or the relevant member of the Group may (but is not obliged to) surrender the Bonds to the Issuer to be cancelled. An amount of the outstanding balance of the relevant Loan equal to the Outstanding Principal Amount of the Bonds surrendered shall be deemed to be prepaid (or, to the extent that no Loan is then outstanding, then an amount of the relevant Undrawn Commitment equal to the Outstanding Principal Amount of the Bonds surrendered shall be deemed to be cancelled for the purposes of the relevant Loan Agreement and a corresponding portion of the Retained Proceeds shall be paid by the Issuer to the relevant Borrower or the relevant member of the Group).
The Original Borrower has acknowledged (and each Additional Borrower shall acknowledge) that the terms of the Bond Trust Deed provide that any Bonds which are for the time being held by or on behalf of, inter alios, a Borrower or any member of the Group as beneficial owner shall be deemed not to remain outstanding for the purpose of, inter alia, the right to attend and vote at any meeting of the Bondholders.
Optional Prepayment
Pursuant to Clause 5.3 (Optional Prepayment) of the Original Loan Agreement and the corresponding clause in any Additional Loan Agreement, each Borrower may, at any time before the Loan Maturity Date, subject to such Borrower giving a Prepayment Notice: (1) prepay the whole or (as the case may be) any part of the outstanding balance of its Loan and cancel the relevant Commitment in the amount prepaid or a lesser amount, or (2) prepay the whole or (as the case may be) any part of the outstanding balance of its Loan without cancelling any part of the relevant Commitment, in each case together with any interest accrued up to and including the date of prepayment and, in the case of (1) above, the relevant Prepayment Premium (being, for so long as any Bonds are outstanding, an amount equal to the excess of the amount notified to such Borrower by the Issuer as being the price determined under the Bond Trust Deed for the redemption of a corresponding nominal amount of the Bonds over the Outstanding Principal Amount and otherwise zero).
Prepayment Notice means in relation to a prepayment by a Borrower in respect of its relevant Loan Agreement, notice in writing to the Issuer and the Security Trustee not less than 45 nor more than 60 days' before the date of the relevant prepayment.
In the event that a Borrower makes a prepayment and elects to cancel all or part of its Commitment in a corresponding amount in respect of its relevant Loan Agreement, then the Issuer shall apply an amount equal to such cancelled amount of Commitment in accordance with Condition 9.2 (Early Redemption) and the balance (if any) of the prepaid amount shall be credited to the Ongoing Cash Security Account.
Mandatory Prepayment – Redemption of Bonds
If Bonds are to be redeemed prior to the Maturity Date, other than as a result of a prepayment or termination of a Loan Agreement, each Borrower shall prepay, at least one Business Day prior to the relevant date of redemption of those Bonds, the outstanding balance of the Loan, together with accrued interest and accrued commitment fee thereon up to and including the date of redemption.
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Mandatory Prepayment – Change of Status
Pursuant to Clause 5.6 (Mandatory Prepayment – Change of Status) of the Original Loan Agreement and the corresponding clause in any Additional Loan Agreement, each Borrower shall promptly notify the Issuer and the Security Trustee if it ceases to satisfy each of the Borrower Minimum Requirements. Within 180 days of such notification, such Borrower shall prepay the whole of the outstanding balance of its Loan, together with any interest and commitment fee accrued up to and including the date of prepayment, provided, however, that if such Borrower complies with the Borrower Minimum Requirements within such period of 180 days, the relevant Borrower shall no longer be required to prepay the Loan in accordance with the above-mentioned Clause 5.6 (Mandatory Prepayment – Change of Status) or such corresponding clause.
Redemption of Bonds – Further Payment in Respect of Retained Proceeds Par Amount
In the event that a Borrower elects to, or is otherwise required to, prepay the whole of the outstanding balance of its Loan and the Issuer is required to notify such Borrower of the price determined under the Conditions for the redemption of a corresponding Outstanding Principal Amount of the Bonds, then the Issuer shall be entitled to also take account of the redemption of such Outstanding Principal Amount of the Bonds (if no Commitment is put in place with another Borrower) that shall correspond to the Retained Proceeds Par Amount (being an amount equal to the Retained Proceeds including, where any Retained Proceeds are invested in Permitted Investments, the purchase price of the relevant Permitted Investments and ignoring, for these purposes, any increase or decrease in such Retained Proceeds as a result of gains or losses in respect of such Permitted Investments), and the price notified to such Borrower shall be increased accordingly.
Warranties and Covenants
Each Borrower will make various warranties and covenants pursuant to, in the case of the Original Borrower, Clause 8 (Warranties and Covenants by the Current Borrowers) of the Original Loan Agreement and, in the case of any Additional Borrower, the corresponding clause in its Loan Agreement. These warranties and covenants include (or will include, as the case may be), inter alia, the following:
Information Covenants
Each Borrower must supply to the Issuer and the Security Trustee not later than 180 days after the end of each relevant financial year (i) a copy of the audited financial statements of such Borrower for such financial year; and (ii) a certificate setting out, among other things, calculations in respect of the Asset Cover Test substantially in the form set out in the Loan Agreement (the Compliance Certificate) signed by two Authorised Signatories of such Borrower.
Negative Pledge
No Borrower shall create or allow to exist (and each Borrower shall procure that no Eligible Group Member creates or allows to exist) any Security Interest on any assets which are Security Assets, except as set out in, in the case of the Original Borrower, Clause 8.5(b) (Negative Pledge) of the Original Loan Agreement and, in the case of any Additional Borrower, the corresponding clause in its Loan Agreement, which includes (or will include, as the case may be) the Security Interests created pursuant to, inter alia, the Security Trust Deed and the Security Agreements and any Security Interests created with the prior written consent of the Issuer or by operation of law.
Charged Properties
Each Borrower shall obtain (and each Borrower shall procure that each Eligible Group Member obtains) any authorisation or licence required in order to enable the Security Trustee pursuant to the powers of enforcement conferred on it by the Security Documents to sell vacant Charged Properties and maintain insurances on and in relation to its Charged Properties.
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Covenants
Each Borrower shall (and each Borrower shall procure that each Eligible Group Member shall), unless the Security Trustee otherwise agrees in writing, comply in all material respects with any covenants or restrictive covenants relating to a Charged Property which are binding on it.
Guarantee and Indemnity
Pursuant to Clause 9 (Guarantee and indemnity) of the Original Loan Agreement and the corresponding clause in each Additional Loan Agreement, each Borrower has (or will have) irrevocably and unconditionally:
(a) guaranteed to the Issuer the punctual performance by each other Borrower of all such Borrowers' obligations under, inter alia, their respective Loan Agreements, the Security Trust Deed and their respective Security Agreements, other than each other Borrowers' obligations to repay principal and any prepayment premium thereon pursuant to their respective Loan Agreements (such amounts being, the Guaranteed Interest and Fee Amounts);
(b) undertaken with the Issuer that, whenever any other Borrower does not pay any Guaranteed Interest and Fee Amounts when due under its respective Loan Agreement, the Security Trust Deed or its respective Security Agreement(s), it must, immediately on demand by the Security Trustee and/or the Issuer, pay the Guaranteed Interest and Fee Amounts as is if it were the principal obligor;
(c) undertaken with the Issuer that, to the extent that the proceeds of the enforcement of the Underlying Security are insufficient to satisfy the Borrowers' obligations under their respective Loan Agreements in full (the shortfall being, the Guaranteed Principal Amount), it must, immediately on demand by the Security Trustee and/or the Issuer, pay the Guaranteed Principal Amount as if it were the principal obligor; and
(d) agreed to indemnify the Issuer immediately on demand against any loss or liability suffered by the Issuer if any obligation guaranteed by it is or becomes illegal or invalid.
Asset Cover Test
Pursuant to Clause 10.1 (Asset Cover Test) of the Original Loan Agreement and the corresponding clause in each Additional Loan Agreement, each Borrower shall procure that at all times the sum of:
(a) the Minimum Value of the Properties forming part of the Issuer's Designated Security;
(b) the Retained Proceeds Par Amount; and
(c) the Charged Cash,
will not be less than the Aggregate Funded Commitment,
provided however, that from and including the Final Charging Date, the Retained Proceeds Par Amount shall be deemed to be zero for the purpose of determining the Borrowers' compliance with the above test (the Asset Cover Test).
Interpretation
For these purposes:
Aggregate Funded Commitment means the aggregate amount of the Commitments under all Loan Agreements;
Charged Properties means any Properties which are the subject of fixed security (including, as applicable, by way of mortgage, assignment and/or fixed charge) by a Borrower or Eligible Group Member in favour of the Security Trustee, for the benefit of the Issuer, for the purpose of providing underlying security for the Bonds;
Designated Security means the assets, rights and property mortgaged or charged or assigned or the subject of any security created pursuant to any Security Document, the proceeds of which are allocated
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in the reduction of all monies, liabilities and obligations owing by the Borrowers to the Issuer under the Loan Agreements;
Final Charging Date means the date falling twelve months after the Issue Date.
Initial Properties means the Properties which as at the Issue Date are the subject of fixed security (including, as applicable, by way of mortgage, assignment and/or fixed charge) created by the Original Borrower in favour of the Security Trustee, for the benefit of the Issuer, and are set out in Schedule 9 (Initial Properties in Respect of the Original Commitment) to the Original Loan Agreement;
Minimum Value means:
100115
B
105
A
where:
A = the Value of the residential EUV-SH Charged Properties determined on the basis of EUV-SH; and
B = the Value of the residential MV-ST Charged Properties determined on the basis of MV-ST.
The Properties forming part of the Issuer's Designated Security shall each be treated as EUV-SH Charged Properties for the purpose of determining the Minimum Value unless and until a Value, determined on the basis of MV-ST, is given by an Approved Valuer in respect of any such Property and the Approved Valuer has confirmed that it has reviewed a Certificate of Title in respect of such Property certifying that it may be disposed of by the relevant Borrower or Eligible Group Member on an unfettered basis (meaning subject only to any existing tenancies disclosed in the Certificate of Title but not subject to any security interest, option or other encumbrance or to any restriction preventing or restricting its sale to, or use by, any person for residential use);
Property means all estates or interests of a Borrower or an Eligible Group Member in any freehold, heritable or leasehold property wheresoever situate within England and Wales now or in future belonging to it and all buildings, fixtures, fittings (other than tenants fixtures and fittings) and fixed plant and machinery from time to time thereon and all Related Rights (and Properties shall be construed accordingly);
Retained Proceeds Par Amount means an amount equal to the Retained Proceeds at the time of calculation and, for this purpose, where any Retained Proceeds are at that time invested in Permitted Investments, the amount of such Retained Proceeds shall be taken as the purchase price of the relevant Permitted Investments ignoring any gains or losses in respect of those Permitted Investments since the date of purchase; and
Value means, at any time and in relation to the Charged Properties, the value of those properties as shown in the then latest Full Valuation Report or, if later, the latest Desk Top Valuation Report on the basis of EUV-SH or, as the case may be, MV-ST (provided that if any Charged Property or part thereof is sold pursuant to a Right to Buy, the value of the relevant Charged Property shall, for the purposes of this definition and with effect from the date of the relevant sale or release, be zero (if the entire relevant Charged Property has been sold) or (if only part of the relevant Charged Property has been sold) shall be the proportion of the value of the Charged Property which has not been sold pursuant to the relevant Right to Buy).
Substitution and Release of Charged Properties and Statutory Disposals
Substitution
At the request and expense of a Borrower or Eligible Group Member, the Security Trustee shall (subject to receiving instructions to do so and an amended Security Certificate from the Borrowers and the Issuer in accordance with the relevant Security Trust Deed) release from the relevant Security Documents (and/or reallocate, if applicable) such of the Properties (the Released Properties) forming part of the Issuer's Designated Security and substitute for the Released Properties other Properties
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(each, a Substitute Property) as may be selected by such Borrower or Eligible Group Member, provided that such Borrower or Eligible Group Member satisfies the conditions precedent specified in the applicable Loan Agreement in relation to the Substitute Properties. Such conditions precedent include, inter alia, a completed Substitute Property Certificate certifying, inter alia, that the relevant Substitute Property is a residential property of a type and nature that is usually owned by Registered Providers of Social Housing, that, immediately following such release (and/or reallocation, if applicable) and substitution, the Asset Cover Test will not be breached as a result of the substitution of the relevant Charged Properties and that no Event of Default or Potential Event of Default has occurred and is continuing, a Full Valuation Report in respect of each Substitute Property and a Certificate of Title in respect of the Substitute Properties.
Cash Security
Each Borrower or Eligible Group Member may deposit the proceeds of disposal of the relevant Charged Properties which are released from charge under the relevant Security Trust Deed into the Ongoing Cash Security Account of the Issuer for the purpose of maintaining the Asset Cover Test (for the avoidance of doubt, no Borrower or Eligible Group Member shall be required to monitor the market value of any Permitted Investments). The Charged Cash (as defined in Condition 1 (Definitions)) may be withdrawn from the Ongoing Cash Security Account (a) to be applied by the relevant Borrower or Eligible Group Member (provided, for the avoidance of doubt, that such Borrower or Eligible Group Member continues, at such time, to be a Registered Provider of Social Housing) in the acquisition of a Substitute Property or (b) to the extent that such withdrawal would not cause a breach of the Asset Cover Test.
Notwithstanding the above, any Borrower or Eligible Group Member may, at any time, deposit, or arrange for the deposit of, any other money into the Ongoing Cash Security Account for the purposes of satisfying the Asset Cover Test.
The Original Borrower has acknowledged (and each Additional Borrower and Eligible Group Member will be required to acknowledge) that the money standing to the credit of the Ongoing Cash Security Account shall be charged in favour of the Bond Trustee pursuant to the terms of the Bond Trust Deed.
The Original Borrower has also acknowledged (and each Additional Borrower and Eligible Group Member will be required to acknowledge) that the Issuer may invest all or any part of the Charged Cash in Permitted Investments in accordance with the Custody Agreement and that, as a result of any gains or losses made by the Issuer in respect of such Permitted Investments and any income received thereon (which shall, for the avoidance of doubt, be credited to the Ongoing Cash Security Account), the amount of such Charged Cash may be greater or less than the amount deposited in Ongoing Cash Security Account by such Borrower or Eligible Group Member. The Original Borrower has acknowledged (and each Additional Borrower and Eligible Group Member will be required to acknowledge) that it shall not have any recourse to the Issuer in respect of any losses realised by the Issuer in respect of the Charged Cash as a result of investment in any Permitted Investments.
Following the redemption in full of the Bonds, the Issuer shall return any amount standing to the credit of the Ongoing Cash Security Account to the relevant Borrowers and/or Eligible Group Members, to the extent that such balance has not otherwise been applied in accordance with the terms of the Bond Trust Deed.
Release and reallocation
At the request and expense of a Borrower or an Eligible Group Member, the Security Trustee shall release (subject to receiving instructions to do so and an amended Security Certificate from the Borrowers and the Issuer in accordance with the Security Trust Deed) from the relevant Security Documents (and/or reallocate, if applicable) such Properties forming part of the Issuer's Designated Security as may be selected by such Borrower or Eligible Group Member, provided that such Borrower or Eligible Group Member delivers to the Issuer and the Security Trustee a completed Property Release Certificate, certifying that, immediately following such release (and/or reallocation, if applicable), the Asset Cover Test will not be breached as a result of the release (and/or reallocation, if applicable) of such part of the Issuer's Designated Security and that no Event of Default or Potential Event of Default has occurred and is continuing.
I-A8.2.2.9
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Statutory Disposals
Each Borrower and Eligible Group Member shall have the right to withdraw Property from the Issuer's Designated Security pursuant to any Statutory Disposal and the relevant Borrower or Eligible Group Member shall deliver to the Issuer and the Security Trustee, as soon as reasonably practicable after it has received notice of such Statutory Disposal, a completed Statutory Disposal Certificate, certifying that the relevant withdrawal relates to a Statutory Disposal.
Additional Properties
Pursuant to Clause 3 (Additional Security) of the Original Borrower Security Trust Deed (or the corresponding clause in the relevant Additional Security Trust Deed, as applicable) (see Security Trust Deeds – Additional Security below), the Security Trustee may from time to time accept as security for the Secured Liabilities the benefit of any security, rights or obligations, subject to the requirements as to the nature of the security and documentation relating thereto as set out therein (including the conditions precedent documents set out in the relevant Loan Agreement).
Prior to creating a Security Agreement in respect of any Property for the benefit of the Issuer, the relevant Borrower or Eligible Group Member must, in respect of such security, provide the conditions precedent documents specified in the Loan Agreement and must provide a completed Additional Property Certificate (signed by the relevant Borrower or Eligible Group Member) confirming that, inter alia, the proposed Charged Properties are residential properties of a type and nature that are usually owned by Registered Providers of Social Housing, Full Valuation Reports in respect of each such Property and a Certificate of Title in respect of each tranche of Properties charged.
Valuations
Full Valuations and Desk Top Valuations
In accordance with Clause 12.1 (Full Valuations and Desk Top Valuations) of the Original Loan Agreement and the corresponding clause in any Additional Loan Agreement, each Borrower shall deliver, or procure the delivery, to the Issuer and the Security Trustee of:
(a) a Full Valuation Report, being a valuation report prepared by an Approved Valuer which values all Charged Properties on a full valuation basis (1) in the period between 31st March, 2019 and the date falling 120 days thereafter (or, at the option of the Borrowers acting together, within the same period in any prior calendar year), and (2) unless the Issuer and each Borrower agree otherwise, thereafter within 120 days of each consecutive fifth anniversary of the date on which the Full Valuation Report was previously provided (the first such Full Valuation Report appears in Valuation Report below); and
(b) a Desk Top Valuation Report, being a valuation report prepared by an Approved Valuer which values all the Charged Properties on a "desk-top" basis in the period between 31st March and the date falling 120 days thereafter in each year other than a year in respect of which such Charged Properties have been valued on a full valuation basis through the delivery of a Full Valuation Report. The first such Desk Top Valuation Report must be delivered within 120 days after 31st March, 2015.
For these purposes Approved Valuer means any of Countrywide plc, Jones Lang LaSalle Limited, Mazars Property Consultancy Limited or Savills Advisory Services Limited, or any subsidiary of any of them or such other reputable firm of surveyors which is a member of the Royal Institute of Chartered Surveyors as may be selected by any Borrower and approved by the Security Trustee from time to time.
Loan Events of Default and Enforcement
Borrower Default
Each of the following (which is set out in more detail in Clause 14 (Borrower Default) of the Original Loan Agreement and will be set out in more detail in the corresponding clause in any Additional Loan Agreement) is a Borrower Default:
I-A8.2.2.9
49
(a) Non-payment
The Borrower does not pay on the due date any amount payable by it under the Finance Documents in the manner required under the Finance Documents, unless the non-payment continues for a period of not more than seven days in the case of principal and not more than fourteen days in the case of interest. Finance Documents means each Loan Agreement, each Security Trust Deed, each Security Agreement and any other document designated as such by the Issuer and a Borrower.
(b) Breach of other obligations
The Borrower or any Eligible Group Member fails to perform or observe any of its obligations under the Finance Documents (other than as referred to in (a) above and (j) below) and (except in any case where, in the opinion of the Security Trustee, the failure is incapable of remedy when no such continuation or notice as is hereinafter mentioned will be required) the failure continues for the period of 30 days next following the service by the Security Trustee on the relevant Borrower or Eligible Group Member of notice requiring the same to be remedied.
(c) Other non-payment
(A) Any other present or future indebtedness of the Borrower or an Eligible Group Member for or in respect of moneys borrowed or raised becomes due and payable prior to its stated maturity by reason of any actual default, event of default or the like (howsoever described), or (B) any such indebtedness is not paid when due or, as the case may be, within any originally applicable grace period, or (C) the Borrower or any Eligible Group Member fails to pay when due any amount payable by it under any present or future guarantee for, or indemnity in respect of, any moneys borrowed or raised; provided that the aggregate amount of the relevant indebtedness, guarantees and indemnities in respect of which one or more of the events mentioned in (A), (B) or (C) above in this paragraph (c) have occurred equals or exceeds £10,000,000 or its equivalent in other currencies (as reasonably determined by the Security Trustee) (and provided further, for the avoidance of doubt, that the amounts mentioned in (A), (B) or (C) above in this paragraph (c) shall exclude the amount of any Public Sector Subsidy except for any Public Sector Subsidy which is or becomes due and payable to the relevant grant making body or organisation).
(d) Enforcement Event
An Enforcement Event occurs under a Finance Document. Enforcement Event means, in relation to a Finance Document, any of the events, howsoever described, specified in such Finance Document as an event upon the occurrence of which the Issuer (or any person on its behalf) becomes entitled (1) to call for early repayment of all or any of the sums owing to the Issuer under, amongst other agreements, such Finance Document and/or (2) to terminate all or any of the facilities under, or all or any of the transactions entered into pursuant to, such Finance Document prior to the scheduled maturity thereof (other than the termination of any hedging arrangement contemplated under any Finance Document where such termination occurs other than through the default of the Borrower).
(e) Winding-up
Any order is made by any competent court or resolution passed for the winding up or dissolution of the Borrower or any Eligible Group Member save for the purposes of a Permitted Reorganisation or a reorganisation on terms previously approved in writing by the Security Trustee.
(f) Cessation of Business
The Borrower or an Eligible Group Member ceases or threatens to cease to carry on the whole or, as determined by the Security Trustee, substantially the whole of its business, save for the purposes of a Permitted Reorganisation or a reorganisation on terms previously approved in writing by the Security Trustee.
50
(g) Failure or inability to pay debts
The Borrower or an Eligible Group Member stops or threatens to stop payment of, or is unable to, or admits inability to, pay, its debts (or any class of its debts) as they fall due, or is deemed unable to pay its debts pursuant to or for the purposes of any applicable law, or is adjudicated or found bankrupt or insolvent.
(h) Insolvency
Any of the insolvency related events occurs or proceedings are taken as referred to in Clause 14.9 (Insolvency) or Clause 14.10 (Insolvency Proceedings), respectively of the Original Loan Agreement and the corresponding clauses in any Additional Loan Agreement (which exclude any Permitted Reorganisation or reorganisation on terms previously approved in writing by the Security Trustee).
(i) Unlawfulness
It is or becomes unlawful for the Borrower or any Eligible Group Member to perform any of its obligations under the Finance Documents to which they are, respectively, a party.
(j) Breach of the Asset Cover Test
The Borrower fails to perform its obligations under Clause 10.1 (Asset Cover Test) of the Original Loan Agreement (or the corresponding clause in the relevant Additional Loan Agreement, as applicable) and (except in any case where, in the opinion of the Security Trustee, the failure is incapable of remedy when no such continuation or notice as is hereinafter mentioned will be required) the failure continues for the period of 60 days next following the service by the Security Trustee on the Borrower of notice requiring the same to be remedied.
Obligation to Notify the Issuer and the Security Trustee
Each Borrower shall notify the Issuer and the Security Trustee of any Borrower Default (and the steps, if any, being taken to remedy it) or potential Borrower Default in respect of its Loan Agreement promptly upon becoming aware of the same. The Issuer shall also notify the Security Trustee of any Borrower Default or potential Borrower Default promptly upon becoming aware of the same (unless the Issuer is aware that a notification has already been provided by the relevant Borrower) including, but not limited to, the non-payment by a Borrower of any amounts owing to the Issuer under its Loan Agreement on the due date for payment thereof.
Borrower Default Notice
Following the occurrence of a Borrower Default (but in the case of the happening of any of the events described in paragraphs (b) (Breach of other obligations), (c) (Other non-payment) and (i) (Unlawfulness) above, only if the Security Trustee shall have certified in writing to the Borrower that such event is, in its opinion, materially prejudicial to the interests of the Issuer), the Issuer may declare by notice to the relevant Borrower either:
(a) that the security for the relevant Loan has become enforceable, whereupon the security for the relevant Loan shall become, immediately enforceable (and the Issuer shall notify the Security Trustee of the same in accordance with the Security Trust Deed); and/or
(b) (irrespective of whether a notice to the effect set out in (a) shall have already been given) that the Loan has become due and repayable, whereupon that Loan shall become immediately due and repayable at the outstanding balance thereof together with accrued interest, premium (if any) and any other amounts and the security therefor shall become immediately enforceable.
Enforcement
If the security constituted under any Security Documents for the benefit of the Issuer becomes enforceable as a result of the service of a notice pursuant to Clause 14.14 (Borrower Default Notice) of the Original Loan Agreement (or the corresponding clause in any Additional Loan Agreement), then the Security Trustee or any receiver (where appropriate) shall hold the monies arising from any sale, calling in, collection or conversion under, or otherwise arising from the exercise of, the powers of
I-A8.2.2.6
I-A8.3.4.5
51
conversion contained in the Security Documents after the security has become enforceable upon trust to apply the same:
(a) first, in payment or retention of all costs, charges, expenses and liabilities incurred in or about the exercise of such powers or otherwise in accordance with the Security Documents and payments made by the Security Trustee, any Appointee or any receiver in accordance with the Security Documents and of all remuneration payable to the Security Trustee, any Appointee or any receiver in accordance with the Security Documents with interest thereon as provided in the Security Documents;
(b) second, in or towards payment to the Issuer of all interest then due and remaining unpaid on the relevant Loan and all commitment fees then due and remaining unpaid;
(c) third, in or towards payment to the Issuer of all principal and premium (if any) then due and remaining unpaid in respect of the relevant Loan; and
(d) fourth, in or towards payment to the Issuer of all other amounts then due and remaining unpaid under the relevant Loan Agreement.
Taxes
Each Borrower must make all payments to be made by it to the Issuer under, inter alia, its Loan Agreement, the Security Agreements and the Security Trust Deed, without any deduction or withholding for or on account of tax, unless a deduction or withholding is required by law.
If a deduction or withholding from any such payment is required by law to be made by such Borrower, the amount of the payment due from such Borrower shall be increased to an amount which (after making such deduction or withholding) leaves an amount equal to the payment which would have been due if no deduction or withholding had been required.
If, as a result of any actual or proposed change in tax law, the Issuer determines (in its reasonable commercial judgement) that it would on the next following Interest Payment Date be required to make a withholding or deduction in respect of payments to be made by the Issuer to the Bondholders pursuant to the Conditions (other than in respect of a Bondholder Specific Withholding), the Issuer shall notify each Borrower of the same. Each Borrower may (but, for the avoidance of doubt, shall not be obliged to), in its sole discretion, pay to the Issuer its pro rata share of such additional amounts as will enable the Issuer (after such withholding or deduction) to pay to the Bondholders the amounts of principal and interest which they would have received in respect of the Bonds in the absence of such withholding or deduction. Each Borrower shall continue to pay such additional amounts to the Issuer unless and until such Borrower delivers to the Issuer a notice stating that it shall cease to make such additional payments with effect from the next following Interest Payment Date.
In the event that one or more Borrowers does not choose to make such additional payments (or indicates that it intends to cease to make such additional payments), the remaining Borrowers may (but, for the avoidance of doubt, shall not be obliged to), in their sole discretion, pay to the Issuer such increased amount as will enable the Issuer (after such withholding or deduction) to pay to the Bondholders the amounts of principal and interest which they would have received in respect of the Bonds in the absence of such withholding or deduction. If the remaining Borrowers (either collectively or individually) do not choose to make such payments and as a result the Issuer will not have sufficient funds to pay the additional amounts in respect of the Bonds, the Issuer shall not opt to pay such additional amounts (or, having so opted, will notify the Bond Trustee and the Bondholders of its intention to cease paying such additional amounts) and the Bonds shall be redeemed in accordance with Condition 9.3 (Early Redemption for Tax Reasons), whereupon each Borrower shall be required to prepay the outstanding balance of its Loan, together with accrued interest and accrued commitment fee thereon up to and including the date of redemption.
Governing Law
Each Loan Agreement, and any non-contractual obligations or matters arising from or connected with it, shall be governed by, and construed in accordance with, English law.
I-LR2.2.2(1)
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DESCRIPTION OF THE ISSUER SECURITY, THE SECURITY AGREEMENTS AND THE SECURITY TRUST DEED
The following consists of a summary of certain provisions of the Bond Trust Deed, the Original Security Agreements and the Original Borrower Security Trust Deed and is qualified by reference to the detailed provisions thereof. The Bond Trust Deed, the Original Security Agreements and the Original Borrower Security Trust Deed are not, however, incorporated by reference into, and therefore do not form part of, this Prospectus.
Definitions used in this section but not otherwise defined in this Prospectus have the meanings given to them in the Bond Trust Deed, the Original Security Agreements and/or the Original Borrower Security Trust Deed.
See, also, Risk Factors – Risks Relating to the Security of the Bonds.
Security framework
Issuer Security
The Issuer's obligations in respect of the Bonds are secured pursuant to the Bond Trust Deed in favour of the Bond Trustee for the benefit of itself and the Bondholders and the other Secured Parties by the following (the Issuer Security):
(a) an assignment by way of security of the Issuer's rights, title and interest arising under each Loan Agreement, the Security Agreements, the Security Trust Deeds, the Corporate Services Agreement, the Agency Agreement, the Account Agreement and the Custody Agreement;
(b) a charge by way of first fixed charge over all moneys and/or securities from time to time standing to the credit of the Transaction Account, the Ongoing Cash Security Account, the Initial Cash Security Account and the Custody Account and all debts represented thereby; and
(c) a charge by way of first fixed charge over all sums held from time to time by the Paying Agents for the payment of principal or interest in respect of the Bonds; and
(d) a first floating charge over all of the Issuer's property, assets, rights and revenues (whether or not the subject of fixed security as aforesaid).
Original Borrower Security Trust Deed
Pursuant to a Security Trust Deed originally dated 6th November, 2000 and amended and restated on 19th August, 2008 between, inter alios, the Original Borrower and the Security Trustee (as amended from time to time, the Original Borrower Security Trust Deed) a security trust was established pursuant to which the Security Trustee holds for the benefit of designated beneficiaries security created by the Original Borrower from time to time in favour of the Security Trustee. On the Issue Date, the Issuer has been designated as a beneficiary under the Original Borrower Security Trust Deed.
Eligible Group Members
Any Borrower may procure that Properties are charged as underlying security for the Bonds by an Eligible Group Member. Eligible Group Members include any member of the Group which is approved by each existing Obligor and which has either acceded to the Original Borrower Security Trust Deed or has entered into an Additional Security Trust Deed (as defined below) and has created (and which is subsisting) or will create security pursuant to a Security Agreement substantially in the form set out in the relevant Security Trust Deed. Unless otherwise approved by the Security Trustee, each such Eligible Group Member must be (a) a member of the Group and (b) a Registered Provider of Social Housing.
I-A8.2.2.13
I-A8.3.4.7
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Additional Security Trust Deeds
The Issuer and Security Trustee may from time to time:
(a) agree to another Borrower or Eligible Group Member acceding to the Original Borrower Security Trust Deed with the effect that security created by such Borrower or Eligible Group Member from time to time in favour of the Security Trustee will be held by the Security Trustee on trust for the benefit of the Issuer (although the existing terms of the Original Borrower Security Trust Deed do not currently expressly provide for such accession); and/or
(b) enter into one or more security trust deeds with another Borrower or Eligible Group Member which establish a security trust similar to the Original Borrower Security Trust Deed with the effect that security created by such Borrower or Eligible Group Member from time to time in favour of the Security Trustee is held by the Security Trustee on trust for the benefit of the Issuer (each an Additional Security Trust Deed and, together with the Original Borrower Security Trust Deed, the Security Trust Deeds and each a Security Trust Deed).
Original Security Agreements
The Original Borrower has, as security for Borrowers' liabilities under the Loan Agreement (the Original Borrower Secured Liabilities), in relation to the Initial Properties, entered into the Original Security Agreements, being:
(a) Fixed Charges dated 22nd December, 2008, 31st March, 2009, 23rd July, 2009, 23rd March, 2012, 31st October, 2012 and 7th August, 2013 (each an Original Fixed Charge, and together with any additional Fixed Charge entered into by the Original Borrower in favour of the Security Trustee as security in respect of such liabilities, each a Fixed Charge); and
(b) Mortgage Deeds dated 22nd December, 2008, 31st March, 2009, 23rd July, 2009, 23rd March, 2012, 31st October, 2012, 7th August, 2013 and 3rd July, 2014 (each an Original Mortgage Deed, and together with any additional Mortgage Deed entered into by the Original Borrower in favour of the Security Trustee as security in respect of such liabilities, each a Mortgage Deed),
in each case substantially in the form set out in the Original Borrower Security Trust Deed.
Additional Security Agreements
From time to time a Borrower or an Eligible Group Member may enter into one or more additional security agreements in favour of the Security Trustee (each an Additional Security Agreement and, together with each Original Security Agreement, the Security Agreements) in accordance with the terms of a Security Trust Deed pursuant to which (1) such Borrower provides security in respect of its liabilities under the relevant Loan Agreement or (2) such Eligible Group Member provides security in respect of one or more Borrowers' liabilities under one or more Loan Agreements.
Each Security Agreement, each Security Trust Deed and any other document creating, evidencing or granting any guarantee or security in support of the liabilities of any Borrower or an Eligible Group Member under the Finance Documents are together the Security Documents. The Security Assets means the assets which are the subject of the relevant security created pursuant to the relevant Security Document; Relevant Documents means the Finance Documents, the Security Documents and the Ancillary Documents; and Ancillary Documents means the valuations, reports or certificates of title held by or given on behalf of the relevant Borrower or Eligible Group Member in respect of the Security Assets.
Security Trustee
Prudential Trustee Company Limited is the security trustee under the Original Borrower Security Trust Deed and the Original Security Agreements and it (or any successor as such security trustee) will be the security trustee under each Additional Security Trust Deed and each Additional Security Agreement, in each case for, inter alios, the Issuer (including any such successor, the Security Trustee).
I-A8.2.2.3
I-A8.2.2.7
I-A8.2.2.8
I-A8.3.3
G-A6.1
G-A6.2
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Security Agreements
Original Security Agreements
(a) Mortgage
Pursuant to the Original Mortgage Deeds, the Original Borrower, as security for payment and discharge of the Original Borrower Secured Liabilities, has charged with full title guarantee, by way of first legal mortgage all of the Original Borrower's right, title and interest from time to time in the Initial Properties.
(b) Assignment
Pursuant to the Original Fixed Charges, the Original Borrower, with full title guarantee, as security for payment of all Secured Liabilities, has assigned to the Security Trustee for the benefit of itself and, inter alios, the Issuer all of its rights, title and interest in and to:
(1) the personal agreements and covenants (still subsisting and capable of being enforced) entered into by the tenants, lessees, licensees or other parties under the Letting Documents relating to the Initial Properties and by all guarantors and all security held by the Original Borrower from time to time, whether present or future, in respect of the obligations of the tenants, lessees, licensees or other parties under such Letting Documents (including, without limiting the generality of the foregoing, all moneys due and owing to the Original Borrower or which may become due and owing to the Original Borrower at any time in the future in connection therewith); and
(2) all agreements, now or from time to time entered into or to be entered into to enable the charging of the Initial Properties and other Security Assets and for the sale, letting or other disposal or realisation of the whole or any part of the Security Assets (including, without limiting the generality of the foregoing, all moneys due and owing to the Original Borrower or which may become due and owing to the Original Borrower at any time in the future in connection therewith) and including any development agreements, contracts or warranties in relation to the Security Assets the benefit of which is or will be vested in the Original Borrower (so far as such are assignable).
The Original Borrower shall, however, until an event of default or potential event of default has occurred and is outstanding under any Loan Agreement which is secured pursuant to a Security Trust Deed (including the Original Loan Agreement), be entitled to exercise all its rights under or in connection with such agreements and covenants.
(c) Fixed charge
Pursuant to the Original Fixed Charges, the Original Borrower, as security for the payment of all Original Borrower Secured Liabilities, has charged in favour of the Security Trustee for the benefit of itself and, inter alios, the Issuer by way of first fixed charge:
(1) all benefits in respect of the Insurances relating to the Initial Properties and all claims and returns of premiums in respect thereof;
(2) the benefit of all present and future licences, consents and authorisations (statutory or otherwise) held in connection with the Security Assets and the use of any of the Security Assets and the right to recover and receive all compensation which may at any time become payable to it in respect thereof; and
(3) if and in so far as the legal mortgage referred to in Mortgage above or the assignments referred to in Assignment above shall for any reason be ineffective as legal mortgages or assignments, the assets referred to therein.
See Valuation Report for further information in relation to the Initial Properties.
The security expressly granted by the Original Borrower pursuant to the Original Security Agreements does not include a floating charge.
I-A8.2.2.3
I-A8.2.2.7
I-A8.2.2.8
I-A8.3.3
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Additional Security Agreements
If a Borrower or Eligible Group Member enters into an Additional Security Agreement, such Borrower or Eligible Group Member (as applicable) will create fixed charges, legal mortgages and assignments, pursuant to such Additional Security Agreement, in favour of the Security Trustee having substantially the same nature and effect in relation to the relevant Charged Properties as the fixed charges, legal mortgages and assignments created by the Original Borrower in relation to the Initial Properties under the Original Security Agreements (as summarised in Original Security Agreements above).
Representations, Warranties and Undertakings
Each Borrower and each Eligible Group Member shall make various representations in respect of the Charged Properties including as to ownership, planning permission, covenants and security interests. In addition, each Borrower and each Eligible Group Member shall undertake to, inter alia, repair, insure, pay or procure the payment of taxes in respect of and comply with all leases in respect of, the Charged Properties.
Governing Law
The Security Agreements, and any non-contractual obligations or matters arising from or connected with them, are, or will be, governed by and construed in accordance with English law.
Security Trust Deeds
The benefit of the security created by the Borrowers and the Eligible Group Members pursuant to the Security Agreements shall be held by the Security Trustee on trust for the benefit of itself and, inter alios, the Issuer on the terms of the relevant Security Trust Deed.
Designation of Security Assets
The Original Borrower Security Trust Deed provides, and each Additional Security Trust Deed will provide, that the Security Trustee, the relevant Borrower(s) and, in the case of the Loan Agreements, the Issuer shall schedule and agree the allocation of Properties which shall comprise the Issuer's Designated Security in respect of the Loan Agreements. All Properties which are not Designated Security shall form the Undesignated Security.
Additional Security
Pursuant to Clause 3.2 (Additional Security) of the Original Borrower Security Trust Deed (or the corresponding clause in the relevant Additional Security Trust Deed, as applicable), the Security Trustee may from time to time accept as security for the Secured Liabilities the benefit of any security, rights or obligations, subject to the requirements as to the nature of the security and documentation relating thereto as set out therein (including the conditions precedent documents set out in the relevant Loan Agreement).
Release and Reallocation of Security
Pursuant to the terms of the Security Trust Deeds, the Borrowers and the Issuer may agree to amend the Issuer's Designated Security by either removing all or part of the Issuer's Designated Security, designating in favour of the Issuer other Designated Security formerly designated to another beneficiary under the relevant Security Trust Deed so that such Designated Security shall form part of the Issuer's Designated Security or by designating any Undesignated Security as the Issuer's Designated Security by, inter alia, delivering an amended Security Certificate in accordance with the relevant Security Trust Deed signed by each Borrower and the Issuer to the Security Trustee.
At any time prior to the Security Trustee taking any steps to enforce the Undesignated Security, upon receiving instructions from the relevant Borrower or Eligible Group Member, the Security Trustee shall release the benefit of any encumbrance, rights or obligations held by it over the Undesignated Security provided that such Borrower or Eligible Group Member shall have paid to the Security Trustee, or provided for to the satisfaction of the Security Trustee, all Trustee Costs which relate to that Undesignated Security.
I-A8.2.2.8
I-LR2.2.2(1)
I-A8.2.2.1
I-A8.2.2.7
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Any such release or reallocation will be subject to the requirements set out in the Loan Agreements (see Description of the Loan Agreements above).
Governing Law
Each Security Trust Deed, and any non-contractual obligations or matters arising from or connected with it, are (or shall be) governed by and shall be construed in accordance with English law.
Enforcement of security and application of proceeds
Enforcement of Issuer Security
In enforcing the Issuer Security (including the Issuer's rights, title and interests in the Security Trust Deed and the Security Agreements insofar as they relate to the Bonds) the Bond Trustee may act in its discretion. It is, however, required to take action, pursuant to Condition 12.2, where so directed by the requisite majority of the Bondholders provided, however, that it is secured and/or indemnified and/or pre-funded to its satisfaction.
The proceeds of enforcement of the Issuer Security will be applied by the Bond Trustee in accordance with the Post-enforcement Priority of Payments (see Condition 5.2 (Post-enforcement)).
Enforcement of Security Documents
Each Security Agreement provides, or will provide, that at any time after an Enforcement Event has occurred under any Loan Agreement which is secured pursuant to the relevant Security Trust Deed (including the Original Loan Agreement), the security created by or pursuant to such Security Agreement will be immediately enforceable and the Security Trustee may enforce all or any part of such security in such manner as the lender(s) under the relevant Loan Agreement (including the Original Loan Agreement) direct subject to the terms of the relevant Loan Agreement.
The Security Agreements further shall entitle the Security Trustee and, inter alios, the Issuer to be indemnified out of the Security Assets in respect of, inter alia, all liabilities and expenses properly incurred by them in the execution or purported execution in good faith of any of the powers, authorities or discretions vested in them pursuant to the Security Agreements.
Pursuant to Clause 6.2 of the Original Borrower Security Trust Deed (or the corresponding clause in the relevant Additional Security Trust Deed, as applicable), the Security Trustee shall only be required to take action to enforce or protect the security in respect of the Loan Agreements if so instructed by the Issuer (and then only if it has been indemnified and/or secured to its satisfaction).
In respect of instructions given by the Issuer, the Issuer has assigned its rights under, inter alia, the Security Trust Deeds and the Security Agreements to the Bond Trustee and, pursuant to Condition 6.3, and the Issuer has covenanted not to take any action or direct the Security Trustee to take any action pursuant thereto except with the prior consent of the Bond Trustee. The Bond Trustee may, but is not obliged to, seek the consent of the Bondholders in accordance with the Bond Trust Deed prior to giving any such consent.
Application of Proceeds - Security Agreements
The Original Security Agreements provide and each Additional Security Agreement will provide that any moneys received by the Security Trustee pursuant to the enforcement of the security constituted by or pursuant to the relevant Security Agreement shall be applied by the Security Trustee in the following order of priority:
(a) in satisfaction of or provision for all remuneration, costs, charges, expenses and liabilities (including interest) (together Relevant Trustee Costs) incurred and payments made by the Security Trustee or any receiver appointed under such Security Agreement and of all remuneration due under such Security Agreement together with interest on the foregoing (as well after as before judgment and payable on demand) at the Default Rate from the date the same became due and payable by the Borrower until the date the same are unconditionally and irrevocably paid and discharged in full;
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(b) in or towards payment of the Secured Liabilities or such part of them as is then due and payable; and
(c) in payment of the surplus (if any) to the Borrower or other person entitled thereto.
Application of Proceeds - Security Trust Deeds
The Original Borrower Security Trust Deed provides and each Additional Security Trust Deed will provide that upon the enforcement of any of the security constituted by or pursuant to any of the relevant Security Documents, and after satisfying claims which at law rank in priority to sums owing under or in respect of any of the Relevant Documents, the Security Trustee shall apply all Proceeds and all money derived therefrom:
(a) in respect of Designated Security in the following order:
(1) first, in or towards payment of all Relevant Trustee Costs relating to that pool of Designated Security and to the extent the Security Trustee has received payment from an Instructing Party pursuant to its indemnity, the Security Trustee will pay such Proceeds to that Instructing Party;
(2) secondly, in relation to the obligations owed by the Borrower under the relevant Finance Document to which, at the relevant time, that pool of Designated Security has been designated towards payment of the Designated Debt attributable to the Beneficiary or Beneficiaries which are party to that Finance Document; and
(3) thirdly: (A) in the event that at the relevant time there are no other Beneficiaries with an outstanding Shortfall Amount, in payment of the surplus (if any) to the relevant Borrower or Eligible Group Member; or (B) in the event that at the relevant time there are any Beneficiaries with an outstanding Shortfall Amount, then any such surplus shall be held by the Security Trustee to the order of such Affected Beneficiaries to be applied in discharge of such Shortfall Amount(s) in accordance with the provisions of sub-paragraph (2) of paragraph (b) below; and
(b) any moneys received by the Security Trustee or by any receiver appointed by it pursuant to any Security Document in respect of any Undesignated Security (together with the related Security Assets) shall be applied by the Security Trustee in the following order:
(1) first, in or towards payment of all Relevant Trustee Costs relating to the Undesignated Security;
(2) second, in or towards payment to each Affected Beneficiary of an amount equal to the Shortfall Amount owed to that Affected Beneficiary and, where it is determined that there would be insufficient Security Assets in the Undesignated Security to discharge the Shortfall Amount of each Affected Beneficiary requiring an application to be made to it, then the Proceeds from the Undesignated Security and all monies derived therefrom shall be apportioned pro rata between the Affected Beneficiaries by reference to the proportion which the Liabilities owed to each Affected Beneficiary bear to the aggregate Liabilities owed to all Affected Beneficiaries at the time of such application; and
(3) third, in payment of any surplus to the relevant Borrower or Eligible Group Member.
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DESCRIPTION OF THE ACCOUNT AGREEMENT AND THE CUSTODY AGREEMENT
The Issuer has appointed The Bank of New York Mellon, London Branch, a banking corporation organised pursuant to the laws of State of New York operating through its branch in London at One Canada Square, London E14 5AL, United Kingdom, as its Account Bank pursuant to the Account Agreement and its Custodian pursuant to the Custody Agreement, in each case in relation to the issue of the Bonds.
The Bank of New York Mellon, a wholly owned subsidiary of The Bank of New York Mellon Corporation, is incorporated, with limited liability by Charter, under the Laws of the State of New York by special act of the New York State Legislature, Chapter 616 of the Laws of 1871, with its Head Office situated at One Wall Street, New York, NY 10286, USA and having a branch registered in England and Wales with FC Number 005522 and BR Number 000818 with its principal office in the United Kingdom situated at One Canada Square, London E14 5AL.
The Bank of New York Mellon’s corporate trust business services $12 trillion in outstanding debt from 55 locations around the world. It services all major debt categories, including corporate and municipal debt, mortgage-backed and asset-backed securities, collateralised debt obligations, derivative securities and international debt offerings. The Bank of New York Mellon’s corporate trust and agency services are delivered through The Bank of New York Mellon and The Bank of New York Mellon Trust Company, N.A.
The Bank of New York Mellon Corporation is a global financial services company focused on helping clients manage and service their financial assets, operating in 34 countries and serving more than 100 markets. The company is a leading provider of financial services for institutions, corporations and high-net-worth individuals, providing superior asset management and wealth management, asset servicing, issuer services, clearing services and treasury services through a worldwide client-focused team. It has more than $23 trillion in assets under custody and administration and more than $1.1 trillion in assets under management. Additional information is available at www.bnymellon.com.
The following description of the Account Agreement and the Custody Agreement consists of a summary of certain provisions of the Account Agreement and the Custody Agreement and is qualified by reference to the detailed provisions thereof. The Account Agreement and the Custody Agreement are not, however, incorporated by reference into, and therefore do not form part of, this Prospectus.
Definitions used in this section but not otherwise defined in this Prospectus have the meanings given to them in the Account Agreement and the Custody Agreement.
Account Agreement
Accounts
The Account Bank shall maintain three accounts for the Issuer in respect of the Bonds: the Transaction Account, the Initial Cash Security Account and the Ongoing Cash Security Account.
Initial Deposits
Pursuant to the Account Agreement, the Issuer shall on the Issue Date of the Bonds:
(a) credit the Initial Cash Security Account with the Retained Proceeds to the extent that such amount is not invested directly in Permitted Investments which are deposited in the Initial Cash Security Custody Sub-Account; and
(b) credit the Transaction Account with the net issue proceeds of the Bonds less the Retained Proceeds to the extent that such amount is not paid directly to the Original Borrower pursuant to, and in accordance with, the Original Loan Agreement.
The Issuer shall, upon receipt, credit to the Ongoing Cash Security Account all amounts received from a Borrower pursuant to Clause 11.3 (Cash Security) of the Original Loan Agreement and the corresponding clause of any Additional Loan Agreement.
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Future Deposits and Withdrawals
The Issuer has covenanted, pursuant to the Bond Trust Deed, that:
(a) prior to the enforcement of the Issuer Security, payments from the Initial Cash Security Account shall only be made to fund:
(1) the Commitments pursuant to, and in accordance with the terms of, the Loan Agreements;
(2) payment to a Borrower or another member of the Group in respect of any Bonds surrendered for cancellation in accordance with the Loan Agreements;
(3) the purchase of Permitted Investments pursuant to the Custody Agreement; or
(4) redemptions of the Bonds in accordance with the Conditions;
(b) it shall sell or otherwise dispose of all Permitted Investments standing to the credit of the Initial Cash Security Custody Sub-Account and shall transfer all monies standing to the credit of the Initial Cash Security Account (if any) to the Transaction Account, in each case on the date falling five Business Days prior to the Loan Maturity Date;
(c) prior to the enforcement of the Issuer Security, payments from the Ongoing Cash Security Account shall only be made to a Borrower pursuant to, and in accordance with the terms of, the relevant Loan Agreement or to purchase Permitted Investments in accordance with the Custody Agreement; and
(d) no payments from the Transaction Account will be made other than in accordance with the Conditions and the Issuer has undertaken to procure that amounts are paid into and out of the Transaction Account only in accordance with the Conditions, the Account Agreement and the Agency Agreement.
The Account Bank is under no obligation to monitor compliance with the above covenants.
Interest
Any monies standing to the credit of the Transaction Account, the Initial Cash Security Account and/or the Ongoing Cash Security Account will earn interest at the rate(s) notified from time to time by the Account Bank to the Issuer. The Account Bank shall be entitled to vary such rate(s) (which may be positive, negative set at zero) or the method by which such rate(s) is/are calculated at its own discretion.
Pursuant to the Account Agreement, interest accrued on the Transaction Account and the Initial Cash Security Account shall (when payable) be credited to the Transaction Account and interest accrued on the Ongoing Cash Security Account shall (when payable) be credited to the Ongoing Cash Security Account.
Change of Account Bank
The appointment of the Account Bank may, with the prior written approval of the Bond Trustee, be terminated upon 45 days' written notice or forthwith at any time the Account Bank is adjudged bankrupt or insolvent. The appointment of the Account Bank shall also be terminated in the event that the short-term senior, unsecured and unguaranteed indebtedness rating of the Account Bank as assigned by S&P falls below "A-1" or is withdrawn and there are amounts standing to the credit of the Initial Cash Security Account and/or the Ongoing Cash Security Account (subject to the Issuer using all reasonable endeavours to secure the appointment of a replacement Account Bank within 30 days of notice to the Bond Trustee and (if applicable) S&P of such termination).
The Account Bank may resign its appointment upon giving at least 45 days' written notice (subject to the appointment of a replacement Account Bank).
Pursuant to the Account Agreement, the appointment of any replacement Account Bank shall be subject to the prior written approval of the Bond Trustee, be on substantially the same terms as the Account Agreement and be subject to the condition that it must have a short-term senior, unsecured and unguaranteed indebtedness rating of no less than "A-1" from S&P.
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Custody Agreement
Custody Account
Pursuant to the Custody Agreement, the Custodian shall, subject to receipt of such documents as it may require, open, in the name of the Issuer, the Ongoing Cash Security Custody Sub-Account and the Initial Cash Security Custody Sub-Account (the Custody Sub-Accounts) and the Ongoing Cash Security Cash Sub-Account and the Initial Cash Security Cash Sub-Account (the Cash Sub-Accounts and, together with the Custody Sub-Accounts, the Custody Account).
Payments and Delivery
The Issuer has authorised the Custodian to make payments and delivery out of the Custody Account only for the purpose of any acquisition or sale of Permitted Investments or as provided below.
Pursuant to the Custody Agreement, unless otherwise instructed pursuant to Instructions to make a payment out of the proceeds of any Distributions in respect of Permitted Investments purchased by or on behalf of the Issuer in the settlement of an acquisition of other Permitted Investments on or prior to the date of receipt of such Permitted Investments (subject as provided below), the Issuer has agreed to give Instructions to the Custodian, forthwith upon receipt by the Custodian of any Distributions, to transfer:
(a) all Distributions credited to the Ongoing Cash Security Cash Sub-Account to the Ongoing Cash Security Account;
(b) all Distributions (including any amount representing Permitted Investment Profit (if any)) credited to the Initial Cash Security Cash Sub-Account (other than Distributions which represent redemption and/or sale proceeds less any Permitted Investment Profit (if any)) to the Transaction Account; and
(c) all Distributions credited to the Initial Cash Security Cash Sub-Account (other than those to be credited to the Transaction Account pursuant to (b) above) to the Initial Cash Security Account,
subject, in each case, to any deductions in respect of any taxes or levies required by any revenue or governmental authority.
The Issuer has agreed that it shall not instruct the Custodian pursuant to Instructions to make a payment out of the proceeds of any Distributions standing to the credit of the Initial Cash Security Cash Sub-Account other than Distributions which represent redemption and/or sale proceeds (but excluding any amount representing Permitted Investment Profit (if any)) and that such amounts shall forthwith upon receipt be transferred to the Transaction Account in accordance with (b) above.
Interest
Any monies standing to the credit of the Ongoing Cash Security Cash Sub-Account and the Initial Cash Security Cash Sub-Account will earn interest at the standard positive, negative or zero rate(s) set by the Custodian in its deposit terms and conditions, as may be issued by it from time to time.
Change of Custodian
The appointment of the Custodian may, with the prior written approval of the Bond Trustee, be terminated upon 45 days' written notice (subject to the appointment of a replacement Custodian) or forthwith at any time the Custodian is adjudged bankrupt or insolvent. At any time when the Bonds have been assigned a rating by S&P, the appointment of the Custodian shall also be terminated in the event that the short-term senior, unsecured and unguaranteed indebtedness rating of the Custodian as assigned by S&P falls below "A-1" or is withdrawn and there are Permitted Investments standing to the credit of the Custody Account (subject to the appointment of a replacement Custodian).
The Custodian may resign its appointment upon giving at least 45 days' written notice to the Issuer and the Bond Trustee (subject to the appointment of a replacement Custodian).
Pursuant to the Custody Agreement, the appointment of any replacement Custodian shall be subject to the prior written approval of the Bond Trustee, be on substantially the same terms as the Custody Agreement and, at any time when the Bonds have been assigned a rating by S&P, be subject to the
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condition that it must have a short-term senior, unsecured and unguaranteed indebtedness rating of no less than "A-1" from S&P.
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DESCRIPTION OF THE CORPORATE SERVICES AGREEMENT
Corporate Services Provider
Law Debenture Corporate Services Limited (LDCS) will be appointed as Corporate Services Provider pursuant to the Corporate Services Agreement. The registered office of LDCS is Fifth Floor, 100 Wood Street, London EC2V 7EX.
LDCS is a wholly-owned subsidiary of The Law Debenture Corporation p.l.c., a London Stock Exchange FTSE-250 company. From its origins in 1889, Law Debenture has diversified to become a group with a unique range of activities in the financial and professional services sectors. The group divides into two distinct areas of business: Investment Trust and Independent Fiduciary Services.
LDCS provides corporate services to a number of securitisation issuing companies in the UK across a range of asset classes.
Corporate Services Agreement
On or prior to the Issue Date, the Issuer and the Corporate Services Provider will enter into the Corporate Services Agreement (the Corporate Services Agreement) pursuant to which the Corporate Services Provider will provide the Issuer with certain corporate and administrative functions against the payment of a fee. Such services include, inter alia, the performance of all general book-keeping, secretarial, registrar and company administration services for the Issuer (including the provision of a director), the providing of the directors with information in connection with the Issuer and the arrangement for the convening of shareholders’ and directors’ meetings.
Governing Law
The Corporate Services Agreement will be governed by English law.
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TERMS AND CONDITIONS OF THE BONDS
The following are the terms and conditions of the Bonds (the Conditions) which will be endorsed on each Bond in definitive form (if issued).
The £80,000,000 4.665 per cent. Secured Bonds due 2045 (the Bonds, which expression shall in these Conditions, unless the context otherwise requires, include any further bonds issued pursuant to Condition 19 (Further Issues) and forming a single series with the Bonds) of TCHG Capital plc (the Issuer) are constituted by a Bond Trust Deed (as modified and/or amended and/or supplemented and/or restated from time to time, the Bond Trust Deed) dated 3rd July, 2014 made between the Issuer and Prudential Trustee Company Limited (the Bond Trustee, which expression shall include any successor as Bond Trustee) as trustee for the holders of the Bonds (the Bondholders), the holders of the principal receipts appertaining to the Bonds (the Receiptholders and Receipts respectively) and the holders of the interest coupons appertaining to the Bonds (the Couponholders and the Coupons respectively, which expressions shall, unless the context otherwise requires, include the talons for further interest coupons (the Talons) and the holders of the Talons).
The Bonds have the benefit of an Agency Agreement (as amended and/or supplemented and/or restated from time to time, the Agency Agreement) dated 3rd July, 2014 and made between the Issuer, the Bond Trustee, The Bank of New York Mellon, London Branch as principal paying agent (the Principal Paying Agent, which expression shall include any successor agent) and the other paying agents named therein (together with the Principal Paying Agent, the Paying Agents, which expression shall include any additional or successor paying agents).
Copies of the Bond Trust Deed, the Agency Agreement, the Loan Agreements, the Security Agreements and the Security Trust Deed are available for inspection during normal business hours at the registered office for the time being of the Bond Trustee being at the date of the issue of the Bonds at Laurence Pountney Hill, London EC4R 0HH and at the specified office of each of the Paying Agents. The Bondholders, the Receiptholders and the Couponholders are deemed to have notice of, and are entitled to the benefit of, all the provisions of the Bond Trust Deed and the Agency Agreement. The statements in these Conditions include summaries of, and are subject to, the detailed provisions of and definitions in the Bond Trust Deed, which includes the form of the Bonds.
1. Definitions
Words and expressions defined in the Bond Trust Deed or the Agency Agreement shall have the same meanings where used in the Conditions unless the context otherwise requires or unless otherwise stated.
In these Conditions:
Account Agreement means the Account Agreement dated 3rd July, 2014 and made between the Issuer, the Bond Trustee and the Account Bank, as amended and/or supplemented and/or restated from time to time;
Account Bank means The Bank of New York Mellon, London Branch as account bank pursuant to the Account Agreement or any successor account bank appointed thereunder;
Accounting Profit has the meaning given to it in the Loan Agreements;
Additional Borrower means any entity which (a) satisfies the Borrower Minimum Requirements and (b) is a borrower under a loan agreement between the Issuer (as lender) and the Security Trustee where all its liabilities as such borrower are secured by the Security Agreements;
Additional Loan Agreement means a loan agreement between the Issuer, an Additional Borrower and the Security Trustee substantially on the same terms as the Original Loan Agreement;
Additional Security Agreement means a security agreement (other than an Original Security Agreement) (including without limitation a Fixed Charge or Mortgage Deed as defined in the
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relevant Security Trust Deed) by a Borrower or an Eligible Group Member in favour of the Security Trustee pursuant to which:
(a) such Borrower provides first fixed Security Interests in relation to Additional Properties (and ancillary interests) in respect of its obligations under the relevant Loan Agreement; or
(b) such Eligible Group Member provides first fixed Security Interests in relation to Additional Properties (and ancillary interests) in respect of one or more Borrowers' obligations under one or more Loan Agreements,
in each case similar to the security contemplated by the Original Security Agreements.
Additional Security Trust Deed means a security trust deed (other than the Original Borrower Security Trust Deed) between a Borrower or Eligible Group Member and the Security Trustee:
(a) which establishes a security trust similar to the Original Borrower Security Trust Deed with the effect that Security Interests created pursuant to one or more Additional Security Agreements by such Borrower or Eligible Group Member from time to time in favour of the Security Trustee are held by the Security Trustee on trust for the benefit of the Issuer; and
(b) which has a document structure, clauses and schedules which integrate properly with the cross references within the Loan Agreement and other Transaction Documents to the same effect as those cross references integrate with the Original Borrower Security Trust Deed.
Appointee means any attorney, manager, agent, delegate, nominee, custodian, receiver or other person appointed by the Bond Trustee under, or pursuant to, these Conditions or the Bond Trust Deed;
Approved Valuer has the meaning given to it in the Loan Agreements;
Asset Cover Test has the meaning given to it in the Loan Agreements;
Bondholder Specific Withholding means any withholding or deduction of Taxes which is required in respect of any payment in respect of any Bond, Receipt or Coupon:
(a) presented for payment by or on behalf of a holder who is liable to the Taxes in respect of the Bond, Receipt or Coupon by reason of his having some connection with the Relevant Jurisdiction other than the mere holding of the Bond, Receipt or Coupon; or
(b) where such withholding or deduction is imposed on a payment to an individual and is required to be made pursuant to European Council Directive 2003/48/EC or any law implementing or complying with, or introduced in order to conform to, such Directive; or
(c) presented for payment by or on behalf of a holder who would have been able to avoid such withholding or deduction by presenting the relevant Bond, Receipt or Coupon to another Paying Agent in a Member State of the European Union; or
(d) presented for payment more than 30 days after the Relevant Date except to the extent that a holder would have been entitled to additional amounts on presenting the same for payment on the last day of the period of 30 days assuming, whether or not such is in fact the case, that day to have been a Payment Day (as defined in Condition 8.5 (Payment Day));
Borrower Minimum Requirements means the following requirements in relation to an entity (a) being a charity; (b) being a Registered Provider of Social Housing; and (c) being a member of the Group;
Borrowers means the Original Borrower and any Additional Borrower, in each case for so long as it is a borrower under a Loan Agreement;
Borrower Default has, in relation to a Borrower, the meaning given to it in the Loan Agreement to which that Borrower is a party as a borrower;
Cancelled Retained Proceeds has the meaning given to it in the Loan Agreements;
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Charged Cash means, at any time, the aggregate of all amounts (whether representing proceeds of disposal or other moneys) standing to the credit of the Ongoing Cash Security Account and, to the extent invested in Permitted Investments in accordance with the Custody Agreement, such Permitted Investments and any income received by the Issuer in respect of such Permitted Investments, provided however that, for the purpose of determining the compliance of the Borrowers with the Asset Cover Test, the value to be attributed to such Permitted Investments shall be the purchase price thereof;
Charitable Group Member means a charitable member of the Group;
Commitment has the meaning given to it in the Loan Agreements;
Compliance Certificate has the meaning given to it in the Loan Agreements;
Corporate Services Agreement means the Corporate Services Agreement dated 3rd July, 2014 and made between the Issuer, the Bond Trustee, The Law Debenture Intermediary Corporation p.l.c. (as share trustee) and the Corporate Services Provider, as amended and/or supplemented and/or restated from time to time;
Corporate Services Provider means Law Debenture Corporate Services Limited as corporate services provider pursuant to the Corporate Services Agreement or any successor corporate services provider appointed thereunder;
Custodian means The Bank of New York Mellon, London Branch as custodian pursuant to the Custody Agreement or any successor custodian appointed thereunder;
Custody Account means the account of the Issuer set up with the Custodian in respect of the Permitted Investments in accordance with the Custody Agreement;
Custody Agreement means the Custody Agreement dated 3rd July, 2014 and made between the Issuer, the Bond Trustee and the Custodian, as amended and/or supplemented and/or restated from time to time;
Eligible Group Member means any entity (a) which, unless otherwise approved by the Security Trustee, is (i) a member of the Group; and (ii) a Registered Provider of Social Housing and (b) which, in each case, has created (and which is subsisting) or will create security pursuant to a Security Agreement;
Group means the Original Borrower and any other present or future, direct or indirect, subsidiaries of the Original Borrower (which includes, for the avoidance of doubt, any entity with which any Borrower and/or any Eligible Group Member may merge or be consolidated with at any time including as a result of a Permitted Reorganisation) and a member of the Group refers to the Original Borrower and any such present or future, direct or indirect, subsidiary of the Original Borrower;
Initial Cash Security Account means the account of the Issuer set up with the Account Bank in respect of the Retained Proceeds in accordance with the Account Agreement;
Instalment Redemption Date has the meaning given to it in Condition 9.1 (Redemption in Instalments);
Issue Date means 3rd July, 2014;
Issuer Charged Property has the meaning given to it in Condition 4;
Issuer Security has the meaning given to it in Condition 4;
Loan means:
(a) in respect of a Borrower at any time is the nominal amount of the Commitment that has been advanced (or deemed to have been advanced and ignoring, for these purposes, any Actual Advance Amount (as defined in the Loan Agreement)) to that Borrower under the relevant Loan Agreement which remains outstanding at that time; and
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(b) in respect of a Loan Agreement at any time is the aggregate nominal amount of the Commitment that has been advanced (or deemed to have been advanced and ignoring, for these purposes, any Actual Advance Amount (as defined in the Loan Agreement)) to Borrowers under that Loan Agreement which remains outstanding at that time;
Loans means at any time the aggregate of each Loan at that time;
Loan Agreements means the Original Loan Agreement and each Additional Loan Agreement;
Loan Payment Day means a day on which principal or interest in respect of a Loan is due and payable by a Borrower to the Issuer in accordance with the terms of a Loan Agreement;
Maturity Date means 3rd July, 2045 being the final Instalment Redemption Date;
Ongoing Cash Security Account means the account of the Issuer set up with the Account Bank in respect of the Charged Cash in accordance with the Account Agreement;
Original Borrower means Town and Country Housing Group and any entity with which that body may merge or be consolidated with at any time;
Original Borrower Security Trust Deed means the Security Trust Deed originally dated 6th November, 2000 and amended and restated on 19th August, 2008 between, inter alios, the Original Borrower and the Security Trustee (as amended from time to time);
Original Loan Agreement means the loan agreement dated on or about the Issue Date between the Issuer, the Original Borrower and the Security Trustee;
Original Fixed Charges means the Fixed Charges dated 22nd December, 2008, 31st March, 2009, 23rd March, 2012, 31st October, 2012 and 7 August, 2013 each substantially in the form set out in the Original Borrower Security Trust Deed and entered into by the Original Borrower in favour of the Security Trustee as security for the Borrowers' liabilities under the Loan Agreements.
Original Mortgage Deeds means the Mortgage Deeds dated 22nd December, 2008, 31st March, 2009, 23rd March, 2012, 31st October, 2012 and 7 August, 2013 each substantially in the form set out in the Original Borrower Security Trust Deed and entered into by the Original Borrower in favour of the Security Trustee as security for the Borrowers' liabilities under the Loan Agreements.
Original Security Agreements means the Original Fixed Charges and the Original Mortgage Deeds.
outstanding means in relation to the Bonds all the Bonds issued other than:
(a) those Bonds which have been redeemed pursuant to the Bond Trust Deed;
(b) those Bonds in respect of which the date for redemption in accordance with the Conditions has occurred and the redemption moneys (including all interest payable thereon) have been duly paid to the Bond Trustee or to the Principal Paying Agent, as applicable, in the manner provided in the Agency Agreement (and where appropriate notice to that effect has been given to the Bondholders in accordance with Condition 15 (Notices)) and remain available for payment against presentation of the relevant Bonds and/or Coupons;
(c) those Bonds which have been purchased and surrendered for cancellation in accordance with Condition 9.7 (Purchase of Bonds by a Borrower or any other member of the Group), those Bonds which have been cancelled by the Issuer in accordance with Condition 9.9 (Cancellation of purchased or redeemed Bonds);
(d) those Bonds which have become void under Condition 11 (Prescription);
(e) those mutilated or defaced Bonds which have been surrendered and cancelled and in respect of which replacements have been issued pursuant to Condition 13 (Replacement of Bonds, Receipts, Coupons and Talons);
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(f) (for the purpose only of ascertaining the nominal amount of the Bonds outstanding and without prejudice to the status for any other purpose of the relevant Bonds) those Bonds which are alleged to have been lost, stolen or destroyed and in respect of which replacements have been issued pursuant to Condition 13 (Replacement of Bonds, Receipts, Coupons and Talons); and
(g) any Global Bond to the extent that it shall have been exchanged for another Global Bond in respect of the Bonds or for the Bonds in definitive form pursuant to its provisions;
PROVIDED THAT for each of the following purposes, namely:
(1) the right to attend and vote at any meeting of the Bondholders, an Extraordinary Resolution in writing or an Extraordinary Resolution by way of electronic consents given through the relevant Clearing System(s) as envisaged by paragraph 1 (Definitions) of Schedule 6 (Provisions for Meetings of Bondholders) of the Bond Trust Deed and any direction or request by the holders of the Bonds;
(2) the determination of how many and which Bonds are for the time being outstanding for the purposes of Clause 9.1 (Action, Proceedings and Indemnification) of the Bond Trust Deed, Conditions 12 (Events of Default and Enforcement) and 17 (Meetings of Bondholders, modification and waiver) and paragraphs 1, 4.1, 4.4 and 4.6 of Schedule 6 (Provisions for Meetings of Bondholders) of the Bond Trust Deed;
(3) any discretion, power or authority (whether contained in these presents or vested by operation of law) which the Bond Trustee is required, expressly or impliedly, to exercise in or by reference to the interests of the Bondholders or any of them; and
(4) the determination by the Bond Trustee whether any event, circumstance, matter or thing is, in its opinion, materially prejudicial to the interests of the Bondholders or any of them,
those Bonds (if any) which are for the time being held by or on behalf of or for the benefit of the Issuer, a Borrower or any other member of the Group in each case as beneficial owner, shall (unless and until ceasing to be so held) be deemed not to remain outstanding.
Outstanding Principal Amount means, in respect of each Bond, its paid up nominal amount less the principal amount (if any) repaid in respect of such Bond (pursuant to Condition 9.1 (Redemption in Instalments) or otherwise);
Permitted Investments has the meaning given to it in the Loan Agreements;
Permitted Investment Profit means, in respect of any sale of Permitted Investments, the amount by which the sale price of such Permitted Investments exceeds the original purchase price of such Permitted Investments (if any);
Permitted Reorganisation means any amalgamation, merger, consolidation or transfer of engagements (whether entering into or acceptance thereof) of the whole of any Borrower's or any Eligible Group Member's property (including, for the avoidance of doubt, any statutory procedure as provided for under the Industrial and Provident Societies Act 1965) made between such Borrower or such Eligible Group Member, as the case may be, (Party A) and any other entity (Party B) provided that (i) Party B is a Registered Provider of Social Housing and any new amalgamated entity to be created as a result thereof will be a Registered Provider of Social Housing; (ii) following any such amalgamation, merger, consolidation or transfer of engagements in respect of which the property of Party A (including, for the avoidance of doubt, any liabilities) shall become vested in Party B or a new amalgamated entity, Party B or such new amalgamated entity will thereafter be responsible for all the liabilities of Party A pursuant to the Industrial and Provident Societies Act 1965; and (iii) a certificate executed by two authorised signatories of Party A or Party B confirming the above is provided to the Bond Trustee;
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Potential Event of Default means any act, event or circumstance which with the expiry of a grace period, the giving of notice, determination of materiality or other determination would constitute an Event of Default;
Registered Provider of Social Housing means a person listed in the register of providers of social housing established under Chapter 3 of Part 2 of the Housing and Regeneration Act 2008 (as amended from time to time) or a person having a status which, in the opinion of the Issuer and the Bond Trustee, is substantially equivalent under any replacement or successor legislation thereto;
Relevant Date means the date on which the payment first becomes due but, if the full amount of the money payable has not been received by the Principal Paying Agent or the Bond Trustee on or before the due date, it means the date on which, the full amount of the money having been so received, notice to that effect has been duly given to the Bondholders by the Issuer in accordance with Condition 15 (Notices);
Relevant Jurisdiction means the United Kingdom or any political subdivision or any authority thereof or therein having power to tax or any other jurisdiction or any political subdivision or any authority thereof or therein having power to tax to which the Issuer becomes subject in respect of payments made by it of principal and interest on the Bonds, Receipts or Coupons;
Retained Proceeds means, at any time, an amount of the net issue proceeds of the Bonds which have not been advanced to a Borrower pursuant to a Loan Agreement at such time (if any);
Secured Parties means the Bond Trustee (for itself and on behalf of the Bondholders, Receiptholders and Couponholders), the Corporate Services Provider, the Principal Paying Agent, the other Paying Agents, the Account Bank and the Custodian;
Security Agreements means the Original Security Agreements and each Additional Security Agreement;
Security Trust Deed means the Original Borrower Security Trust Deed and each Additional Security Trust Deed;
Security Trustee means Prudential Trustee Company Limited (or any successor as security trustee) as the security trustee under the Original Borrower Security Trust Deed and the Original Security Agreements and as security trustee under each Additional Security Trust Deed and each Additional Security Agreement, in each case for, inter alios, the Issuer;
subsidiary has the meaning indicated in section 271 of the Housing and Regeneration Act 2008;
Taxes has the meaning given to it in Condition 10.1 (Payments without withholding);
Transaction Account means the account of the Issuer set up with the Account Bank in respect of the Bonds in accordance with the Account Agreement;
Transaction Documents means the Loan Agreements, the Bond Trust Deed, the Security Trust Deed, the Corporate Services Agreement, the Agency Agreement, the Account Agreement and the Custody Agreement;
Transaction Parties means any person who is party to a Transaction Document;
UK Government Gilt means Sterling denominated gilts or stock issued by or on behalf of Her Majesty's Treasury;
Undrawn Commitment has the meaning given to it in the Loan Agreements; and
Valuation has the meaning given to it in the Loan Agreements.
2. Form, Denomination and Title
The Bonds are in bearer form, serially numbered, with Receipts, Coupons and Talons attached on issue.
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The Bonds shall be issued in the denomination of £100,000 and integral multiples of £1,000 in excess thereof up to and including £199,000 and no Bonds will be issued with a denomination above £199,000.
The Bonds, Receipts and Coupons are freely transferable. Title to the Bonds, Receipts and Coupons will pass by delivery.
3. Status
The Bonds, Receipts and Coupons are direct obligations of the Issuer, secured in the manner set out in Condition 4 (Security), and rank pari passu without preference or priority amongst themselves.
4. Security
The Issuer's obligations in respect of the Bonds are secured (subject as provided in these Conditions and the Bond Trust Deed) pursuant to the Bond Trust Deed in favour of the Bond Trustee for the benefit of itself and the Bondholders and the other Secured Parties as follows:
(a) by an assignment by way of security of the Issuer's rights, title and interest arising under the Loan Agreements, the Security Trust Deed, the Security Agreements, the Corporate Services Agreement, the Agency Agreement, the Custody Agreement and the Account Agreement;
(b) by a charge by way of first fixed charge over all moneys and/or securities from time to time standing to the credit of the Transaction Account, the Ongoing Cash Security Account, the Initial Cash Security Account and the Custody Account and all debts represented thereby;
(c) by a charge by way of first fixed charge over all sums held from time to time by the Paying Agents for the payment of principal or interest in respect of the Bonds; and
(d) a first floating charge over all of the Issuer's property, assets, rights and revenues (whether or not the subject of fixed security as aforesaid).
The property charged and assigned pursuant to the Bond Trust Deed listed in (a) to (d) above, together with any other property or assets held by and/or assigned to the Bond Trustee and/or any deed or document supplemental thereto, is referred to herein as the Issuer Charged Property and the security created thereby, the Issuer Security.
5. Order of payments
5.1 Pre-enforcement
Prior to the enforcement of the Issuer Security, the Issuer shall apply the monies standing to the credit of the Transaction Account on each Interest Payment Date and such other dates on which a payment is due in respect of the Bonds in the following order of priority (the Pre-enforcement Priority of Payments):
(a) first, in payment of any taxes due and owing by the Issuer to any taxing authority (insofar as they relate to the Bonds);
(b) second, in payment of any unpaid fees, costs, charges, indemnity payments (if any), expenses and liabilities incurred by or due to the Bond Trustee (including remuneration payable to it and any Appointee) in carrying out its functions under the Transaction Documents;
(c) third, in payment of any unpaid fees, expenses and liabilities (including indemnity payments, if any, due from the Issuer) of the Issuer owing to the Corporate Services Provider under the Corporate Services Agreement, the Paying Agents under the Agency Agreement, the Account Bank under the Account Agreement and the Custodian under the Custody Agreement on a pro rata and pari passu basis;
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(d) fourth, in payment of any other unpaid fees, expenses and liabilities of the Issuer (in so far as they relate to the Bonds) on a pro rata and pari passu basis;
(e) fifth, in payment, on a pro rata and pari passu basis, to the Bondholders of any interest due and payable in respect of the Bonds;
(f) sixth, in payment, on a pro rata and pari passu basis, to the Bondholders of any principal due and payable in respect of the Bonds;
(g) seventh, in payment, on a pro rata and pari passu basis, to the Borrowers of any amounts due and payable under the terms of the Loan Agreements; and
(h) eighth, in payment of any Permitted Investment Profit or Accounting Profit, as the case may be, to any Charitable Group Member.
5.2 Post-enforcement
Following the enforcement of the Issuer Security, all monies standing to the credit of the Transaction Account, the Ongoing Cash Security Account and the Initial Cash Security Account and the net proceeds of enforcement of the Issuer Security shall be applied in the following order of priority (the Post-enforcement Priority of Payments):
(a) first, in payment or satisfaction of any unpaid fees, costs, charges, indemnity payments (if any), expenses and liabilities incurred by or due to the Bond Trustee, any Appointee or any receiver in preparing and executing the trusts under and/or in carrying out their respective functions under the Transaction Documents (including the costs of realising any Issuer Security and the Bond Trustee's and such receiver's remuneration);
(b) second, in payment of all amounts owing to the Corporate Services Provider under the Corporate Services Agreement, the Paying Agents under the Agency Agreement, the Account Bank under the Account Agreement and the Custodian under the Custody Agreement on a pro rata and pari passu basis;
(c) third, in payment, on a pro rata and pari passu basis, to the Bondholders of any interest due and payable in respect of the Bonds;
(d) fourth, in payment, on a pro rata and pari passu basis, to the Bondholders of any principal due and payable in respect of the Bonds;
(e) fifth, in payment of any other unpaid fees and expenses of the Issuer (in each case insofar as they relate to the Bonds) on a pro rata and pari passu basis;
(f) sixth, in payment, on a pro rata and pari passu basis, to the Borrowers of any amounts due and payable under the terms of the Loan Agreements; and
(g) seventh, in payment of any Permitted Investment Profit or Accounting Profit, as the case may be, to any Charitable Group Member.
6. Covenants
6.1 General Covenants
In addition to the covenants of the Issuer set out in the Bond Trust Deed, for so long as any of the Bonds remain outstanding, the Issuer covenants that it will not, without the consent in writing of the Bond Trustee, engage in any activity or do anything other than:
(a) carry out the business of a company which has as its purpose raising finance and on-lending such finance for the benefit of the Borrowers and the Group as a whole (including, without limitation, as envisaged by the Transaction Documents); and
(b) perform any act incidental to or necessary in connection with (a) above.
The Issuer also covenants, for so long as any of the Bonds remain outstanding, not to create or permit to subsist, over any of the security constituted by or created pursuant to the Bond Trust
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Deed, any mortgage or charge or any other security interest ranking in priority to, or pari passu with, the security created by or pursuant to the Bond Trust Deed.
6.2 Information Covenants
For so long as any of the Bonds remain outstanding, the Issuer shall:
(a) send to the Bond Trustee and any Bondholder that has requested the same of the Issuer (and continues to be a Bondholder) a copy of the Compliance Certificates (and, subject to the consent of the relevant Approved Valuer(s), the Valuation(s) delivered for the purpose of preparing such Compliance Certificates) promptly upon receipt of the same from the Borrowers pursuant to the terms of their respective Loan Agreements;
(b) send to the Bond Trustee and any Bondholder that has requested the same of the Issuer (and continues to be a Bondholder) a copy of the annual reports of each Borrower promptly upon publication of the same by the relevant Borrower; and
(c) unless such requirement is waived by Bondholders holding not less than 33 per cent. in nominal amount of the Bonds for the time being outstanding, convene an annual meeting of the Bondholders to discuss the financial position of the Issuer and the Group. To convene any such meeting, the Issuer shall notify all Bondholders of the date, time and place of the meeting in accordance with Condition 15 (Notices). The Issuer shall act in good faith and in accordance with its actual knowledge in addressing any questions regarding the financial position of itself and any member of the Group raised at any such meeting, provided, however, that the Issuer shall not be obliged to disclose any information which it, in its absolute discretion, considers to be of a confidential nature. For the avoidance of doubt, the provisions of this Condition 6.2(c) are in addition to the meetings provisions set out in Condition 17 (Meetings of Bondholders, modification and waiver).
6.3 Loan Agreements, Security Agreements and Security Trust Deed Consents Covenant
For so long as any of the Bonds remain outstanding, the Issuer covenants that it shall not consent to any waiver, amendment or modification of, or take any action or direct the Security Trustee to take any action pursuant to, the Loan Agreements, the Security Agreements or the Security Trust Deed except with the prior consent of the Bond Trustee. The Bond Trustee may seek the consent of the Bondholders in accordance with the Bond Trust Deed prior to giving any such consent.
7. Interest
7.1 Interest Rate and Interest Payment Dates
Each Bond bears interest on the Outstanding Principal Amount from (and including) 3rd July, 2014, payable semi-annually in arrear on 3rd July and 3rd January in each year (each, an Interest Payment Date) at the rate of 4.665 per cent. per annum in respect of the period from (and including) the Issue Date to (but excluding) the Maturity Date.
7.2 Interest Accrual
Each Bond will cease to bear interest from (and including) its due date for redemption unless, upon due presentation, payment of the principal in respect of the Bond is improperly withheld or refused or unless default is otherwise made in respect of payment, in which event interest shall continue to accrue as provided in the Bond Trust Deed.
7.3 Calculation of Broken Interest
When interest is required to be calculated in respect of a period of less than a full half year, it shall be calculated on the basis of (a) the actual number of days in the period from (and including) the date from which interest begins to accrue (the Accrual Date) to (but excluding) the date on which it falls due divided by (b) the actual number of days from and including the Accrual Date to (but excluding) the next following Interest Payment Date multiplied by 2, and multiplying this by the relevant rate of interest specified in Condition 7.1 above and the relevant Outstanding Principal Amount of the Bonds.
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8. Payments
8.1 Payments in respect of Bonds, Receipts and Coupons
Subject as follows, payments of principal and interest in respect of each Bond will be made against presentation and surrender (or, in the case of part payment only, endorsement) of the Bond.
Payments of interest on an Interest Payment Date will be made against presentation and surrender (or in the case of part payment only, endorsement) of the relevant Coupon, in each case at the specified office outside the United States of any of the Paying Agents.
Payments of instalments of principal on an Instalment Redemption Date (other than the Instalment Redemption Date falling on the Maturity Date) will be made against presentation and surrender (or, in the case of part payment only, endorsement) of the relevant Receipt, in each case at the specified office outside the United States of any of the Paying Agents. Each Receipt must be presented for payment together with the Bond to which it appertains. Receipts presented without the Bond to which they appertain do not constitute valid obligations of the Issuer.
8.2 Method of Payment
Payments will be made by credit or transfer to an account in Sterling maintained by the payee with, or, at the option of the payee, by a cheque in Sterling drawn on, a bank in London.
8.3 Missing Unmatured Receipts or Coupons
Each Bond should be presented for payment together with all relative unmatured Receipts or Coupons (which expression shall, for the avoidance of doubt, include Coupons falling to be issued on exchange of matured Talons), failing which the full amount of any relative missing unmatured Receipt or Coupon (or, in the case of payment not being made in full, that proportion of the full amount of the missing unmatured Receipt or Coupon which the amount so paid bears to the total amount due) will be deducted from the amount due for payment. Each amount so deducted will be paid in the manner mentioned above against presentation and surrender (or, in the case of part payment only, endorsement) of the relative missing Receipt or Coupon at any time before the expiry of 10 years after the Relevant Date in respect of the relevant Bond (whether or not the Receipt or Coupon would otherwise have become void pursuant to Condition 11 (Prescription)) or, if later, five years after the date on which the Receipt or Coupon would have become due, but not thereafter.
8.4 Payments subject to Applicable Laws
Payments in respect of principal and interest on the Bonds are subject in all cases to any fiscal or other laws and regulations applicable thereto in the place of payment.
8.5 Payment Day
If the date for payment of any amount in respect of any Bond, Receipt or Coupon is not a Payment Day, the holder thereof shall not be entitled to payment until the next following Payment Day in the relevant place and shall not be entitled to further interest or other payment in respect of such delay.
For these purposes, Payment Day means any day which (subject to Condition 11 (Prescription)):
(a) is, or falls after, the relevant due date;
(b) is, or falls at least one Business Day after, the corresponding Loan Payment Day;
(c) is a Business Day in the place of the specified office of the Paying Agent at which the Bond, Receipt or Coupon is presented for payment; and
(d) in the case of payment by a credit or transfer to a Sterling account in London as referred to above, is a Business Day in London.
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In this Condition, Business Day means, in relation to any place, a day on which commercial banks and foreign exchange markets settle payments and are open for general business (including dealing in foreign exchange and foreign currency deposits) in that place.
8.6 Initial Paying Agents
The names of the initial Paying Agents and their initial specified offices are set out at the end of these Conditions. The Issuer reserves the right, subject to the prior written approval of the Bond Trustee, at any time to vary or terminate the appointment of any Paying Agent and to appoint additional or other Paying Agents provided that:
(a) there will at all times be a Principal Paying Agent;
(b) there will at all times be at least one Paying Agent (which may be the Principal Paying Agent) having its specified office in a European city which so long as the Bonds are admitted to official listing on the London Stock Exchange shall be London or such other place as the UK Listing Authority may approve; and
(c) the Issuer undertakes to maintain a Paying Agent in a Member State of the European Union that is not obliged to withhold or deduct tax pursuant to European Council Directive 2003/48/EC or any law implementing or complying with, or introduced in order to conform to, such Directive.
Notice of any termination or appointment and of any changes in specified offices will be given to the Bondholders promptly by the Issuer in accordance with Condition 15 (Notices).
In acting under the Agency Agreement, the Paying Agents act solely as agents of the Issuer and, in certain circumstances specified therein, of the Bond Trustee and do not assume any obligation to, or relationship of agency or trust with, any Bondholders, Receiptholders or Couponholders. The Agency Agreement contains provisions permitting any entity into which any Paying Agent is merged or converted or with which it is consolidated or to which it transfers all or substantially all of its assets to become the successor paying agent.
8.7 Interpretation of principal and interest
Any reference in these Conditions to principal in respect of the Bonds shall be deemed to include, as applicable:
(a) any additional amounts which may be payable with respect to principal under Condition 10 (Taxation); and
(b) any specific redemption price referred to in Condition 9 (Redemption and Purchase) which may be payable by the Issuer under or in respect of the Bonds.
Any reference in these Conditions to interest in respect of the Bonds shall be deemed to include, as applicable, any additional amounts which may be payable with respect to interest under Condition 10 (Taxation).
9. Redemption and Purchase
9.1 Redemption in Instalments
Unless previously redeemed, or purchased and cancelled as specified in these Conditions, the Bonds will be redeemed in 20 equal instalments (each a Redemption Instalment) of £50 per £1,000 in original nominal amount on each Interest Payment Date from, and including, 3rd January, 2036 to, and including, the Maturity Date (each an Instalment Redemption Date).
9.2 Early Redemption
Subject to Condition 9.4 (Mandatory Early Redemption) below, if in accordance with a Loan Agreement:
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(1) a Borrower elects to prepay its Loan in whole or in part prior to the repayment date specified in the relevant Loan Agreement and cancels an amount of the Commitment equal to all or any part of the prepaid amount (and no replacement Commitment is put in place with another Borrower); or
(2) the relevant Loan otherwise becomes prepayable in whole or in part prior to the repayment date specified in the relevant Loan Agreement (other than as a result of the Bonds becoming due and repayable but, including, for the avoidance of doubt, pursuant to Clause 5.6 (Mandatory Prepayment – Change of status) of the Loan Agreement),
the Issuer shall redeem the Bonds in whole or, in respect of a prepayment in part, in an aggregate Outstanding Principal Amount equal to (in the case of (1) above) the relevant nominal amount of the Commitment cancelled and not replaced or (in the case of (2) above) the nominal amount of the relevant Loan to be repaid on the date which is two Business Days after that on which payment is made by the relevant Borrower under the relevant Loan Agreement (the Loan Prepayment Date).
Redemption of the Bonds pursuant to this Condition 9.2 shall be made at the higher of the following:
(a) their Outstanding Principal Amount (or, in the case of a partial redemption, the relevant proportion of their Outstanding Principal Amount calculated in accordance with Condition 9.5 (Notice of Early Redemption and Partial Redemptions)); and
(b) the amount (as calculated by a financial adviser nominated by the Issuer and approved by the Bond Trustee (the Nominated Financial Adviser) and reported in writing to the Issuer and the Bond Trustee) which is equal to the amount under (a) above multiplied by the price (expressed as a percentage and calculated by the Nominated Financial Adviser) (rounded to three decimal places (0.0005 being rounded upwards)) at which the Gross Redemption Yield on the Bonds (if the Bonds were to remain outstanding until their original maturity) on the Determination Date would be equal to the sum of (i) the Gross Redemption Yield at 3:00 pm (London time) on the Determination Date of the Benchmark Gilt and (ii) 0.20 per cent.,
together with any interest accrued up to (but excluding) the Loan Prepayment Date.
For the purposes of this Condition:
Benchmark Gilt means the 4.75% Treasury Gilt due 2038 or such other conventional (i.e. not index-linked) UK Government Gilt as the Issuer (with the advice of the Nominated Financial Adviser) may determine (failing such determination, as determined by the Bond Trustee with such advice) to be the most appropriate benchmark conventional UK Government Gilt;
Determination Date means three Business Days prior to the Loan Prepayment Date; and
Gross Redemption Yield means a yield calculated by the Nominated Financial Adviser on the basis set out by the United Kingdom Debt Management Office in the paper "Formulae for Calculating Gilt Prices from Yields" page 5, Section One: Price/Yield Formulae (Conventional Gilts; Double-dated and Undated Gilts with Assumed (or Actual) Redemption on a Quasi-Coupon Date) (published on 8th June, 1998 and updated on 15th January, 2002 and 16th March, 2005) (as amended or supplemented from time to time).
9.3 Early Redemption for Tax Reasons
If as a result of any actual or proposed change in tax law, the Issuer determines (in its reasonable commercial judgement), and certifies to the Bond Trustee, that it would, on the next following Interest Payment Date, be required to make a withholding or deduction in respect of payments to be made on such Interest Payment Date (other than in respect of a Bondholder Specific Withholding) and the Issuer does not opt to pay additional amounts pursuant to Condition 10.2 (No obligation to pay additional amounts) or, having so opted, notifies the Bond Trustee and the Bondholders, in accordance with Condition 15 (Notices), of its intention to cease paying such additional amounts, the Issuer shall redeem the Bonds in whole, but not in part, at their
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Outstanding Principal Amount, plus accrued interest to (but excluding) the date of redemption, as soon as reasonably practicable prior to the next following Interest Payment Date or, if it is not reasonably practicable for the Issuer to redeem the Bonds prior to the next following Interest Payment Date, within three Business Days thereafter. For the avoidance of doubt, any amounts in respect of accrued interest which fall due on any such redemption of the Bonds (and, where the redemption follows the next following Interest Payment Date, such Interest Payment Date) shall be paid subject to the required withholding or deduction and the Issuer shall not be obliged to pay any additional amounts in respect thereof.
9.4 Mandatory Early Redemption
If a Loan becomes repayable:
(a) as a result of a Borrower Default; or
(b) following a Borrower ceasing to satisfy each of the Borrower Minimum Requirements (other than if such Borrower complies with the Borrower Minimum Requirements within 180 days),
then (unless the Issuer has increased the Commitment of another Borrower by the relevant amount of the Loan to be repaid within 14 days of the date of such Borrower Default or upon the expiry of the 180 days as aforesaid) the Issuer shall redeem the Bonds in an aggregate Outstanding Principal Amount equal to the nominal amount of the relevant Loan at their Outstanding Principal Amount, plus accrued interest to (but excluding) the date of redemption of the Bonds, no later than (i) 14 days following the date of such Borrower Default or the date of the expiry of the period of 180 days, as the case may be, or, if later, (ii) two Business Days following the date on which the Loan is repaid.
9.5 Notice of Early Redemption and Partial Redemptions
Notice of any early redemption in accordance with Condition 9.2 (Early Redemption), Condition 9.3 (Early Redemption for Tax Reasons) or Condition 9.4 (Mandatory Early Redemption) above shall be given by the Issuer to the Bond Trustee, the Paying Agents and the Bondholders, in accordance with Condition 15 (Notices), as promptly as practicable.
If a partial redemption of Bonds is to occur, the aggregate Outstanding Principal Amount of a Bond to be used in the calculation, in accordance with the relevant Conditions, of the relevant partial redemption amount in respect of that Bond shall be the same proportion that:
(a) the aggregate Outstanding Principal Amount of that Bond at the end of the day before the redemption date;
bears to
(b) the aggregate Outstanding Principal Amount of all Bonds at the end of the day before the redemption date.
9.6 Calculations
Each calculation, by or on behalf of the Issuer, for the purposes of this Condition 9 shall, in the absence of manifest error, be final and binding on all persons. If the Issuer does not at any time for any reason calculate amounts referred to in this Condition 9, such amounts may be calculated by the Bond Trustee, or an agent appointed (at the expense of the Issuer) by the Bond Trustee for this purpose, (without any liability accruing to the Bond Trustee as a result) based on information supplied to it by the Issuer and each such calculation shall be deemed to have been made by the Issuer.
9.7 Purchase of Bonds by a Borrower or any other member of the Group
A Borrower or any other member of the Group may at any time purchase Bonds in the open market or otherwise at any price. Following any such purchase, such Borrower or other member of the Group, as the case may be, may (but is not obliged to) surrender the Bonds to the Issuer for
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cancellation. An amount equal to the Outstanding Principal Amount of the Bonds being surrendered shall be deemed to be prepaid under the Loan Agreement specified by such Borrower or other member of the Group, as the case may be (but, for the avoidance of doubt, without triggering a redemption under Condition 9.2 (Early Redemption)) or, to the extent that the relevant Loan is not then outstanding, an amount of the Undrawn Commitment of the relevant Borrower equal to the Outstanding Principal Amount of the Bonds surrendered shall be deemed to be cancelled for the purposes of such Loan Agreement and an amount of Retained Proceeds equal to the Cancelled Retained Proceeds shall be paid by the Issuer to such Borrower or other member of the Group, as applicable.
9.8 Purchase of Bonds by the Issuer
The Issuer may at any time purchase Bonds in the open market or otherwise at any price provided that all unmatured Receipts, Coupons and unexchanged Talons are purchased therewith.
9.9 Cancellation of purchased or redeemed Bonds
All Bonds redeemed by the Issuer pursuant to Condition 9.2 (Early Redemption), Condition 9.3 (Early Redemption for Tax Reasons) or Condition 9.4 (Mandatory Early Redemption) or surrendered to the Issuer for cancellation pursuant to Condition 9.7 (Purchase of Bonds by a Borrower or any other member of the Group) and any unmatured Receipts, Coupons or unexchanged Talons attached to or surrendered with them shall be cancelled and may not be issued or resold.
10. Taxation
10.1 Payments without withholding
All payments of principal and interest in respect of the Bonds, Receipts and Coupons by or on behalf of the Issuer shall be made without withholding or deduction for, or on account of, any present or future taxes, duties, assessments or governmental charges of whatever nature (Taxes) imposed or levied by or on behalf of the Relevant Jurisdiction, unless such withholding or deduction is required by law in which case the relevant payment will be made subject to such withholding or deduction.
10.2 No obligation to pay additional amounts
Subject as follows, none of the Issuer, the Bond Trustee or any Paying Agent shall be obliged to pay any additional amounts to the Bondholders, Receiptholders or Couponholders as a result of any withholding or deduction made in accordance with Condition 10.1 (Payments without withholding).
Notwithstanding the foregoing, in the event that the Issuer would, on the next Interest Payment Date, be required to make a withholding or deduction in respect of tax (other than in respect of a Bondholder Specific Withholding), the Issuer may, provided that it has given notice to the Bond Trustee and the Bondholders, in accordance with Condition 15 (Notices), of its intention to do so prior to such Interest Payment Date, pay to Bondholders such additional amounts as may be necessary in order that the net amounts received by the Bondholders after such withholding or deduction will equal the amounts of principal and interest which would have been received in respect of the Bonds in the absence of such withholding or deduction. If at any time the Issuer intends to cease paying such additional amounts it may do so by giving notice to the Bondholders and the Bond Trustee of its intention to do so with effect from the next Interest Payment Date.
11. Prescription
The Bonds, Receipts and Coupons will become void unless presented for payment within a period of 10 years (in the case of principal) and five years (in the case of interest) after the Relevant Date therefor.
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There shall not be included in any Coupon sheet issued on exchange of a Talon any Coupon the claim for payment in respect of which would be void pursuant to this Condition 8 (Payments) or any Talon which would be void pursuant to Condition 8 (Payments).
12. Events of Default and Enforcement
12.1 Events of Default
The Bond Trustee at its discretion may, and if so requested in writing by the holders of at least one-fourth in Outstanding Principal Amount of the Bonds then outstanding or if so directed by an Extraordinary Resolution shall (subject in each case to being secured and/or indemnified and/or pre-funded to its satisfaction), (but in the case of the happening of any of the events described in paragraphs 12.1(b), (c) and (i) below, only if the Bond Trustee shall have certified in writing to the Issuer that such event is, in its opinion, materially prejudicial to the interests of the Bondholders), give notice in writing to the Issuer that the Bonds are, and the Bonds shall thereupon immediately become, due and repayable at their Outstanding Principal Amount together with accrued interest as provided in the Bond Trust Deed if any of the following events (each an Event of Default) shall occur:
(a) if default is made in the payment of any principal or interest due from the Issuer in respect of the Bonds or any of them and the default continues for a period of seven days in the case of principal and fourteen days in the case of interest; or
(b) if the Issuer fails to perform or observe any of its other obligations under, or in respect of, the Conditions or the Bond Trust Deed or if any representation given by the Issuer to the Bond Trustee in the Bond Trust Deed is found to be untrue, incorrect or misleading as at the time it was given and (except in any case where, in the opinion of the Bond Trustee, the failure or inaccuracy is incapable of remedy when no such continuation or notice as is hereinafter mentioned will be required) the failure or inaccuracy continues for the period of 30 days next following the service by the Bond Trustee on the Issuer of notice requiring the same to be remedied; or
(c) (A) any other present or future indebtedness of the Issuer for or in respect of moneys borrowed or raised becomes due and payable prior to its stated maturity by reason of any actual or potential default, event of default or the like (howsoever described), or (B) any such indebtedness is not paid when due or, as the case may be, within any originally applicable grace period, or (C) the Issuer fails to pay when due any amount payable by it under any present or future guarantee for, or indemnity in respect of, any moneys borrowed or raised provided that the aggregate amount of the relevant indebtedness, guarantees and indemnities in respect of which one or more of the events mentioned above in this paragraph (c) have occurred equals or exceeds £10,000,000 or its equivalent in other currencies (as reasonably determined by the Bond Trustee); or
(d) if any order is made by any competent court or resolution passed for the winding up or dissolution of the Issuer save for the purposes of a reorganisation on terms previously approved in writing by the Bond Trustee or by an Extraordinary Resolution; or
(e) if the Issuer ceases or threatens to cease to carry on the whole or, in the opinion of the Bond Trustee, substantially all of its business, save for the purposes of a reorganisation on terms previously approved in writing by the Bond Trustee or by an Extraordinary Resolution; or
(f) if the Issuer stops or threatens to stop payment of, or is unable to, or admits inability to, pay, its debts (or any class of its debts) as they fall due, or is deemed unable to pay its debts pursuant to or for the purposes of any applicable law, or is adjudicated or found bankrupt or insolvent; or
(g) if (A) proceedings are initiated against the Issuer under any applicable liquidation, insolvency, composition, reorganisation or other similar laws, or an application is made (or documents filed with a court) for the appointment of an administrative or other receiver, liquidator, manager, administrator or other similar official, or an administrative or other
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receiver, liquidator, manager, administrator or other similar official is appointed, in relation to the Issuer or, as the case may be, in relation to all or substantially all of the Issuer's undertaking or assets, or an encumbrancer takes possession of all or substantially all of the Issuer's undertaking or assets, or a distress, execution, attachment, sequestration or other process is levied, enforced upon, sued out or put in force against all or substantially all of the Issuer's undertaking or assets and (B) in any such case (other than the appointment of an administrator) is not discharged within 14 days; or
(h) if the Issuer initiates or consents to judicial proceedings relating to itself under any applicable liquidation, insolvency, composition, reorganisation or other similar laws (including the obtaining of a moratorium) or makes a conveyance or assignment for the benefit of, or enters into any composition or other arrangement with, its creditors generally (or any class of its creditors) or any meeting is convened to consider a proposal for an arrangement or composition with its creditors generally (or any class of its creditors); or
(i) if it is or will become unlawful for the Issuer to perform or comply with any of its obligations under or in respect of the Bonds, the Bond Trust Deed or any Loan Agreement.
12.2 Enforcement
The Bond Trustee may at any time, at its discretion and without notice, take such proceedings and/or other steps or action (including lodging an appeal in any proceedings) against or in relation to the Issuer as it may think fit to enforce the provisions of the Bond Trust Deed, the Bonds, the Receipts, the Coupons and/or any of the other Transaction Documents or otherwise, but it shall not be bound to take any such proceedings or other steps or any other action unless (i) it shall have been so directed by an Extraordinary Resolution or so requested in writing by the holders of at least one-fourth in Outstanding Principal Amount of the Bonds then outstanding and (ii) it shall have been secured and/or indemnified and/or pre-funded to its satisfaction.
The Bond Trustee may refrain from taking any action in any jurisdiction if the taking of such action in that jurisdiction would, in its opinion based upon legal advice in the relevant jurisdiction, be contrary to any law of that jurisdiction. Furthermore, the Bond Trustee may also refrain from taking such action if it would otherwise render it liable to any person in that jurisdiction or if, in its opinion based upon such legal advice, it would not have the power to do the relevant thing in that jurisdiction by virtue of any applicable law in that jurisdiction or if it is determined by any court or other competent authority in that jurisdiction that it does not have such power.
No Bondholder, Receiptholder, Couponholder or any Secured Party (other than the Bond Trustee) shall be entitled to (i) take any steps or action against the Issuer to enforce the performance of any of the provisions of the Bond Trust Deed, the Bonds, the Receipts, the Coupons or any of the other Transaction Documents or (ii) take any other action (including lodging an appeal in any proceedings) in respect of or concerning the Issuer, in each case unless the Bond Trustee, having become bound so to take any such steps, actions or proceedings, fails so to do within a reasonable period and the failure shall be continuing.
13. Replacement of Bonds, Receipts, Coupons and Talons
Should any Bond, Receipt, Coupon or Talon be lost, stolen, mutilated, defaced or destroyed, it may be replaced at the specified office of the Principal Paying Agent (subject to all applicable laws and the requirements of the UK Listing Authority or the London Stock Exchange) upon payment by the claimant of such costs and expenses as may be incurred in connection therewith and on such terms as to evidence and indemnity as the Issuer may reasonably require. Mutilated or defaced Bonds, Receipts, Coupons or Talons must be surrendered before replacements will be issued.
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14. Exchange of Talons
On and after the Interest Payment Date on which the final Coupon comprised in any Coupon sheet matures, the Talon (if any) forming part of such Coupon sheet may be surrendered at the specified office of the Principal Paying Agent or any other Paying Agent in exchange for a further Coupon sheet including (if such further Coupon sheet does not include Coupons to (and including) the final date for the payment of interest due in respect of the Bond to which it appertains) a further Talon, subject to the provisions of Condition 11 (Prescription).
15. Notices
All notices regarding the Bonds will be deemed to be validly given if published in a leading English language daily newspaper of general circulation in London. It is expected that any such publication in a newspaper will be made in the Financial Times in London. The Issuer shall also ensure that notices are duly published in a manner which complies with the rules and regulations of any stock exchange or other relevant authority on which the Bonds are for the time being listed or by which they have been admitted to trading. Any such notice will be deemed to have been given on the date of the first publication or, where required to be published in more than one newspaper, on the date of the first publication in all required newspapers. If, in the opinion of the Bond Trustee, publication as provided above is not practicable, a notice shall be validly given if published in another leading daily English language newspaper with general circulation in Europe.
Notices to be given by any Bondholder shall be in writing and given by lodging the same, together with the relative Bond or Bonds, with the Principal Paying Agent.
Receiptholders and Couponholders shall be deemed for all purposes to have notice of the contents of any notice given to the holders of the Bonds in accordance with this Condition 15 (Notices).
16. Substitution
The Bond Trust Deed contains provisions permitting the Bond Trustee, subject to any required amendment of the Bond Trust Deed, without the consent of the Bondholders, Receiptholders or the Couponholders or any Secured Party, to agree with the Issuer to the substitution in place of the Issuer (or of any previous substitute under this Condition) as the principal debtor under the Bonds, the Receipts, the Coupons and the Bond Trust Deed of another company, industrial and provident society or other entity subject to:
(a) the Bond Trustee being satisfied that the interests of the Bondholders will not be materially prejudiced by the substitution; and
(b) certain other conditions set out in the Bond Trust Deed being complied with.
Any such substitution shall be notified to the Bondholders in accordance with Condition 15 (Notices) as soon as practicable thereafter.
17. Meetings of Bondholders, modification and waiver
17.1 Meetings of Bondholders
The Bond Trust Deed contains provisions for convening meetings of the Bondholders to consider any matter affecting their interests, including the sanctioning by Extraordinary Resolution of a modification of the Bonds, the Receipts, the Coupons or any of the provisions of the Bond Trust Deed (as more particularly described in the Bond Trust Deed).
(a) A meeting of Bondholders may be convened by the Issuer or the Bond Trustee and shall be convened by the Issuer if required in writing by Bondholders holding not less than ten per cent. in Outstanding Principal Amount of the Bonds for the time being remaining outstanding (other than in respect of a meeting requested by Bondholders to discuss the financial position of the Issuer and the Group, which shall be requested in accordance with, and shall be subject to, Condition 6.2(c) (Information Covenants)).
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(b) The quorum at any such meeting for passing an Extraordinary Resolution is one or more persons holding or representing in aggregate more than 50 per cent. of the Outstanding Principal Amount of the Bonds for the time being outstanding, or at any adjourned meeting one or more persons being or representing Bondholders whatever the Outstanding Principal Amount of the Bonds so held or represented, except that at any meeting the business of which includes any matter defined in the Bond Trust Deed as a Basic Terms Modification, including, inter alia, modifying any date for payment of principal or interest thereon, reducing or cancelling the amount of principal or the rate of interest payable in respect of the Bonds or altering the currency of payment of the Bonds, the Receipts or the Coupons, the quorum shall be one or more persons holding or representing in aggregate not less than 75 per cent. in Outstanding Principal Amount of the Bonds for the time being outstanding, or at any such adjourned meeting one or more persons holding or representing in aggregate not less than 25 per cent. in Outstanding Principal Amount of the Bonds for the time being outstanding.
(c) The Bond Trust Deed provides that:
(1) a resolution passed at a meeting duly convened and held in accordance with the Bond Trust Deed by a majority consisting of not less than 75 per cent. of the votes cast on such resolution in the case of a poll;
(2) a resolution in writing signed by or on behalf of the holders of not less than 75 per cent. in Outstanding Principal Amount of the Bonds for the time being outstanding; or
(3) consent given by way of electronic consents through the relevant clearing system(s) (in a form satisfactory to the Bond Trustee) by or on behalf of the holders of not less than 75 per cent. in Outstanding Principal Amount of the Bonds for the time being outstanding,
shall, in each case, be effective as an Extraordinary Resolution of the Bondholders.
(d) An Extraordinary Resolution passed by the Bondholders shall be binding on all the Bondholders, whether or not (in the case of Extraordinary Resolutions passed at any meeting) they are present at any meeting and whether or not they voted on the resolution (or, in the case of a written resolution, whether or not they signed such written resolution), and on all Receiptholders and Couponholders.
17.2 Modification, waiver, authorisation and determination
The Bond Trustee may agree, without the consent of the Bondholders, Receiptholders, Couponholders or any Secured Party, to any modification (except as stated in the Bond Trust Deed) of, or to the waiver or authorisation of any breach or proposed breach of, any of the provisions of the Bonds, the Bond Trust Deed, any Security Agreement or any other Transaction Document, or determine, without any such consent as aforesaid, that any Potential Event of Default or Event of Default shall not be treated as such, where, in any such case, it is not, in the opinion of the Bond Trustee, materially prejudicial to the interests of the Bondholders so to do or may agree, without any such consent as aforesaid, to any modification which, in the opinion of the Bond Trustee, is of a formal, minor or technical nature or to correct a manifest error or an error which is, in the opinion of the Bond Trustee, proven. Any such modification, waiver, authorisation or determination shall be binding on the Bondholders, the Receiptholders, the Couponholders and the Secured Parties and (unless the Bond Trustee otherwise agrees) shall be notified to the Bondholders in accordance with Condition 15 (Notices) as soon as practicable thereafter.
17.3 Bond Trustee to have regard to interests of Bondholders as a class
In connection with the exercise by it of any of its trusts, powers, authorities and discretions (including, without limitation, any modification, waiver, authorisation, determination or substitution), the Bond Trustee shall have regard to the general interests of the Bondholders (excluding the Issuer, for so long as it holds any Bonds) as a class (but shall not have regard to
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any interests arising from circumstances particular to individual Bondholders, the Receiptholders or Couponholders whatever their number) and, in particular but without limitation, shall not have regard to the consequences of any such exercise for individual Bondholders, the Receiptholders or Couponholders (whatever their number) resulting from their being for any purpose domiciled or resident in, or otherwise connected with, or subject to the jurisdiction of, any particular territory or any political sub-division thereof and the Bond Trustee shall not be entitled to require, nor shall any Bondholder, the Receiptholders or Couponholder be entitled to claim, from the Issuer, the Bond Trustee or any other person any indemnification or payment in respect of any tax consequences of any such exercise upon individual Bondholders, Receiptholders or Couponholders.
18. Indemnification and protection of the Bond Trustee and Bond Trustee contracting with the Issuer
The Bond Trust Deed contains provisions for the indemnification of the Bond Trustee and for its relief from responsibility and liability towards the Issuer, the Bondholders, Receiptholders and the Couponholders, including (i) provisions relieving it from taking action unless secured and/or indemnified and/or pre-funded to its satisfaction and (ii) provisions limiting or excluding its liability in certain circumstances. The Bond Trustee is exempted from any liability in respect of any loss, diminution in value or theft of all or any part of the Issuer Charged Property, from any obligation to insure all or any part of the Issuer Charged Property (including, in either such case, any documents evidencing, constituting or representing the same or transferring any rights, benefits and/or obligations thereunder), or to procure the same to be insured.
The Bond Trust Deed also contains provisions pursuant to which the Bond Trustee is entitled, inter alia, (a) to enter into or be interested in any contract or financial or other transaction or other arrangement with the Issuer and/or any other Transaction Party or any person or body corporate associated with the Issuer and/or any Transaction Party and (b) to accept or hold the trusteeship of any other trust deed constituting or securing any other securities issued by, or relating to, the Issuer and/or any Transaction Party or any such person or body corporate so associated or any other office of profit under the Issuer and/or any Transaction Party or any such person or body corporate so associated.
The Bond Trustee shall not be bound to take any step or action in connection with the Bond Trust Deed or the Bonds or obligations arising pursuant thereto or pursuant to the other Transaction Documents, where it is not satisfied that it is indemnified and/or secured and/or pre-funded against all its liabilities and costs incurred in connection with such step or action and may demand, prior to taking any such step or action, that there be paid to it in advance such sums as it considers (without prejudice to any further demand) shall be sufficient so as to indemnify it.
The Bond Trustee shall have no responsibility for the validity, sufficiency or enforceability of the Issuer Security. The Bond Trustee shall not be responsible for monitoring the compliance by any of the other Transaction Parties with their obligations under the Transaction Documents, neither shall the Bond Trustee be responsible for monitoring the compliance by the Borrowers or any of the other parties to the Security Agreements and the Security Trust Deed of their obligations under the Security Agreements, the Security Trust Deed or any other document.
19. Further Issues
Provided it has the prior written consent of Bondholders, granted by way of Extraordinary Resolution, and of the Original Borrower, the Issuer shall be at liberty from time to time to create and issue further bonds having terms and conditions (and backed by the same assets) the same as the Bonds or the same in all respects save for the amount and date of the first payment of interest thereon and so that the same shall be consolidated and form a single series with the outstanding Bonds. Any further bonds so created and issued shall be constituted by a trust deed supplemental to the Bond Trust Deed and notice of such creation shall be issued to Bondholders at the time of such issuance.
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20. Contracts (Rights of Third Parties) Act 1999
No person shall have any right to enforce any term or condition of this Bond under the Contracts (Rights of Third Parties) Act 1999, but this does not affect any right or remedy of any person which exists or is available apart from that Act.
21. Governing law
The Bond Trust Deed, the Loan Agreements, the Agency Agreement, the Account Agreement, the Bonds, the Receipts and the Coupons, and any non-contractual obligations or matters arising from or in connection with them, shall be governed by, and construed in accordance with, English law.
22. Submission to Jurisdiction
The Issuer has, in the Bond Trust Deed, irrevocably agreed for the benefit of the Bond Trustee, the Bondholders, the Receiptholders and the Couponholders that the courts of England are to have exclusive jurisdiction to settle any disputes that may arise out of or in connection with the Bond Trust Deed, the Bonds, the Receipts or the Coupons (including a dispute relating to non-contractual obligations arising out of or in connection with the Bond Trust Deed, the Bonds, the Receipts or the Coupons) and accordingly has submitted to the exclusive jurisdiction of the English courts.
The Issuer has, in the Bond Trust Deed, waived any objection to the courts of England on the grounds that they are an inconvenient or inappropriate forum. The Bond Trustee, the Bondholders, the Receiptholders and the Couponholders may take any suit, action or proceeding arising out of or in connection with the Bond Trust Deed, the Bonds, the Receipts or the Coupons respectively (including any suit, action or proceedings relating to any non-contractual obligations arising out of or in connection with the Bond Trust Deed, the Bonds, the Receipts or the Coupons) (together referred to as Proceedings) against the Issuer in any other court of competent jurisdiction and concurrent Proceedings in any number of jurisdictions.
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DESCRIPTION OF THE ISSUER
Incorporation and Status
TCHG Capital plc (the Issuer) is a public limited company duly incorporated in, and according the relevant laws of, England and Wales with registered number 8971695 on 1 April 2014 under the Companies Act 2006.
The registered address of the Issuer is Fifth Floor, 100 Wood Street, London EC2V 7EX. The telephone number of its registered address is 020 7606 5285. The Issuer has no subsidiaries.
Principal Activities
The Issuer is a special purpose vehicle established for the purpose of issuing the Bonds, being asset backed securities, (and incurring other indebtedness (including other secured indebtedness but subject to the covenant set out in Condition 6.1 (General Covenants))) and lending the proceeds thereof to Borrowers to be applied as permitted by the relevant Borrower's constitution.
Directors
The directors of the Issuer and their principal activities outside of the Issuer are as follows:
Name Other Principal Activities
Johanna Ellis Operations Director of the Original Borrower.
Christine Mumcuoglu Business Services Director of the Original Borrower.
Ian Bowden Director of the Corporate Services Provider.
L.D.C. Securitisation Director No 3 Limited
Corporate Director.
The business address of each of the above directors is Fifth Floor, 100 Wood Street, London EC2V 7EX.
The Secretary of the Issuer is Law Debenture Corporate Services Limited whose business address is at Fifth Floor, 100 Wood Street, London EC2V 7EX.
The directors of L.D.C. Securitisation Director No. 3 Limited are Law Debenture Securitisation Services Limited, whose business address is Fifth Floor, 100 Wood Street, London EC2V 7EX and whose principal activity or business occupation is the provision of a director for special purpose vehicles and Ian Bowden, whose business address is Fifth Floor, 100 Wood Street, London EC2V 7EX and whose principal activity is acting as director of the Corporate Services Provider. The directors of Law Debenture Securitisation Services Limited are Denyse Monique Anderson, Julian Robert Mason-Jebb and Richard David Rance each of whose business address is at Fifth Floor, 100 Wood Street, London EC2V 7EX and each of whose principal activity is acting as a director.
Johanna Ellis and Christine Mumcuoglu are employees of the Original Borrower, otherwise there are no potential conflicts of interest between any duties to the Issuer of the directors of the Issuer and their private interests and/or duties.
The Issuer has no employees. In accordance with the Corporate Services Agreement, the Corporate Services Provider will provide to the Issuer certain directors (under certain circumstances), a registered and administrative office, the arrangement of meetings of directors and shareholders and procure the service of a company secretary. No other remuneration is paid by the Issuer to or in respect of any director or officer of the Issuer for acting as such.
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Share Capital and Major Shareholders
The entire issued share capital of the Issuer comprises 50,000 ordinary shares of £1 each, all of which are paid up to 25 pence per share and are held on discretionary trust pursuant to a share trust deed (the Share Trust Deed) by The Law Debenture Intermediary Corporation p.l.c. as the share trustee (the Share Trustee). The Share Trustee has entered into an agreement (the Share Option) with the Original Borrower which gives the Original Borrower the option to purchase all of the issued shares in the Issuer for a consideration specified in that agreement upon giving a notice to the Share Trustee. If and when the Share Option is exercised and completed, the Issuer would become a member of the Group.
The Issuer has no loan capital, borrowings or material contingent liabilities (including guarantees) as at the date of this Prospectus.
Operations
Since the date of incorporation, the Issuer has not commenced operations and no financial statements have been made up as at the date of this Prospectus. The accounting reference date of the Issuer is 31 March and the first statutory accounts of the Issuer will be drawn up to 31 March 2015. The operations of the Issuer contemplated in this Prospectus are in conformity with its constitution.
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DESCRIPTION OF THE ORIGINAL BORROWER AND THE GROUP
The Group
Background and History
Town and Country Housing Group's history began in a voluntary transfer of housing stock from Tunbridge Wells Borough Council to High Weald Housing Association Limited (now called TCHG Living Limited) through a process known as a "large scale voluntary transfer". In 1999 the Original Borrower was incorporated as a limited company, converting into an industrial and provident society in 2007. In the same year High Weald Housing Association Limited became a subsidiary of the Original Borrower. The Original Borrower considers itself to be the leading housing association operating in Kent and East Sussex. As at 31 March 2014, the Original Borrower owned 8,215 dwellings including portfolios of shared ownership, sub-market and market rented units (but excluding the freehold of dwellings sold in their entirety to leaseholders). There were also 491 properties for affordable rent or shared ownership under construction (excluding 145 properties for affordable rent or shared ownership currently owned by Monson Homes, which will be sold to the Original Borrower upon completion).
The Group consists of five incorporated entities:
(a) the Original Borrower, which is a Registered Provider of Social Housing and a charitable industrial and provident society. The Original Borrower is the Group's parent and provides central administrative and treasury management functions for Group members as well as providing strategic direction;
(b) TCHG Living Limited, a Registered Provider of Social Housing and a non-charitable industrial and provident society. As at 31 March 2014, it owned 531 properties including shared ownership, market rent and sub market rent units. TCHG Living Limited manages some dwellings on behalf of the Original Borrower in furtherance of the strategy which sees TCHG Living Limited being the Group’s main vehicle for the management of shared ownership properties. The Original Borrower also manages some properties on behalf of TCHG Living Limited;
(c) TCHG Foundation, a registered charity incorporated as a private company limited by guarantee which is responsible for the Group’s community involvement initiatives;
(d) Monson Homes Limited, a private company limited by shares which is used as a development company. Monson Homes Limited was incorporated in 2006 but remained dormant until January 2011. MHL enters into the Group's new development contracts and also acts as a regeneration vehicle for certain schemes; and
(e) Countrywise Repairs Limited, a joint venture formed to deliver responsive maintenance and associated works established as a private company limited by shares. It started trading in the financial year 2012 to 2013. The Original Borrower owns 51% of the shares in Countrywise Repairs Limited with the remaining 49% being owned by Wates Living Space (Maintenance) Limited, part of the Wates Group.
Objectives
The Original Borrower and the Group as a whole has a vision of "Homes people choose". In delivering this vision, the Original Borrower expects to achieve a number of key outcomes:
(a) provide a choice of good quality homes and services;
(b) deliver excellent services tailored to the needs of individual residents, with additional support for those who need it;
(c) support the development of vibrant, sustainable communities; and
(d) continue to provide new homes, working within financial constraints.
The Group's headline priorities are:
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(a) an excellent landlord - delivering excellent core services;
(b) sustainable growth;
(c) a local leader working in partnership; and
(d) a well run business.
The Original Borrower
Town and Country Housing Group is the Original Borrower.
Incorporation and Status
The Original Borrower is constituted in England as a charitable industrial and provident society under the Industrial and Provident Societies Act 1965-2003 (registration number 30167R) and registered with and regulated by the Regulator with registration number L4251.
The principal place of business of the Original Borrower is Monson House, Monson Way, Tunbridge Wells, Kent TN1 1LQ. The telephone number of its principal place of business is 01892 501480.
Principal Activities of the Original Borrower
The Original Borrower's principal activities are to:
(a) provide social housing, other housing accommodation and assistance for those in need by reason of youth, age, ill-health, disability, financial hardship or other disadvantage for the benefit of the community;
(b) provide associated facilities, amenities and services for those in need by reason of youth, age, ill-health, disability, financial hardship or other disadvantage for the benefit of the community; and
(c) carry on any other charitable object which is not prohibited for an industrial and provident society registered as Registered Provider of Social Housing.
Corporate Governance
The Original Borrower has 10 board members. Together they bring a broad range of expertise and experience to the Original Borrower, in fields ranging from customer service, finance and property, to the governance and management of housing associations. Up to two board members can be residents, which help to bring a customer's perspective to board meetings. The board meets formally eight times a year.
Board members also serve on one or more functional committees:
• The Investment and Finance Committee
The Investment and Finance Committee meets two to four times a year to consider matters relating to the treasury function, business planning, financial risk monitoring, and development.
• The Audit Committee
The Audit Committee meets four times a year to approve financial statements, appoint and monitor the work of external and internal auditors (including receiving their reports), approve and monitor risk management arrangements (including financial risk monitoring) and to monitor any incidents of fraud.
• The Remuneration & Appointments Committee
The Remuneration & Appointments Committee meets twice a year to oversee the recruitment of board members, committee members and senior executives (including the chief executive), to consider the remuneration of board and staff members annually and to monitor policies relating to board members.
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• The Customer Services Committee
The Customer Services Committee meets four times a year to consider matters pertaining to the Group’s customers and to monitor complaints and performance statistics.
The board is further supported by a Funding Sub Group which is also established as a committee of the board, which meets as necessary to oversee the raising of new finance and monitors discussions with existing funders. It is expected that the Funding Sub Group will be disbanded during 2014.
Provision exists for persons who are not board members to be co-opted to the committees including the Funding Sub Group where individuals have significant experience relevant to the work of that committee. There are currently two such individuals who serve on the committees. One sits on the Audit Committee and the second is a member of both the Investment and Finance Committee and the Funding Sub Group. The Original Borrower's Finance Director is also a member of the Funding Sub Group.
The day-to-day management of the Original Borrower is delegated by the board members to the chief executive and the executive team.
The Original Borrower complies with the National Housing Federation's code of governance.
Board
The board members of the Original Borrower and their principal activities outside of the Original Borrower, where these are significant with respect to the Original Borrower, are as follows:
Name Office Other Principal Activities
Francis Salway Group Chair Not applicable.
Graham Hill Group Vice Chair Audit Cttee Chair
Not applicable.
Peter Cooke Board Member. Not applicable.
Mark Easton Board Member. Board member of Plexus UK (First Project) Limited.
Robert Owen Heapy Chief Executive Monson Homes Chair
Not applicable.
Jenine Langrish Investment & Finance Committee, and Funding Sub Group Chair
Risk & Audit Committee member, Gateway Housing Association.
Charles Leigh-Dugmore Customer Services Committee Chair
Board member of Golding Homes Limited.
Christine Pointer Remuneration & Appointments Committee Chair
Not applicable.
Alan Riddell TCHG Foundation Chair Chair of Old Ford Housing Association.
Sanaya Robinson Board Member. Board member of Housing & Care 21.
The business address of each of the board members is Monson House, Monson Way, Tunbridge Wells, Kent TN1 1LQ.
There are no potential conflicts of interest between any duties to the Original Borrower of the board members of the Original Borrower and their private interests and/or duties.
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Corporate Rating
The Original Borrower currently has a credit rating of "AA-" stable assigned by S&P.
Financial Statements of the Original Borrower
The consolidated audited financial statements, including the reports of the auditors, for the financial years ended 31st March, 2012 and 31st March, 2013 for the Original Borrower are set out Appendix 1 - Financial Statements of the Original Borrower.
I-A7.5.2
G-A9.11.1
G-A9.11.2 G-A9.11.3.1
G-A9.11.4.1
I-A13.7.2
89
VALUATION REPORT
The valuation report in Appendix 2 - Valuation Report (the Valuation Report) relates to the properties which will be charged in favour of the Issuer and the Security Trustee on the Closing Date (such Properties, the Initial Properties) and which will be allocated to secure the Bonds together with the Retained Proceeds (if any). All of the Initial Properties are being charged by the Original Borrower.
The Valuation Report was prepared by Savills Advisory Services Limited, Registered Chartered Surveyors, of 33 Margaret Street, London W1G 0JD (the Valuer). The Valuation Report is included in this Prospectus, in the form and context in which it is included, with the consent of the Valuer and the Valuer has authorised the contents of this section.
The Valuer does not have a material interest in the Issuer or the Original Borrower.
The Original Borrower’s Financial Statements are prepared using the historical cost basis of accounting as modified by the revaluation of housing and commercial properties. The majority of assets are social or affordable rented housing and are valued at EUV-SH (87.7% of Tangible Fixed Assets in the 2013 Financial Statements). Some assets (such as shared ownership properties and properties under rent to homebuy or intermediate rent) are at MV-T (6.6%). Some other assets (such as properties under construction) are at the lower of cost and realisable value (5.2%) and a further small proportion (0.5%) are commercial assets and valued at MV-VP. Additionally, the amounts presented in the Original Borrower’s latest published consolidated accounts with respect to the social or affordable rented housing were derived from a valuation based on the going concern of that portion of the whole stock, in contrast with the valuation contained in the Valuation Report which only represents the value to a funder in possession of a smaller portion of the stock. As such, different assumptions have been applied and, consequently, the amounts reflected in the Valuation Report and the valuations contained in the Original borrower’s latest published consolidated accounts are not directly comparable.
Summary of valuations
A summary of the values of the Initial Properties set out in the Valuation Report is set out below:
EUV-SH basis for all properties EUV-SH / MV-ST as appropriate Total
Units All properties Units Valued on EUV-SH basis Units Valued on MV-ST basis
456 £26,447,500 5 £289,500 451 £41,266,000 £41,555,500 MV-T (also referred to as MV-ST) refers to Market Value, subject to existing tenancies, and EUV-SH refers to Existing Use Value for Social Housing as explained in more detail in the Valuation Report. The Valuation Report also includes, for information, the values of the Initial Properties according to MV-VP which refers to Market Value assuming Vacant Possession, as explained in more detail in the Valuation Report, given that only the MV-ST and EUV-SH bases are used in calculating the Asset Cover Test (see Description of the Loan Agreements –Asset Cover Test).
I-A8.2.2.16
I-A7.1.1
A-A13.1.1
I-A13.7.3
A-A9.13.1 I-A7.9.1
ESMA 130(vi)
I-A8.2.2.6
90
TAXATION
United Kingdom Taxation
The following applies only to persons who are the beneficial owners of Bonds and is a summary of the Issuer's understanding of current United Kingdom law and published HM Revenue & Customs practice relating to certain aspects of United Kingdom taxation as at the date of this Prospectus. Some aspects do not apply to certain classes of person (such as dealers and persons connected with the Issuer) to whom special rules may apply. The United Kingdom tax treatment of prospective Bondholders depends on their individual circumstances and may be subject to change at any time in the future, possibly with retrospective effect. This is not intended to constitute a complete analysis of all tax consequences relating to the ownership of the Bonds and it is not intended to be, nor should it be considered to be, legal or tax advice. Prospective Bondholders who may be subject to tax in a jurisdiction other than the United Kingdom or who may be unsure as to their tax position should seek their own professional advice.
Interest on the Bonds
Payment of interest on the Bonds
Payments of interest by the Issuer on the Bonds may be made without deduction of or withholding on account of United Kingdom income tax provided that the Bonds continue to be listed on a "recognised stock exchange" within the meaning of section 1005 of the Income Tax Act 2007. The London Stock Exchange is a recognised stock exchange for these purposes. Securities will be treated as listed on the London Stock Exchange if they are included in the Official List (within the meaning of and in accordance with the provisions of Part 6 of the Financial Services and Markets Act 2000) and admitted to trading on the London Stock Exchange. Provided, therefore, that the Bonds remain so listed, interest on the Bonds will be payable without withholding or deduction on account of United Kingdom tax.
Interest on the Bonds may also be paid without withholding or deduction on account of United Kingdom tax where interest on the Bonds is paid by a company (e.g. the Issuer) and, at the time the payment is made, the Issuer reasonably believes (and any person by or through whom interest on the Bonds is paid reasonably believes) that the beneficial owner is within the charge to United Kingdom corporation tax as regards the payment of interest, provided that HM Revenue & Customs (HMRC) has not given a direction (in circumstances where it has reasonable grounds to believe that it is likely that the above exemption is not available in respect of such payment of interest at the time the payment is made) that the interest should be paid under deduction of tax.
In other cases, an amount must generally be withheld from payments of interest on the Bonds on account of United Kingdom income tax at the basic rate (currently 20 per cent.). However, where an applicable double tax treaty provides for a lower rate of withholding tax (or for no tax to be withheld) in relation to a Bondholder, HMRC can issue a notice to the Issuer to pay interest to the Bondholder without deduction of tax (or for interest to be paid with tax deducted at the rate provided for in the relevant double tax treaty).
HMRC has powers, in certain circumstances, to obtain information about certain payments of interest, payments derived from securities (whether income or capital) and securities transactions.
The persons from whom HMRC can obtain information include: a person by or through whom interest is paid or credited, each registered or inscribed holder of securities, a person who receives (or is entitled to receive) a payment derived from securities, a person who makes such a payment (received from, or paid on behalf of, another person), a person who effects or is a party to securities transactions (which includes an issue of securities) on behalf of others, and registrars or administrators in respect of securities transactions.
The information HMRC can obtain includes: in relation to interest paid or credited on money received or retained in the United Kingdom, the identity of the security under which interest is paid, in relation to payments derived from securities, details of the beneficial owner of securities; details of the person for whom the securities are held, or the person to whom the payment is to be
91
made (and, if more than one, their respective interests) and, in relation to securities transactions, information and documents relating to securities transactions. HMRC is generally not able to obtain information (under its power relating solely to interest) about a payment of interest to (or a receipt for) a person that is not an individual. This limitation does not apply to HMRC's power to obtain information about payments derived from securities.
In certain circumstances the information which HMRC has obtained using these powers may be exchanged with tax authorities in other jurisdictions.
EU Savings Directive
Under EC Council Directive 2003/48/EC (the Directive) on the taxation of savings income, Member States are required to provide to the tax authorities of another Member State details of payments of interest (or similar income) paid by a person within its jurisdiction to an individual resident in that other Member State or to certain limited types of entities established in that other Member State. However, for a transitional period, Luxembourg and Austria are instead required (unless during that period they elect otherwise) to operate a withholding system in relation to such payments (the ending of such transitional period being dependent upon the conclusion of certain other agreements relating to information exchange with certain other countries). A number of non-EU countries and territories including Switzerland have adopted similar measures (a withholding system in the case of Switzerland). In April 2013, the Luxembourg Government announced its intention to abolish the withholding system with effect from 1st January, 2015, in favour of automatic information exchange under the Directive.
The European Commission has proposed certain amendments to the Directive, which may, if implemented, amend or broaden the scope of the requirements described above.
If a payment were to be made or collected through a Member State which has opted for a withholding system and an amount of, or in respect of, tax were to be withheld from that payment, neither the Issuer nor any Paying Agent nor any other person would be obliged to pay additional amounts to the holder of the Bonds or to otherwise compensate the holder of the Bonds for the reduction in the amounts that they will receive as a result of the imposition of such withholding tax.
Further United Kingdom Income Tax Issues
Interest on the Bonds constitutes United Kingdom source income for tax purposes and, as such, may be subject to income tax by direct assessment even where paid without withholding.
However, interest with a United Kingdom source received without deduction or withholding on account of United Kingdom tax will not be chargeable to United Kingdom tax in the hands of a Bondholder (other than certain trustees) who is not resident for tax purposes in the United Kingdom unless that Bondholder carries on a trade, profession or vocation in the United Kingdom through a United Kingdom branch or agency in connection with which the interest is received or to which the Bonds are attributable (and where that Bondholder is a company, unless that Bondholder carries on a trade in the United Kingdom through a permanent establishment in connection with which the interest is received or to which the Bonds are attributable). There are exemptions for interest received by certain categories of agent (such as some brokers and investment managers). The provisions of an applicable double taxation treaty may also be relevant for such Bondholders.
United Kingdom Corporation Tax Payers
In general, Bondholders which are within the charge to United Kingdom corporation tax will be charged to tax as income on all returns, profits or gains on, and fluctuations in value of, the Bonds (whether attributable to currency fluctuations or otherwise) broadly in accordance with their statutory accounting treatment.
92
Other United Kingdom Tax Payers
Taxation of Chargeable Gains
The Bonds will constitute "qualifying corporate bonds" within the meaning of section 117 of the Taxation of Chargeable Gains Act 1992. Accordingly, a disposal by a Bondholder of a Bond will not give rise to a chargeable gain or an allowable loss for the purposes of the UK taxation of chargeable gains.
Accrued Income Scheme
On a transfer of Bonds by a Bondholder, any interest which has accrued since the last interest payment date may be chargeable to tax as income under the rules of the accrued income scheme as set out in Part 12 of the Income Tax Act 2007. The purchaser of such a Bond should be entitled to any equivalent tax credit under the accrued income scheme to set against any actual interest received by the purchaser in respect of the Bonds.
If the Bonds constitute variable rate securities for the purposes of the accrued income scheme, on a disposal of Bonds by a Bondholder the Bondholder may be charged to income tax on an amount of income which is just and reasonable in the circumstances. However, the purchaser of such a Bond will not be entitled to any equivalent tax credit under the accrued income scheme to set against any actual interest received by the purchaser in respect of the Bonds (which may therefore be taxable in full).
Taxation of Discount
HMRC's published practice is that securities having similar terms of early redemption as the Bonds are not treated by HMRC as "deeply discounted securities" and accordingly the Bonds should not be treated as "deeply discounted securities" for the purposes of Chapter 8 of Part 4 of the Income Tax (Trading and Other Income) Act 2005. If the Bonds are treated as "deeply discounted securities" any profit on redemption would be subject to income tax.
Stamp Duty and Stamp Duty Reserve Tax
No United Kingdom stamp duty or stamp duty reserve tax (SDRT) is payable on the issue of the Bonds or on a transfer by delivery of the Bonds.
The Proposed Financial Transactions Tax
The European Commission has published a proposal for a Directive for a common Financial Transactions Tax (FTT) in Belgium, Germany, Estonia, Greece, Spain, France, Italy, Austria, Portugal, Slovenia and Slovakia (the participating Member States).
The proposed FTT has very broad scope and could, if introduced in its current form, apply to certain dealings in the Bonds (including secondary market transactions) in certain circumstances.
Under current proposals the FTT could apply in certain circumstances to persons both within and outside of the participating Member States. Generally, it would apply to certain dealings in the Bonds where at least one party is a financial institution which is established in a participating Member State. A financial institution may be, or be deemed to be, "established" in a participating Member State in a broad range of circumstances, including (a) by transacting with a person established in a participating Member State or (b) where the financial instrument which is subject to the dealings is issued in a participating Member State.
The FTT proposal remains subject to negotiation between the participating Member States and is the subject of legal challenge. It may therefore be altered prior to any implementation, the timing of which remains unclear. Additional EU Member States may decide to participate. Prospective holders of the Bonds are advised to seek their own professional advice in relation to the FTT.
93
PURCHASE AND SALE
The Dealer has, in a purchase agreement (the Purchase Agreement) dated 1st July, 2014, agreed to subscribe for the Bonds at the issue price of 100 per cent. of the nominal amount of the Bonds and to then sell these Bonds to a third party purchaser (the Purchaser), who, in the Purchase Agreement, has agreed to purchase these Bonds from the Dealer.
The Purchaser will represent, warrant and agree, in the Purchase Agreement, that it is not a U.S. person as defined in Regulation S of the United States Securities Act of 1933, as amended.
The Purchase Agreement may be terminated in certain circumstances prior to payment to the Issuer.
I-A13.3
94
GENERAL INFORMATION
Authorisation
The issue of the Bonds has been approved by a resolution of the board of directors of the Issuer dated 23 June, 2014 and are duly authorised according to the requirements of the Issuer's constitution.
Listing of Bonds
It is expected that the official listing of the Bonds will be granted on or about 4th July, 2014 subject only to the issue of the Temporary Global Bond. Application has been made to the UK Listing Authority for the Bonds to be admitted to the Official List and to the London Stock Exchange for the Bonds to be admitted to trading on the London Stock Exchange's regulated market.
The Issuer estimates that the total expenses related to the admission to trading will be £11,595. The Original Borrower shall pay to the Issuer, inter alia, an amount equal to such expenses in accordance with Clause 19 (Expenses) of the Original Loan Agreement.
Documents Available
For the period of 12 months following the date of this Prospectus, copies of the following documents will, when published, be available for inspection from the registered office of the Issuer and from the specified office of the Paying Agent for the time being in London:
(a) the constitutional documents of the Issuer and each Borrower;
(b) the audited consolidated financial statements, including the reports of the auditors, of the Original Borrower in respect of the financial years ended 31st March, 2012 and 31st March, 2013. The Original Borrower currently prepares audited accounts on an annual basis;
(c) the most recently published audited annual financial statements (if any) of the Issuer, each Additional Borrower and each Eligible Group Member and the most recently published unaudited interim financial statements (if any) of the Issuer, each Additional Borrower and each Eligible Group Member, in each case together with any audit or review reports prepared in connection therewith;
(d) the Bond Trust Deed, the Agency Agreement, the Account Agreement, the Custody Agreement, each Loan Agreement, the Security Trust Deed, the Security Agreements and the Corporate Services Agreement;
(e) the Valuation Report;
(f) a copy of this Prospectus; and
(g) any future offering circulars, prospectuses and information memoranda and any other documents incorporated therein by reference.
Clearing Systems
The Bonds have been accepted for clearance through Euroclear and Clearstream, Luxembourg. The ISIN and the Common Code for the Bonds are XS1080221598 and 1080221598, respectively.
The address of Euroclear is Euroclear Bank S.A./N.V., 1 Boulevard du Roi Albert II, B-1210 Brussels, Belgium and the address of Clearstream, Luxembourg is Clearstream Banking, société anonyme, 42 Avenue JF Kennedy, L-1855 Luxembourg.
Characteristics of underlying assets
The securitised assets backing the issue of the Bonds (being the Original Loan Agreement and each Additional Loan Agreement entered into from time to time) have (or, in the case of an Additional Loan Agreement, will have) characteristics that demonstrate the capacity to produce funds to service any payments due and payable on the Bonds.
I-LR2.2.1(2) I-LR2.2.2(2)
I-A13.4.12
I-LR2.2.3 I-LR2.2.9(1) I-LR2.2.10(2)(a)I-A13.4.1
I-A13.5.1
I-A13.6.1
I-A7.10.1
A-A9.14
I-A13.4.11
A-A6.4.1
I-A13.4.2
I-A8.1.1
I-A13.4.4
I-A8.2.1
95
Material or Significant Change
There has been no material adverse change in the financial position or prospects of the Issuer since its date of incorporation.
There has been no material adverse change in the financial position or prospects of the Original Borrower since 31st March, 2013.
There has been no material adverse change in the financial position or prospects of the Group since 31st March, 2013.
There has been no significant change in the financial or trading position of the Group since 31st March, 2013.
There has been no significant change in the financial or trading position of the Original Borrower since 31st March, 2013.
Litigation
There are no governmental, legal or arbitration proceedings (including any such proceedings which are pending or threatened of which the Issuer is aware) since the date of its incorporation which may have, or have had in the recent past significant effects on the Issuer's financial position or profitability.
There are no governmental, legal or arbitration proceedings (including any such proceedings which are pending or threatened of which the Original Borrower is aware) in the 12 months preceding the date of this Prospectus which may have, or have had in the recent past significant effects on the Original Borrower's financial position or profitability.
There are no governmental, legal or arbitration proceedings (including any such proceedings which are pending or threatened of which the Original Borrower is aware) in the 12 months preceding the date of this Prospectus which may have, or have had in the recent past significant effects on the Group 's financial position or profitability.
Auditors
The auditors of the Issuer are Nexia Smith & Williamson, Chartered Accountants & Registered Auditors, of 25 Moorgate, London EC2R 6AY. As at the date of this Prospectus no financial statements have been prepared in respect of the Issuer. The auditors of the Issuer have no material interest in the Issuer.
The auditors of the Original Borrower are Nexia Smith & Williamson, Chartered Accountants & Registered Auditors, of 25 Moorgate, London EC2R 6AY who have audited the Original Borrower's accounts, without qualification, in accordance with generally accepted accounting principles in the United Kingdom for each of the two financial years ended on 31st March, 2012 and 31st March, 2013. The auditors of the Original Borrower have no material interest in the Original Borrower.
Post-issuance information
The Issuer does not intend to provide any post-issuance information in relation to the Bonds, the Issuer Security or the Underlying Security, provided that, pursuant to Condition 6.2 (Information Covenants), the Issuer will, on an annual basis, send to the Bond Trustee and any Bondholder that has requested the same of the Issuer (and continues to be a Bondholder) (a) a copy of the Compliance Certificates (and, subject to the consent of the relevant Approved Valuer(s), the Valuation(s) delivered for the purpose of preparing such Compliance Certificates) promptly upon receipt of the same from the Borrowers pursuant to the terms of their respective Loan Agreements and (b) a copy of the annual reports of each Borrower (promptly upon publication of the same by the relevant Borrower).
Arranger and the Dealer transacting with the Issuer or the Borrowers
The Arranger, the Dealer and each of their affiliates may in the future engage in corporate finance, investment banking and/or commercial banking transactions with, and may perform services for, the Issuer and/or the Borrowers and their respective affiliates in the ordinary course of business.
G-A9.7.1
G-A9.11.6
I-A7.8.3
G-A9.11.5
I-A7.2.1 A-A9.2.1
I-A7.2.1
I-A13.7.2
A-A9.2.1
G-A9.11.1
G-A9.11.3.1
G-A9.11.4.1
I-A8.4.1
96
Yield
Indication of the yield on the Bonds: 4.665 per cent. (semi-annual). The yield is calculated at the Issue Date on the basis of the Issue Price. It is not an indication of future yield.
I-A13.4.10
97
GLOSSARY
The following terms used in this Prospectus are defined on the page number specified below:
£ ................................................................................................... 4 Account Agreement ................................................................... 63 Account Bank ............................................................................ 63 Accountholder............................................................................ 37 Accounting Profit....................................................................... 63 Accrual Date .............................................................................. 71 Act.............................................................................................. 27 Actual Advance Amount ........................................................... 41 Additional Borrower ........................................................ 1, 40, 63 Additional Borrowers ................................................................ 40 Additional Loan Agreement ............................................ 1, 40, 63 Additional Properties ................................................................... 1 Additional Security Agreement ..................................... 13, 53, 63 Additional Security Trust Deed..................................... 13, 53, 64 Agency Agreement .................................................................... 63 Aggregate Funded Commitment ............................................... 45 Ancillary Documents ................................................................. 53 Appointee................................................................................... 64 Approved Valuer.................................................................. 48, 64 Arranger ....................................................................................... 3 Asset Cover Test .................................................................. 45, 64 Aviva Scheme ............................................................................ 29 Benchmark Gilt.......................................................................... 74 Bond Trust Deed........................................................................ 63 Bond Trustee.......................................................................... 3, 63 Bondholder................................................................................. 38 Bondholder Specific Withholding ............................................. 64 Bondholders ............................................................................... 63 Bonds ................................................................................. 1, 6, 63 Borrower Default ............................................................. 8, 48, 64 Borrower Minimum Requirements.................................. 1, 20, 64 Borrowers............................................................................. 40, 64 Business Day.............................................................................. 73 Cancelled Retained Proceeds..................................................... 64 Cash Sub-Accounts.................................................................... 60 Charged Cash............................................................................. 65 Charged Properties..................................................................... 45 Charitable Group Member................................................... 11, 65 Clearstream, Luxembourg ..................................................... 1, 36 Closing Date ................................................................................ 1 Commitment .............................................................................. 65 Commitments............................................................................. 40 Compliance Certificate ........................................................ 44, 65 Conditions .................................................................................. 63 Corporate Services Agreement ............................................ 62, 65 Corporate Services Provider ...................................................... 65 Couponholders ........................................................................... 63 Coupons ..................................................................................... 63 CPI ............................................................................................. 24 Custodian ................................................................................... 65 Custody Account.................................................................. 60, 65 Custody Agreement ................................................................... 65 Custody Sub-Accounts .............................................................. 60 Dealer ........................................................................................... 3 Designated Security ................................................................... 45 Desk Top Valuation Report ....................................................... 48 Determination Date.................................................................... 74 Directive............................................................................... 32, 91 DWP........................................................................................... 23 Eligible Group Member............................................................. 65 Enforcement Event .................................................................... 49 Equivalent Rating ...................................................................... 11 Euroclear ................................................................................ 1, 36 EUV-SH..................................................................................... 89 Event of Default......................................................................... 77 Exchange Date ....................................................................... 1, 36 Exchange Event ......................................................................... 36 Final Charging Date................................................................... 46 Finance Documents ................................................................... 49 Fixed Charge.............................................................................. 53 Framework ................................................................................. 26 FTT............................................................................................. 92
Full Valuation Report................................................................. 48 Further Commitment.................................................................. 40 Further Proceeds..................................................................... 1, 40 Global Bonds.......................................................................... 1, 36 Gross Redemption Yield ............................................................ 74 Group.......................................................................................... 65 Guaranteed Interest and Fee Amounts................................. 12, 45 Guaranteed Principal Amount.............................................. 12, 45 HCA............................................................................................ 25 HMRC ........................................................................................ 90 holder of Bonds .......................................................................... 38 Initial Cash Security Account ..........................................1, 10, 65 Initial Properties ................................................................... 46, 89 Instalment Redemption Date............................................1, 65, 73 Interest Payment Date ........................................................ 1, 7, 71 Investor's Currency .................................................................... 32 Issue Date ........................................................................... 1, 6, 65 Issuer ................................................................................1, 63, 83 Issuer Charged Property....................................................... 65, 69 Issuer Security ............................................................9, 52, 65, 69 KCC Scheme .............................................................................. 29 LDCS.......................................................................................... 62 Loan..................................................................................1, 42, 65 Loan Agreement..................................................................... 1, 40 Loan Agreements .............................................................1, 40, 66 Loan Interest Period ................................................................... 42 Loan Maturity Date .................................................................... 43 Loan Payment Date .................................................................... 42 Loan Payment Day..................................................................... 66 Loan Prepayment Date........................................................... 7, 74 Loans .......................................................................................... 66 London Stock Exchange .............................................................. 1 Markets in Financial Instruments Directive................................. 1 Maturity Date ..................................................................... 1, 7, 66 member....................................................................................... 65 Minimum Value ......................................................................... 46 Mininum Denomination............................................................. 30 Moody's ...................................................................................... 11 Mortgage Deed........................................................................... 53 MV-ST........................................................................................ 89 MV-VP ....................................................................................... 89 New Framework......................................................................... 26 NGN ........................................................................................... 36 Nominated Financial Adviser ................................................ 7, 74 Ongoing Cash Security Account................................................ 66 Original Borrower .................................................................. 1, 66 Original Borrower Secured Liabilities................................. 13, 53 Original Borrower Security Trust Deed.........................13, 52, 66 Original Commitment ................................................................ 40 Original Fixed Charge................................................................ 53 Original Fixed Charges .............................................................. 66 Original Loan Agreement ................................................1, 40, 66 Original Mortgage Deed ............................................................ 53 Original Mortgage Deeds........................................................... 66 Original Security Agreements........................................13, 53, 66 outstanding ................................................................................. 66 Outstanding Principal Amount .................................................. 67 participating Member States ...................................................... 92 Paying Agents ............................................................................ 63 Payment Day .............................................................................. 72 Permanent Global Bond ......................................................... 1, 36 Permitted Investment Profit ................................................. 11, 67 Permitted Investments................................................................ 67 Permitted Reorganisation........................................................... 67 Post-enforcement Priority of Payments ............................... 17, 70 Potential Event of Default.......................................................... 68 Pre-enforcement Priority of Payments................................. 17, 69 Prepayment Notice ..................................................................... 43 Prepayment Premium................................................................. 43 Principal Paying Agent .............................................................. 63 Proceedings ................................................................................ 82 Properties.................................................................................... 46
98
Property...................................................................................... 46 Prospectus Directive .................................................................... 2 Purchase Agreement .................................................................. 93 Purchaser.................................................................................... 93 Receiptholders ........................................................................... 63 Receipts...................................................................................... 63 Redemption Instalment .............................................................. 73 Registered Provider of Social Housing ..................................... 68 Regulation Committee ............................................................... 27 Regulator.................................................................................... 27 Regulatory Framework .............................................................. 27 Released Properties.................................................................... 46 Relevant Date............................................................................. 68 Relevant Documents .................................................................. 53 Relevant Jurisdiction ................................................................. 68 Retained Proceeds...................................................... 1, 10, 39, 68 Retained Proceeds Par Amount ................................................. 46 Right-to-Buy .............................................................................. 14 RPI ............................................................................................. 24 S&P .............................................................................................. 1 SDRT ......................................................................................... 92 Secured Parties........................................................................... 68 Securities Act ............................................................................... 3 Security Agreements...................................................... 13, 53, 68 Security Assets........................................................................... 53 Security Documents................................................................... 53 Security Trust Deed ....................................................... 13, 53, 68 Security Trust Deeds............................................................ 13, 53
Security Trustee.................................................................... 53, 68 Share Option............................................................................... 84 Share Trust Deed........................................................................ 84 Share Trustee.............................................................................. 84 Shared Ownership Property ....................................................... 14 Shared Ownership Sale .............................................................. 14 Social HomeBuy ........................................................................ 14 Statutory Disposal ...................................................................... 14 Sterling ......................................................................................... 4 subsidiary ................................................................................... 68 Substitute Property ..................................................................... 47 Talons ......................................................................................... 63 Taxes .................................................................................... 68, 76 Temporary Global Bond ........................................................ 1, 36 Transaction Account .................................................................. 68 Transaction Documents.............................................................. 68 Transaction Parties ..................................................................... 68 TSA ............................................................................................ 27 UC tenants .................................................................................. 23 UK Government Gilt.................................................................. 68 UK Listing Authority ................................................................... 1 Underlying Security ................................................................... 13 Undrawn Commitment......................................................... 40, 68 Unit ............................................................................................. 14 Valuation .................................................................................... 68 Valuation Report ........................................................................ 89 Value .......................................................................................... 46 Valuer ..................................................................................... 2, 89
Industrial and Provident Society number 30167R Homes and Communities Agency Registration No. L4251
TOWN AND COUNTRY HOUSING GROUP
Report and Financial Statements
for the year ended
31 March 2013
TOWN AND COUNTRY HOUSING GROUP Year ended 31 March 2013 REPORT AND FINANCIAL STATEMENTS
CONTENTS
Page
Board, directors, advisors and bankers 1
Chair’s introduction 2-3
Report of the Board including operating and financial review 4-16
Independent Auditor’s report 17
Consolidated income and expenditure account 18
Note of consolidated historical cost surpluses and deficits 18
Company income and expenditure account 19
Note of historical cost surpluses and deficits 19
Balance sheets 20
Consolidated cash flow statement 21
Statements of total recognised surpluses and deficits 22
Notes to the accounts 23-55
TOWN AND COUNTRY HOUSING GROUP Year ended 31 March 2013 REPORT AND FINANCIAL STATEMENTS
1
BOARD, DIRECTORS, ADVISORS AND BANKERS
BOARD MEMBERS
Francis Salway. Ordinary Member (Chair) Appointed November 2012 Nigel Cox JP. Ordinary Member (Chair) Retired December 2012 Graham Hill. Vice Chair and Chair of Audit Committee Appointed July 2012 Peter Cooke. Tenant Member Mark Easton. Ordinary Member Robert Heapy. Executive Member Darren Hughes. Ordinary Member and Chair of TCHG Living Jenine Langrish. BSc. (Hons) ACIB. Ordinary Member Charles Leigh-Dugmore. MCIOB. Ordinary Member Jenny Molloy. Tenant Member Christine Pointer. MSc. Ordinary Member Alan Riddell. Ordinary Member and Chair of TCHG Foundation Sanaya Robinson. BSc. (Hons) ACA MCT. Ordinary Member Howard Williams. FCA. Vice Chair and Chair of Audit Committee Ordinary Member Retired July 2012
EXECUTIVE DIRECTORS
Robert Heapy. Chief Executive Suzanne Twerdochlib. Finance Director & Company Secretary (until December 2012) Robin Tebbutt. Interim Finance Director (from July 2012) Paul Turton. Operations Director (Full time until August 2012, Job share thereafter) Jo Ellis. Operations Director (Job share from August 2012) Christine Mumcuoglu. Business Services Director Colin Lissenden. Development Director
AUDITORS
External Internal Nexia Smith & Williamson Mazars LLP 25 Moorgate Tower Bridge House London St Katherine’s Way EC2R 6AY London E1W 1DD
BANKERS
National Westminster Bank Plc
LEGAL STATUS
Registered under the Industrial and Provident Societies Act 1965 No: 30167R Registered under Section 3 of the Housing and Regeneration Act 2008 number: L4251
REGISTERED OFFICE
Monson House, Monson Way, Tunbridge Wells, Kent, TN1 1LQ
TOWN AND COUNTRY HOUSING GROUP Year ended 31 March 2013 REPORT AND FINANCIAL STATEMENTS
2
CHAIR’S INTRODUCTION
This was a year in which we made good progress against our objectives to deliver more homes, to improve services for our existing residents and to achieve cost efficiencies in our operations.
In terms of delivering new homes for future residents, we invested £31 million in development during the year and we completed 162 new homes. We also started work on our major regeneration schemes at Sherwood and Ramslye in Tunbridge Wells. For our current residents, we have continued to invest in our existing stock, spending more than £12 million on responsive, planned and programmed maintenance. We have established a new joint venture company, Countrywise Repairs Limited, which is delivering a responsive repairs and void service across approximately two thirds of our properties at a lower net cost.
Our residents remain at the heart of all we do. There has been significant improvement in the majority of our key service performance indicators. For example, at the end of the year, 100% of our homes were compliant with gas safety regulations and tenant satisfaction with the repairs service was at an all-time high. Other achievements included:
Our homes all continue to meet the Decent Homes Standard.
We have embedded our Differential Service Offer, delivering targeted services to residents designed to meet their needs.
Despite the challenging economic situation, our success in collecting the rent due to us resulted in the need to make less new bad debt provision than budgeted.
The average relet period for void properties was reduced to 24 days (28 days in 2011/12).
We have provided access to training and employment opportunities through our core business, through regeneration and maintenance activities and through our support of social enterprises. This includes providing 13 apprenticeships and trainee places, with a further 21 potential positions identified.
In terms of our financial performance, cashflows from operations were £28 million (£20m in 2011/12), and we have maintained our underlying operating surplus (excluding exceptional one off adjustments for accelerated depreciation and impairment charges) at over 42%. However, our pre-tax surplus in the Income and Expenditure account is lower at £2.8m (£5.4m in 2011/12), primarily as a result of the exceptional non-recurring and non-cash depreciation charges relating to our commitment to regeneration projects as the old buildings are written down.
Our residents have felt the effects of the difficult economic climate, and many will also be affected by the welfare reforms which commenced in April 2013 and are being rolled out progressively. Trials in other parts of the country indicate that these reforms are posing challenges to residents’ budgeting and are impacting on rental income flows. We have continued to provide additional support to our residents through money advice and we have also offered access to training and employment opportunities. We have made budgetary provision in 2013/14 to further enhance this support, both for the benefit of the residents themselves and to maintain our revenue stream. We also worked to assist residents in fuel poverty, particularly at our rural properties.
The sector has seen changes both to the regulator and to regulations including new guidance on scrutiny by residents. In terms of our own governance, our Board undertook a review this year which has focused on ensuring that we manage the Group in the most efficient manner possible, with a smaller number of Board and Committee members and fewer meetings. Our review also covered the regulator’s new expectations for co-regulation with our residents, and we will be introducing resident scrutiny from April 2014, after an initial set up period for recruitment and training.
TOWN AND COUNTRY HOUSING GROUP Year ended 31 March 2013 REPORT AND FINANCIAL STATEMENTS
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CHAIR’S INTRODUCTION (Continued)
During the year, we refreshed our corporate strategy to reflect the changes to our operating environment since the document was first produced. The strategy gives the business a clear direction with more measurable targets and we have already made good progress against these targets during the year. Our financial position is sound and we have £64 million of undrawn loan facilities. However, we are alive to the more difficult funding environment in which we will be operating and also to the potential negative impact of welfare reforms on rental income flows. As a result, we will be carefully monitoring the external environment and any potential financial impacts to ensure that we set our future investment at prudent levels.
In closing, I should like to thank my predecessor as Chair, Nigel Cox, who stood down in December 2012 after a full nine year term on the Board, six years as Chair. We are all of us much indebted to Nigel for his dedication and commitment to Town & Country Housing Group.
Francis Salway Group Chair
TOWN AND COUNTRY HOUSING GROUP Year ended 31 March 2013 REPORT AND FINANCIAL STATEMENTS
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REPORT OF THE BOARD INCLUDING OPERATING AND FINANCIAL REVIEW
The Board presents its report and the audited financial statements of Town & Country Housing Group (TCHG) for the year ended 31 March 2013.
Principal activities
TCHG’s principal activities are the management and development of social and affordable housing.
Background
The Group consists of five companies: Town & Country Housing Group and TCHG Living Limited, both of whom are registered providers (RPs), TCHG Foundation, a charitable entity responsible for the Group’s community involvement initiatives, a development company, Monson Homes Limited and Countrywise Repairs Limited, which is a 51% owned company delivering responsive repairs to the Group’s homes in the Tunbridge Wells council area. Countrywise Repairs was incorporated in February 2012 and commenced trading from 2 April 2012.
Town & Country Housing Group (TCHG)
TCHG is a housing association and a Charitable Industrial and Provident Society, registration number 30167R. TCHG is the parent company and provides all of the central administrative functions for all members of the Group, as well as providing the strategic direction and treasury management.
The Group owns 8,536 properties; this includes portfolios of shared ownership, sub-market and market rented units.
TCHG Living Limited (Living)
Living is a housing association and non-charitable Industrial and Provident Society, registration number 26702R. Living stock ownership is 539 properties. This consists of shared ownership, market rent, sub market rent and 98 general needs and affordable units managed by the parent, TCHG. During 2012/13 Living acquired 44 units of Group owned shared ownership properties as part of the strategy to make Living the Group’s centre for excellence in shared ownership.
Monson Homes Limited (MHL)
MHL was formed in 2006 but remained dormant until January 2011 when it started to act as the Group’s developer. All new development contracts are being signed directly with MHL and it is the regeneration vehicle for the Sherwood and Ramslye schemes.
TCHG Foundation (Foundation)
Foundation continues to play a key role within the Group and an important part in the local community in which it operates. Foundation is a registered charity, number 1122306.
Countrywise Repairs Limited
Countrywise Repairs Limited is a joint venture company formed with 51% being owned by TCHG and 49% by Linbrook Services Limited (part of the Wates Group). This joint venture is designed to give the Group certainty over service delivery and to better manage risk. 2012-13 was the company’s first year of trading.
Business review
A review of TCHG’s results for the year is included in the Operating and Financial Review on pages 7 to 13.
Governance
TCHG fully complies with the recommendations of the NHF Code of Governance (revised 2010).
TOWN AND COUNTRY HOUSING GROUP Year ended 31 March 2013 REPORT AND FINANCIAL STATEMENTS
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REPORT OF THE BOARD (continued)
Board Members and Executive Directors
The present Board Members and the Executive Directors are set out on page 1. The Board members are drawn from a wide range of backgrounds, bringing together professional, commercial and local experience.
The Board consists of twelve members; eleven of whom are non-executives, including two tenant members. The Board meets formally at least eight times a year to discuss the affairs of the Group.
The Board members of Town & Country Housing Group, including its subsidiary companies, are remunerated for their role as non executive members. Details of their remuneration levels can be found under note 8b of these financial statements.
The Board members are subject to an annual appraisal process to assess their performance and identify any areas of weakness and training requirements.
The purpose of the Board is to determine strategy, direct, control, scrutinise and evaluate the Group’s affairs. The day to day management and implementation of the agreed strategy is delegated to the Chief Executive and the Executive Directors who meet regularly and attend Board meetings. The Executive Directors hold no interest in the share capital of TCHG.
During the year the Group completed a review of its governance arrangements aimed at providing a more structured and efficient process. The recommendations of this review will be implemented in 2013-14.
Statement of Board’s responsibilities
As a Registered Provider of Social Housing, the board is responsible for preparing the report and financial statements for each financial year in accordance with applicable law and regulations, Industrial and Provident Societies Acts and registered provider legislation. Under that law the members have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable laws). Under the Industrial and Provident Society legislation the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs and surplus or deficit of the Association for that period. In preparing these financial statements, the Directors are required to:
Select suitable accounting policies and apply them consistently;
Make judgements and estimates that are reasonable and prudent;
State whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements;
Prepare the financial statements on the going concern basis unless it is inappropriate to presume that TCHG will continue in business.
The Board is responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of TCHG and enable it to ensure that the financial statements comply with the Industrial and Provident Societies Acts 1965 to 2002, Housing and Regeneration Act 2008 and the Accounting Direction for Private Registered Providers of Social Housing 2012, and the Statement of Recommended Practice: Accounting by Registered Social Landlords 2010.
The Board has general responsibility for safeguarding the assets of TCHG and hence for the prevention and detection of fraud and other irregularities.
The Board is responsible for the maintenance and integrity of the corporate and financial information on TCHG’s website. Legislation in the United Kingdom governing the preparation and dissemination of the financial statements and other information included in annual reports may differ from legislation in other jurisdictions.
TOWN AND COUNTRY HOUSING GROUP Year ended 31 March 2013 REPORT AND FINANCIAL STATEMENTS
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REPORT OF THE BOARD (continued)
Employees and Board members
The strength of TCHG lies in the quality of its Board members and all its employees. In particular, its ability to meet its objectives and commitments in an efficient and effective manner depends upon their contribution.
TCHG shares information on its strategic objectives, progress and activities through regular office and team meetings and formal briefings that involve Board Members, the senior management team and staff, and by means of the intranet.
TCHG is an equal opportunities employer.
The health and safety of all staff is of upmost importance to TCHG. It has prepared detailed health and safety policies and provides staff training and education on health and safety matters.
Disclosure of information to auditors
At the date of making this report each of TCHG’s Board members, as set out on page 1, confirm the following:
So far as each Board member is aware there is no relevant information needed by TCHG’s auditors in connection with preparing their report of which TCHG’s auditors are unaware; and
each Board member has taken all the steps that they ought to have taken as a Board member to make themselves aware of any relevant information needed by TCHG’s auditors in connection with preparing their report and to establish that TCHG’s auditors are aware of that information.
STATEMENT ON INTERNAL CONTROLS
The Board acknowledges its responsibility for establishing and maintaining the whole system of internal control and for reviewing its effectiveness.
The system of internal control is designed to manage rather than eliminate the risk of failure to achieve business objectives, and to provide reasonable, and not absolute assurance against material misstatement or loss.
The risks faced by TCHG are considered both in relation to the Company and their impact on the Group as a whole.
The process for identifying, evaluating and managing the significant risks faced by the Group is ongoing and has been in place throughout the period commencing 1 April 2012 up to the date of approval of the annual report and financial statements. Some of the key elements of the control framework that the Group has established are as follows:
The key risks are identified and recorded in a strategic risk register with the Group’s Audit Committee being delegated to consider risk as a separate agenda item four times a year. Group Board consider strategic risk twice a year, and approve the Group’s approach to risk and its risk appetite annually.
Business plans, comprehensive financial budgets and long term financial plans are produced and approved at least annually by the Group Board.
TCHG regularly reviews key performance indicators and management accounts, and ensures that appropriate action is taken to address any areas of under-performance.
Standing Orders and Financial Regulations, including delegated authorities, have been approved by the Group Board and are reviewed on a regular basis.
A comprehensive treasury management policy and strategy is maintained and reviewed annually by the Group Board.
TOWN AND COUNTRY HOUSING GROUP Year ended 31 March 2013 REPORT AND FINANCIAL STATEMENTS
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REPORT OF THE BOARD (continued)
An outsourced internal audit service reports quarterly to the Group Audit Committee and has direct access to the Chair of this committee.
The Board appraises all significant new business opportunities as recommended by the Chief Executive.
The Board has approved a fraud policy and the maintenance of a fraud register with fraud being a standing item at each of the Group Audit Committee meetings.
There has been significant investment in training and staff development to minimise control weaknesses through error.
The Group Audit Committee and the Group Board receive and review annually a report from the Chief Executive on the effectiveness of the system of internal controls.
The Board confirms that there have been no regulatory concerns which have led to the regulator intervening in the affairs of TCHG, neither are there significant problems in relation to failures of internal controls which required disclosure in the financial statements.
OPERATING AND FINANCIAL REVIEW FOR THE YEAR TO 31 MARCH 2013
External influences and operating highlights
2012/13 was a challenging year for the social housing sector as a whole. Our residents have clearly felt the economic pressure generally and with the implementation of welfare benefits reform from April 2013, all providers will need to work closely with their residents to ensure that income streams are protected as much as possible.
The year has, however, also been a successful one for TCHG. The business has performed well both financially and operationally with strong cash generation and key performance indicators performing strongly.
We continue to prioritise investment in our assets with £12m spent on planned, responsive and programmed maintenance.
We have begun construction to regenerate the estates at Sherwood and Ramslye. These and other regeneration schemes will eventually provide 326 properties for rent, for shared ownership and for outright sale.
Overall we are building 851 homes by March 2015 under the HCA Affordable Homes programme. This is a major contribution to our headline priority of “sustainable growth”.
Our joint venture vehicle Countrywise Repairs Limited (51% owned by TCHG) is now successfully delivering responsive maintenance and void works to our properties in the Tunbridge Wells area.
We continue to strive to improve services to our residents. We have embedded our Differential Service Offer following a successful pilot phase. This delivers more targeted services to residents which more clearly meet their needs. In 2013-14 we will also be building on the Differential Service Offer and investing significantly in services to support our residents through welfare benefits changes, both to assist residents and to preserve our own income streams.
We continue to work with our residents to ensure that we can ‘co-regulate’ our services and comply with the new regulatory framework. One of the aims of the changes to our governance structure which we will be implementing during 2013/14 is to strengthen resident scrutiny.
TOWN AND COUNTRY HOUSING GROUP Year ended 31 March 2013 REPORT AND FINANCIAL STATEMENTS
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REPORT OF THE BOARD (continued)
Below are shown the group highlights for the last 5 years. The year 2011 has been adjusted to reflect the impact of component accounting on the Group. The previous years have not been restated.
GROUP HIGHLIGHTS
Annual accounts summaries
2013 2012
2011 2010 2009
Income & Expenditure account (£m)
Turnover 50.9 46.8 44.5 39.1 35.0
Income from social housing lettings 46.7 42.4 37.9 32.6 29.5
Operating surplus 17.7 19.0 15.3 14.8 13.8
(Deficit)/surplus on sales of fixed assets (0.5) 0.5 0.5 0.4 (0.2)
Interest payable (14.5) (14.3) (12.7) (12.7) (12.2)
Surplus for the year before tax 2.8 5.4 3.1 2.6 1.6
Balance sheet (£m)
Completed units at valuation 608.0 607.3 547.3 510.8 467.5
Work in progress at year end 31.2 25.1 33.1 43.8 59.5
Net current assets 5.6 3.5 2.7 4.2 3.6
Loans (due after more than one year) (382.5) (375.6) (352.5) (323.5) (305.0)
Revenue reserves 17.2 19.5 11.2 (1.2) (3.2)
Revaluation reserve 244.7 242.4 222.5 234.6 230.1
Key Ratios
Interest cover 164% 147% 143% 136% 133%
Gearing 59% 59% 60% 58% 57%
Asset cover 156% 157% 154% 156% 173%
Average interest cost 4.11% 4.14% 4.12% 4.27% 4.71%
Gross operating margin 34.75% 40.38% 34.16% 28.0% 39.5%
Annual surplus margin 5.57% 11.54% 6.97% 6.54% 4.45%
Housing stock owned 8,536 8,724 8,379 7,868 7,375
TOWN AND COUNTRY HOUSING GROUP Year ended 31 March 2013 REPORT AND FINANCIAL STATEMENTS
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REPORT OF THE BOARD (continued)
This year’s surplus was significantly reduced due to around £4m of one-off non-cash charges. These related mainly to exceptional items in respect of our regeneration schemes. Excluding these items the operating and net surpluses were both at higher levels than in 2012. The decline in unit numbers is principally due to the effect of the release for demolition of 326 units on regeneration schemes.
Development
TCHG continues to provide affordable housing in a number of areas in the South East: Kent, Sussex, Surrey and outer London, and offers a range of housing products: affordable housing, shared ownership, and market and sub-market rents.
TCHG met its targets for new homes with a further 370 started against our Homes and Communities Agency (HCA) target of 349. During the year TCHG completed 162 new homes and received £7.6m grant funding from the HCA.
Following a successful consultation process, TCHG entered into contract with our selected Regeneration Development Partner on two key strategic estates within Tunbridge Wells. The initial phase is for the demolition of 116 properties with the subsequent newbuild development of 125 properties plus a retail unit in their place. These new units will help provide more balanced and sustainable communities with properties available for affordable rent, shared ownership and private sale. Future phases and sites form part of the regeneration ambitions in TCHG’s pursuit of improving both the local housing offer and the neighbourhoods that our residents live in.
TCHG continues to look at our stockholding and the areas that we operate in, as part of our stock rationalisation ambitions. A total of 66 properties were purchased in Tunbridge Wells and Wealden from another Registered Provider. Conversely, 111 properties in Medway and Croydon were transferred to other Registered Providers as it was felt that they were better placed to deliver services to residents due to their locality.
Objectives and strategy
During the year, the Group refreshed its strategic plan for the five year period to 2016, to reflect the continuing substantial change to our operating environment since it was originally set. TCHG ensures that the ‘golden thread’ of strategy flows from the strategic plan, through the annual delivery plans into team plans and individual targets.
The strategic plan embodies the Group’s mission ‘to deliver quality homes, build communities and improve lives’. Our vision is “Homes people choose”: In delivering our vision, we expect to achieve a number of key outcomes:
1. Provide a choice of good quality homes and services. 2. Deliver excellent services tailored to the needs of individual residents, with additional support for
those who need it. 3. Support the development of vibrant, sustainable communities. 4. Continue to provide new homes, working within financial constraints.
Performance against key outcomes
Provide a choice of good quality homes and services
The Group offers a wide range of tenure types: general needs, affordable rent, sheltered accommodation, sub-market rent, market rent, shared ownership and rent to homebuy. By investing in a variety of tenures, TCHG is able to offer its residents a choice of homes to meet their differing needs. In addition there are teams who specialise in each tenure type to ensure each area is managed effectively.
In addition to building and acquiring award winning homes the Group has a comprehensive investment programme to maintain and improve its existing stock.
TOWN AND COUNTRY HOUSING GROUP Year ended 31 March 2013 REPORT AND FINANCIAL STATEMENTS
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REPORT OF THE BOARD (continued)
The effective use of resources is key to achieving the optimum effect; a key aim of the Group’s Asset Management Strategy.
The Group has invested significantly in the area of estate management, to upgrade the grounds maintenance, estate cleaning and caretaking services and thereby improve the environment of its estates. It also recruited staff in preparation for welfare reform which commenced in April 2013, and devoted funds to anti fuel poverty measures.
Delivering service excellence is paramount to the continued success and development of TCHG. To enhance the organisation’s already strong approach to customer service, TCHG developed a bespoke training methodology based around a cultural change programme. Despite recessionary constraints, TCHG continued to invest significant sums in staff training, thereby taking a long term view of staff development, which should ultimately lead to improved service delivery and cost efficiencies.
Deliver excellent services tailored to the needs of individual residents, with additional support for those who need it.
Enhanced service delivery to our residents remains central to the Group’s objectives. This was recognised in 2012 when we became the first housing association in the country to achieve the Institute of Customer Services (ICS) accreditation.
The Group continues to invest in service improvements and respond to residents’ priorities and the following highlights some of the Group’s achievements during 2012/13:
The Group’s stock, where applicable, has continued to be 100% decent homes compliant throughout 2012/13.
We have worked with energy efficiency specialists to deliver our insulation programme and have installed cavity wall insulation in 50 homes, and insulated 136 loft spaces. We were able to access Carbon Emission Reduction Target (CERT) grant funding to assist this programme. We have also fitted PV panels to 61 homes and are working with our residents, particularly in our rural stock, to combat fuel poverty. For example, 108 homes received voltage optimisers, many of which are in rural/non-gas areas, together with three solar hot water systems and two air source heat pumps.
Continued success and evolution of the Sherwood Estate and Ramslye renewal programme.
TCHG Foundation have successfully delivered its key themes programme (further details are shown under ‘Support the development of vibrant, sustainable communities’ below).
Support the development of vibrant, sustainable communities.
A number of the key programmes are as follows:
Our regeneration of Sherwood and Ramslye has been designed with the full involvement of the communities there. It includes diversification of tenure and is about more than just “bricks and mortar.”
An older persons strategy that involves the remodelling of existing stock, the purchase of stock from Origin Housing Group and the redefining of the role of the Scheme Support Managers to that of Community Support Workers. This role now focusses on delivering flexible community based services to a wider range of older and vulnerable residents, not just those based in the Group’s sheltered accommodation. This work will now continue as part of the Asset Management Strategy.
The Foundation’s projects added pivotal value to our efforts to improve lives and extended significantly the work of other agencies to address issues at a wider community level. Highlights included:
TOWN AND COUNTRY HOUSING GROUP Year ended 31 March 2013 REPORT AND FINANCIAL STATEMENTS
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REPORT OF THE BOARD (continued)
Direct support to residents and the community in gaining qualifications and securing employment. Nine residents secured employment with social enterprises, 60 people achieved NVQ level qualifications, and eight residents and members of the community obtained secure employment.
Ongoing development support was provided to charities that Foundation have worked to create and establish such as Domestic Abuse Volunteers Support Service (DAVSS), Nourish, a Tunbridge Wells based food bank, and Pickering Trust, a cancer drop-in centre.
Young people have been engaged through support for the Young Start Up Talent enterprise competition and 33 excluded youngsters involved in partner programmes.
Environmental programmes such as front garden makeovers in Showfields, Old Park and Sherwood were delivered.
Continue to provide new homes, working within financial constraints
TCHG is one of the largest social housing developers in the South East of England and remains committed to developing in the long term and is well placed to continue its success in this area. Despite the change in the grant regime we have long term sustainable plans in place.
TCHG has built up an enviable reputation as a developer of high quality housing and works extensively with a number of strategic and local authorities. TCHG has an extensive new build programme with 229 units currently on site. The Group continues to investigate possible small scale stock acquisitions from other social housing providers in its local area.
In cash flow terms, the Group spent £28m net of grant (2012: £25m) on scheme development. In addition, TCHG has entered into commitments of £41m for the completion of projects currently under construction (2012: £25m).
The affordable homes programme relies to some extent on the conversion of existing homes from social rent to affordable rent when tenancies turn over. We are successfully meeting our targets on this, whilst balancing the needs of those new tenants who need to be able to rent at social rents.
Risk and uncertainty
The main risks that may prevent the Group achieving its objectives are considered and reviewed regularly by the senior management team and Board. The risks are recorded and assessed in terms of their impact and likelihood. During the year the Board reviewed and updated its risk management framework to refresh its risk policy and strategy. Major risks, presenting the greatest threats to the Group, are reported to the Board half yearly and Audit Committee four times a year. These reports include an assessment of key controls used to manage the risks.
The Group has identified the major risks to successful achievement of its objectives and ensured that there are mitigation measures in place. The eight overarching major risks identified are:
Financial risk.
Governance failure.
People management.
Initiative overload.
Resident expectations.
Partnership risk.
Legislative and regulatory risk.
External events.
TOWN AND COUNTRY HOUSING GROUP Year ended 31 March 2013 REPORT AND FINANCIAL STATEMENTS
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REPORT OF THE BOARD (continued)
Financial position
Accounting Policies
The Group’s principal accounting policies are set out on pages 23 to 27 of the financial statements.
Housing Properties
Independent professional valuers were appointed to assess the value of the Group’s property portfolio as at 31 March 2013. The total value of the Group’s completed housing stock is £608m, with an additional sum, net of grant, of £31m, attributable to properties under construction, giving a total housing stock figure of £639m.
In the previous financial year the Group implemented a policy of component accounting across its property assets in accordance with the Statement of Recommended Practice 2010. During 2012-13 some of the workings used in our component accounting model were revisited. This resulted in a charge to the revenue reserve of £1.1m in the year.
TCHG operates a planned internal subsidy to support its social housing development programme, whereby the revaluation reserves of older stock are utilised for the production of new housing units. However, in 2012 we had our first impairment requirement for two shared ownership schemes that were purchased at the height of the housing market. This resulted in a reduction in the surplus of £865k in 2011-12. In this financial year one of these schemes was sold to another registered provider and our impairment provision now stands at £694k.
Group investment in housing properties was funded through a mix of Social Housing Grant, loan finance and working capital.
Pension Liability
The pension deficit at 31 March 2013 is £2,600k, an increase of £1,427k on the previous year’s deficit of £1,173k.
Group borrowings and treasury policy
The Group’s loan facilities of £447m are provided by Nationwide Building Society and Co-operative Bank, Dexia Credit Local and Barclays Bank PLC. The Group has loans drawn down of £383m, which leaves £64m available for future development and regeneration activities.
The Group increased its borrowings by £7m net of loan repayments during the year. This was used to fund the Group’s development programme. The Group took advantage of the current low interest environment and fixed a number of loans over a variety of short and medium term periods whilst maintaining the balance between fixed and variable loans in accordance with the Group’s Treasury Policy.
The average interest rate for the year was 4.11% (2012: 4.14%).
Cash flow
Cash inflow and outflow during the year is shown in the consolidated cash flow statement, page 21.
The cash flow highlights the strong net operational inflows from which the interest cost is paid with the balance, coupled with external funds, being invested in development and capital maintenance programmes.
TOWN AND COUNTRY HOUSING GROUP Year ended 31 March 2013 REPORT AND FINANCIAL STATEMENTS
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REPORT OF THE BOARD (continued)
Future prospects
We have set ourselves some challenging and ambitious headline priorities:
An excellent landlord
Delivering excellent core services plus:
Embedding our flexible selection of service options and housing products that meet the diverse needs of residents.
Ensuring effective scrutiny and local accountability.
Delivering services to customers increasingly through new and emerging technology.
Tackling fuel poverty.
Sustainable growth
We will continue to achieve sustainable growth by:
Delivering more homes and improving our existing homes.
Using innovation in building new homes.
Becoming a greener organisation in terms of fuel efficiency and environmental sustainability.
Matching our supply of homes with the changing demographics (for example, the predicted increase in older people and single person households).
Responding to the changing patterns of demand in rural areas.
Disposing of inappropriate stock to support the re-supply of homes.
Focusing on key relationships in Kent, East Sussex and South East London.
Securing new funding solutions to facilitate growth.
Focusing on key housing products to respond to our customers’ needs.
A local leader working in partnership
We will work in partnership with our stakeholders by:
Engaging with wider communities using a broad range of channels and methods.
Supporting the strategic aims of our partner organisations.
Continuing to develop creative delivery vehicles with key partners.
Where appropriate facilitating and signposting customers to external agencies.
Developing and sustaining key partnerships.
Learning from the Community Budget Pilot scheme by working with other agencies with the aim of delivering an excellent service.
Delivering innovative community development activities that are clearly linked to our corporate strategy.
A well run business
We will continue to be an organisation that is:
Willing to use innovative commercial solutions in order to support our core social purpose.
A cost-conscious, effective business with strong risk-based processes.
Focussed on achieving value for money.
The employer of choice.
Effective at managing our finances.
Willing to share services with other providers in order to achieve better value for money.
Focussed on retaining financial stability and the active management of assets to release value.
TOWN AND COUNTRY HOUSING GROUP Year ended 31 March 2013 REPORT AND FINANCIAL STATEMENTS
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REPORT OF THE BOARD (continued)
VALUE FOR MONEY STATEMENT
At Town & Country we are committed to delivering value for money in achieving our social purpose. Our aim is to ensure that value for money underpins every aspect of our decision making.
Our strategic approach to value for money has been completely refreshed and reinvigorated during 2012/13 to reflect changes within our operating environment. It has been driven by a strong desire on the part of the Board to focus not only on working efficiently (saving money) but also on the wider impact and value of our work in making a positive difference to residents’ lives and their communities. This is reflected in our definition of value for money, which is: “to produce as much social, financial and environmental value as possible from the resources we use in order to deliver quality homes and services, in neighbourhoods people choose, with the ultimate goal of improving lives”.
During 2012/13 our approach to value for money was independently validated through an internal audit by Mazars. Their assessment was that our internal controls relating to the strategic approach to value for money provide “substantial assurance”.
How we deliver value for money
We aim to deliver value for money through:
Clarity of purpose – we are clear about our value for money approach, which is to enable us to make the best use of resources in order to achieve our mission.
Undertaking the right activities – We are focussed on carrying out the right mix of activities and continuing to grow in order to achieve our objectives. This includes investment in non-social housing with the aim of generating surpluses that can be reinvested into social housing activities.
Investing in the right assets – We have a coherent Asset Management Strategy covering repair and improvement, disposal and stock rationalisation across the entire portfolio so that we are investing in the stock that provides the optimum return in financial, social and environmental terms.
Ensuring the right delivery – Our aim is to do things right through efficient operations and effective business practices. Our culture change programme helps us promote a value for money culture within the organisation.
Delivering the right outcomes and impact – Customer satisfaction with our homes and services is a key outcome measure for Town & Country and therefore our 2013/14 delivery plan contains various actions to improve customer services and therefore customer satisfaction. During 2013 we will carry out a further independent customer satisfaction survey to inform our future plans.
Value for money achievements during 2012/13
During 2012/13 we continued to improve our value for money activities, including:
Launching a joint venture company called Countrywise Repairs with our partners Linbrook Services Limited (a subsidiary of Wates) in order to deliver repairs and maintenance. The joint venture company is delivering savings on labour costs and improved customer satisfaction.
Appointing a single contractor to service and repair gas and electrical heating in homes, which will generate savings of £225k per year compared to 2011/12 costs.
A process review of our fencing service resulting in the introduction of a new arrangement which will improve quality and save around £110k per year.
TOWN AND COUNTRY HOUSING GROUP Year ended 31 March 2013 REPORT AND FINANCIAL STATEMENTS
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REPORT OF THE BOARD (continued)
41 shared ownership properties were sold during 2012/13, which generated a gross surplus of £556k for the year.
We reduced the average time to relet empty general needs homes from 28 days in 2011/12 to 24 days in 2012/13.
Our plans for improving value for money during 2013/14
Our Value for Money Strategy 2013-16 contains a detailed action plan and some of the initiatives included in the plan for 2013/14 are:
Produce a Social Regeneration Plan to maximise the social value that is obtained from the regeneration of Sherwood and other priority areas.
Produce a new procurement plan that sets out the arrangements for the re-procurement of key contracts during the period of the strategy.
Produce a revised Treasury Strategy that sets out how we will secure funding at the most advantageous rates to develop homes in the future.
Refresh our Welfare Reform Plan in the light of experience as the changes take place, to minimise any potential negative impacts of the reforms on Town & Country and on residents.
From 1 April 2013, use a minimum of 60% of our repairs and maintenance budgets to carry out planned maintenance.
Introduce new performance measures for monitoring the return on assets (including social and environmental returns).
Complete at least two process reviews per year using “lean” systems thinking with the aim of generating at least 2% efficiencies from the reviewed areas.
We will publish a more detailed value for money self-assessment for residents by September 2013 as required by the Regulatory Framework for Social Housing in England.
Going concern
After making enquiries the Board has a reasonable expectation that the Group and the Company have adequate resources to continue in operational existence for the foreseeable future. For this reason, it continues to adopt the going concern basis in preparing the financial statements.
Post balance sheet events
There are considered to be no events since the financial year end which have had a significant effect on the financial position of the Group.
Equal opportunities
The Group ensures that in all of its activities it does not allow unlawful discrimination. It also promotes equality of opportunity and treatment for all sections of the community. In particular the Group recognises its responsibility to persons with special needs and has set standards within its development and housing management programmes and employment policies to ensure that such needs can be readily met.
Health and safety
The Chief Executive provides an annual Health and Safety Report to Group Board and an update at each meeting. The health and safety of the Group’s employees and tenants is paramount to the Board. The Group’s policy is to provide and maintain safe and healthy working conditions, housing, equipment and systems of work for all those connected with the organisation and to provide such information, training and supervision as is needed for this purpose. There have been no material health and safety breaches in the year.
TOWN AND COUNTRY HOUSING GROUP Year ended 31 March 2013 REPORT AND FINANCIAL STATEMENTS
16
REPORT OF THE BOARD (continued)
Statement of Compliance
In preparing this Operating and Financial Review, the Board has followed the principles as set out in the SORP ‘Accounting by Registered Social Housing Providers’ (update 2010).
Approved by the Board and signed on its behalf by;
Francis Salway
Chair
30 July 2013
TOWN AND COUNTRY HOUSING GROUP Year ended 31 March 2013 REPORT AND FINANCIAL STATEMENTS
17
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF TOWN & COUNTRY HOUSING GROUP We have audited the financial statements of TCHG for the year ended 31 March 2013 which comprise the Income and Expenditure Accounts, the Balance Sheets, the Consolidated Cash Flow Statement, the Statement of Total Recognised Surpluses and Deficits, the Notes of Historical cost Surpluses and Deficits and the related notes 1 to 30. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice). This report is made solely to the Association’s members, as a body, in accordance with the requirements of statute. Our audit work has been undertaken so that we might state to the Association’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Association and the Association’s members as a body, for our audit work, for this report, or for the opinions we have formed. Respective responsibilities of the board and the auditor As explained more fully in the Statement of Board’s Responsibilities set out on page 5 , the Board is responsible for the preparation of financial statements which give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s (APB’s) Ethical Standards for Auditors. Scope of the audit of the financial statements A description of the scope of an audit of financial statements is provided on the APB’s website at www.frc.org.uk/apb/scope/private.cfm. Opinion on financial statements In our opinion the financial statements:
give a true and fair view of the state of the Association’s affairs as at 31 March 2013 and of its income and expenditure for the year then ended; and
have been properly prepared in accordance with the Industrial and Provident Societies Acts 1965 to 2002, the Housing and Regeneration Act 2008 and The Accounting Direction for Private Registered Providers of Social Housing 2012.
Matters on which we are required to report by exception We have nothing to report in respect of the following matters where the Industrial and Provident Societies Acts 1965 to 2002 requires us to report to you if, in our opinion:
a satisfactory system of control over transactions has not been maintained; or
the association has not kept proper accounting records; or
the financial statements are not in agreement with the books of account; or
we have not received all the information and explanations we need for our audit. 25 Moorgate London Nexia Smith & Williamson EC2R 6AY Statutory Auditor Chartered Accountants Date:
TOWN AND COUNTRY HOUSING GROUP CONSOLIDATED INCOME AND EXPENDITURE ACCOUNT for the year ended 31 March 2013
18
Group
Note
2013 £’000
2012 £’000
Turnover
2a 50,904 46,798
Cost of sales
2a (1,773) (2,823)
Operating costs 2a (31,440) (25,021)
Operating surplus 2a 17,691 18,954 (Deficit)/surplus on the sale of fixed assets
7
(503)
503
Interest receivable and other income 4 55 231 Interest payable and similar charges 5 (14,478) (14,326)
Surplus on ordinary activities before taxation 2,765 5,362
Tax on surplus on ordinary activities 9 103 (103) Minority interest (31) -
Surplus for the financial year 2,837 5,259
The above results relate solely to continuing activities.
The notes on pages 23 to 52 form part of these financial statements.
NOTE OF CONSOLIDATED HISTORICAL COST SURPLUSES AND DEFICITS for the year ended 31 March 2013 Group
2013 £’000
2012
£’000 Reported surplus on ordinary activities before taxation and after minority interest
2,734 5,362
Component accounting adjustments relating to prior years (1,121) - Realisation of property revaluation (losses)/gains (2,016) 195
Historical cost retained (deficit)/surplus before taxation (403) 5,557 Tax credit/(charge) on surplus on ordinary activities 103 (103)
(300) 5,454
TOWN AND COUNTRY HOUSING GROUP COMPANY INCOME AND EXPENDITURE ACCOUNT for the year ended 31 March 2013
19
Company Note
2013 £’000
2012 £’000
Turnover
2b 49,516 44,702
Cost of sales 2b (1,773) (2,823) Operating costs 2b (30,795) (24,525)
Operating surplus 2b 16,948 17,354 (Deficit)/surplus on the sale of fixed assets
7
(547)
466
Interest receivable and other income 4 39 219 Interest payable and similar charges 5 (13,283) (13,123)
Surplus on ordinary activities before taxation 3,157 4,916 Tax on surplus on ordinary activities 9 - -
Surplus for the financial year 3,157 4,916
The above results relate solely to continuing activities.
The notes on pages 23 to 52 form part of these financial statements.
NOTE OF HISTORICAL COST SURPLUSES AND DEFICITS for the year ended 31 March 2013 Company 2013
£’000 2012
£’000 Reported surplus on ordinary activities 3,157 4,916 Component accounting adjustments relating to prior years (1,058) - Realisation of property revaluation (losses)/gains (2,025) 351
74 5,267
TOWN AND COUNTRY HOUSING GROUP BALANCE SHEETS as at 31 March 2013
20
Note Group Company
2013 £’000
2012
£’000
2013
£’000
2012 £’000
Tangible fixed assets Housing properties 10 639,270 632,399 594,325 591,545 Other tangible fixed assets Other assets at cost less depreciation 11 2,972 3,158 2,972 3,158 Fixed asset investment 12 - - 204 -
642,242 635,557 597,501 594,703 Current assets Property held for sale 13 3,878 2,672 2,862 2,672 Debtors – due within one year 14 6,297 7,084 6,674 7,157 Debtors – due after one year 14 - - 8,000 8,000 Cash at bank and in hand 10,145 5,989 7,389 1,486
20,320 15,745 24,925 19,315
Creditors: amounts falling due within one year
15 (14,764) (12,263) (12,570) (12,036)
Net current assets 5,556 3,482 12,355 7,279
Total assets less current liabilities 647,798 639,039 609,856 601,982
Creditors: amounts falling due
after more than one year
16
382,314
375,523
354,386
347,568 Net pension liability 16 & 20 2,600 1,173 2,600 1,173
Long term liabilities 384,914 376,696 356,986 348,741
Capital and reserves Revaluation reserve 10&28 244,691 242,394 233,890 232,848 Revenue reserve 28 17,232 19,484 18,050 19,928 Designated reserve 28 930 465 930 465 Minority interest 31 - - -
262,884 262,343 252,870 253,241
Capital reserves and long term liabilities
647,798
639,039
609,856
601,982
These financial statements were approved by the Board and signed on its behalf on 30 July 2013 by:
Francis Salway Robert Heapy Robin Tebbutt Chair Chief Executive Company Secretary
TOWN AND COUNTRY HOUSING GROUP CONSOLIDATED CASH FLOW STATEMENT for the year ended 31 March 2013
21
Group Note
2013
£’000 2012
£’000 Net cash inflow from operating activities 24 28,240 20,237 Returns on investments and servicing of finance Interest received 28 104 Interest paid (15,453) (17,151)
Net cash outflow from returns on investments and servicing of finance
(15,425)
(17,047)
Capital expenditure and financial investment Social Housing grants received 8,114 16,818 Other grants received 203 131 Proceeds from the sales of housing property 9,636 879 Purchase of other tangible fixed assets (358) (445) Acquisition, construction and capital maintenance of housing
properties (33,754) (42,223)
(16,159) (24,840)
Net cash outflow before financing (3,344) (21,650)
Financing Loans received in the year 7,500 23,047
Net cash inflow from financing 7,500 23,047
Increase in cash 26 4,156 1,397
TOWN AND COUNTRY HOUSING GROUP
22
STATEMENT OF TOTAL RECOGNISED SURPLUSES AND DEFICITS
For the year ended 31 March 2013
Group Company
2013 £’000
2012
£’000
2013
£’000
2012 £’000
Surplus for the financial year 2,837 5,259 3,157 4,916 Unrealised surplus on the revaluation of properties
1,618 24,610 417 28,348
Elimination of revaluation on regeneration schemes
(2,458) - (2,458) -
Actuarial loss relating to pension scheme (1,487) (1,198) (1,487) (1,198)
Total recognised surpluses/(deficits) relating to the year
510
28,671
(371)
32,066
TOWN AND COUNTRY HOUSING GROUP NOTES TO THE ACCOUNTS for the year ended 31 March 2013
23
1. Accounting policies
Basis of accounting The financial statements have been prepared in accordance with the applicable accounting standards and the Statement of Recommended Practice (SORP): accounting by Registered Social Housing Providers (updated 2010) and comply with the Accounting Direction for Private Registered Providers of Social Housing 2012.
The Board is satisfied that the current accounting policies are the most appropriate for TCHG.
Basis of consolidation The Group accounts consolidate the financial statements of the Company and all its subsidiaries at 31 March 2013 using acquisition accounting. Any minority interest is shown in the income and expenditure account and balance sheet based on the Group’s share of net assets and surpluses for the year. Turnover Turnover comprises rental income receivable in the year; income from first tranche sales on shared ownership properties; sales of properties built for sale; supporting people income; other services included at the invoiced value (excluding VAT) of goods and services supplied in the year and revenue grants receivable in the year.
Rental income is recognised from the point when the properties under development reach practical completion or otherwise become available for letting. Income from first tranche sales and sales of properties built for sale is recognised at the point of legal completion of the sale. Revenue grants are recognised when the conditions for receipt of grant funding have been met. Charges for support services funded under Supporting People are recognised as they fall due under the contractual arrangements with administering authorities. Investment properties Investment properties are included in the accounts at open market value (being market value with vacant possession) at the year end in accordance with Statement of Standard Accounting Practice 19: Investment Properties. Any surplus on revaluation is recognised in the statement of total recognised surpluses and deficits and the Revaluation Reserve. Any deficit on revaluation, if temporary, is recognised in the Statement of Total Recognised Surpluses and Deficits and the Revaluation Reserve. If a deficit below original cost arises and is deemed to be permanent it is recognised in the Income and Expenditure account.
No depreciation is provided in respect of freehold and long leasehold investment properties where the lease has over 20 years to the date of expiry. Housing properties Housing properties are properties available for rent and properties subject to shared ownership leases.
Completed housing properties are held at valuation. The following valuation basis is adopted:
General needs housing – existing use value for social housing
Intermediate rent – market value subject to tenancies
Shared ownership properties – market value subject to tenancies
Housing properties under construction are stated at cost less related social housing grant and other capital grants.
TOWN AND COUNTRY HOUSING GROUP NOTES TO THE ACCOUNTS for the year ended 31 March 2013
24
1. Accounting policies (continued) Housing properties (continued)
Cost includes the cost of acquiring land and buildings, development costs, interest charges incurred during the development period and expenditure incurred in respect of capital improvements, as well as directly incremental overhead costs and staff time associated with new developments, improvements and component-works.
The Group’s unsold shared ownership stock is shown at cost and the sold shared ownership stock is valued on a cash flow basis only. The valuation includes no assumptions on future potential capital receipts.
The Company accounts for its expenditure on housing properties using component accounting. Under component accounting, the housing property is divided into those major components which are considered to have substantially different useful economic lives. These components are then depreciated over their individual useful economic lives.
The particular components identified by the Group and their respective useful economic lives are as follows:
Component Useful Economic Life Structure 135 years Roof 60 years Bathroom 30 years Windows and doors 35 years Kitchen 20 years Heating system: boiler 15 years Lift 30 years
Where a separate identified and depreciated component of an existing property is replaced, the carrying value of the component is expensed and the cost of the replacement component capitalised.
Expenditure on items not separately identified as components are capitalised if they result in an increase in the net rental stream over the life of the property, over the standard originally assessed when the property was first acquired or constructed. Depreciation of housing properties Freehold land is not depreciated. Depreciation of housing properties is charged so as to write down their net book value to the estimated residual value, on a straight-line basis, over their estimated useful economic lives in the business. Depreciation is provided against the revalued asset value.
Properties held on leases are amortised over the life of the lease or their estimated useful economic lives in the business, if shorter.
Impairment
Housing properties which are depreciated over a period in excess of 50 years are subject to impairment reviews annually. Other assets are reviewed for impairment if there is an indication that impairment may have occurred.
TOWN AND COUNTRY HOUSING GROUP NOTES TO THE ACCOUNTS for the year ended 31 March 2013
25
1. Accounting policies (continued)
Impairment (continued) Where there is evidence of impairment, a review is conducted to ascertain whether its effect is to reduce the value of the property beyond that which meets the internal criteria for the approval of schemes. Deficits that fall within these criteria are regarded as planned internal subsidies and are not treated as impairments. If an impairment above the acceptable level exists, a charge is made to the Income and Expenditure account to the extent that the impairment exceeds the acceptable deficit.
Properties for sale Completed properties for outright sale and properties under construction are valued at the lower of cost and net realisable value. Cost comprises material, direct labour and direct development overheads. Net realisable value is based on the estimated sales price after allowing for all further costs of completion and disposal.
Shared ownership properties unsold at the balance sheet date are split between current assets and fixed assets. The current assets represent an estimate of the likely first tranche sale percentage and value, which once sold, is shown in cost of sales. The remaining value represents the remaining equity held by the Group and is shown as a fixed asset. Mixed developments Where a development is evaluated as a single scheme but has more than one element, such that one or more of the elements is expected to generate a surplus and one or more of the other elements has a valuation below the cost less attributable grant (“the shortfall”) then the surplus is reduced by the shortfall through the apportionment of the costs to each element of the scheme. This policy is applicable to all mixed development schemes where surpluses from properties are used to cross-subsidise rented properties. Regeneration schemes Where regeneration schemes involving the decanting of residents and demolition of property are undertaken and where the intention to undertake such a scheme has been communicated to residents in such a manner that they expect the regeneration to proceed, the following policy will apply.
The dwellings concerned will be transferred to a separate class of fixed asset which will be carried at historic cost. The difference between the valuation and historic cost will be adjusted through the revaluation reserve (i.e. not through the income and expenditure account).
The asset will then be depreciated on a straight line basis over its remaining useful economic life, namely from the date of the reclassification specified above to the date on which decanting is estimated to occur. This is referred to in these accounts as accelerated depreciation. Social housing grant (“SHG”) When developments have been financed wholly or partly by SHG, the cost of those developments has been reduced by the amount of the grant receivable. At the balance sheet date, if SHG recoverable on the development programme as a whole is greater than gross cost, the difference is included in creditors and shown as SHG in advance. SHG is repayable under certain circumstances, primarily following the sale of a property supported by SHG but this will normally be restricted to the net proceeds of the sale.
Recycled capital grant fund The grant element on the net sale receipts of grant funded properties, typically right to buy or shared ownership staircasing but not right to acquire, are required to be credited to a recycled
TOWN AND COUNTRY HOUSING GROUP NOTES TO THE ACCOUNTS for the year ended 31 March 2013
26
1. Accounting policies (continued) Recycled capital grant fund (continued) capital grant fund under the terms of the SHG originally paid on such properties. Within the terms defined by the Homes and Communities Agency (HCA) the fund is to be used to provide replacement properties for rent, land acquisition and works to existing stocks or if unused within three years, is repayable to the HCA.
Disposal proceeds fund The net proceeds on the sale of properties made under Right to Acquire or Social HomeBuy are required to be credited to a disposal proceeds fund under the terms of the SHG originally paid on such properties. Within the terms defined by the HCA, the fund is to be used to provide replacement properties for rent. Interest payable Interest is capitalised on borrowings to finance developments to the extent that it accrues in respect of the period of development, if it represents interest on borrowings of the Group as a whole, after deduction of interest on SHG in advance, to the extent that they can be deemed to be financing the development programme.
The arrangement fees and legal costs incurred in connection with loan facilities have been capitalised as part of loan issue costs and will be amortised over the term of the facilities or until there is a significant event that would require immediate expensing.
Other fixed assets and depreciation Tangible fixed assets, except housing properties, are stated at cost less accumulated depreciation. Cost of computers is written off in the Income and Expenditure account, except for major computer installations. Depreciation is charged from the month of acquisition on a straight line basis over the expected useful economic life of the assets at the following annual rates:
Freehold offices - 2% Community Centre - 2% Major computer equipment and software
- 33%
Office equipment and fixtures - 20%
Leased assets Rentals paid under operating leases are charged to the Income and Expenditure account on a straight-line basis over the life of the lease. Investments Investments are shown as fixed or current assets as appropriate and are stated at cost. Pensions The Group contributes to the Kent County Council Superannuation Scheme, a defined benefit, final salary scheme. The assets of the scheme are invested and managed independently of the finances of the Group in respect of existing staff in the scheme.
The scheme assets are measured at fair value. Scheme liabilities are measured on an actuarial basis using the projected unit method and are discounted at appropriate high quality corporate bond rates. The net surplus or deficit, adjusted for deferred tax, is presented separately from other net assets on the balance sheet. A net surplus would only be recognised to the extent that it is recoverable by TCHG.
TOWN AND COUNTRY HOUSING GROUP NOTES TO THE ACCOUNTS for the year ended 31 March 2013
27
1. Accounting policies (continued)
Pensions (continued) The current service cost and costs from settlements and curtailments are charged against operating profit. Past service costs are spread over the period until the benefit increases vest. Interest on the scheme liabilities and the expected return on scheme assets are included net in other finance costs. Actuarial gains and losses are reported in the statement of total recognised gains and losses.
The Group closed membership of this scheme during the 2002/03 year for new joiners.
The closure of the defined benefit final salary scheme to new joiners resulted in the Group entering into an arrangement with Aviva to provide these employees with a stakeholder pension scheme. Taxation The charge for taxation is based upon the surplus for the year and includes current tax and deferred tax. Deferred taxation Provision is made in full for all taxation deferred in respect of timing differences that have originated but not reversed by the balance sheet date, except for gains on disposal of fixed assets, which will be rolled over into replacement assets. No provision is made for taxation on permanent differences.
Deferred tax assets are recognised to the extent that it is more likely than not that they will be recovered.
Any assets and liabilities recognised have not been discounted.
Deferred tax is measured at the tax rates expected to apply in the periods when the timing differences are expected to reserve, based on tax rate and law enacted or substantially enacted at the balance sheet date.
Value added tax The Group charges Value Added Tax (VAT) on some of its income and is able to recover part of the VAT it incurs on expenditure. VAT is recognised as a cost to the extent that it is suffered by the Group and not recoverable from HM Revenue and Customs. The balance of VAT payable or recoverable at the year-end is included as a current liability or current asset.
TOWN AND COUNTRY HOUSING GROUP NOTES TO THE ACCOUNTS for the year ended 31 March 2013
28
2a Turnover, cost of sales, operating costs and operating surplus
Group
Turnover 2013
£’000
Cost of sales 2013
£’000
Operating
costs 2013
£’000
Operating surplus /
(deficit) 2013 £’000
Social housing lettings 46,716 - (29,997) 16,719 Other social housing activities Current asset property sales 2,329 (1,773) - 556 Charges for support services 198 - (198) - Other 80 - - 80 Non-social housing activities Lettings 1,088 - (748) 340 Development 129 - (367) (238) Other 364 - (130) 234
50,904 (1,773) (31,440) 17,691
Group
Turnover 2012
£’000
Cost of sales 2012
£’000
Operating
costs 2012
£’000
Operating surplus /
(deficit) 2012 £’000
Social housing lettings 42,373 - (24,050) 18,323 Other social housing activities Current asset property sales 2,741 (2,823) - (82) Charges for support services 253 - (253) - Non-social housing activities Lettings 1,050 - (347) 703 Development 54 - (263) (209) Other 327 - (108) 219
46,798 (2,823) (25,021) 18,954
TOWN AND COUNTRY HOUSING GROUP NOTES TO THE ACCOUNTS for the year ended 31 March 2013
29
2b. Turnover, cost of sales, operating costs and operating surplus
Company
Turnover 2013
£’000
Cost of sales 2013
£’000
Operating
costs 2013
£’000
Operating surplus /
(deficit) 2013 £’000
Social housing lettings 44,830 - (29,730) 15,100 Other social housing activities Current asset property sales 2,329 (1,773) - 556 Charges for support services 198 - (198) - Income from subsidiaries 306 - - 306 Non-social housing activities Lettings 245 - (42) 203 Development 495 - (733) (238) Gift aid 781 - - 781 Other 332 - (92) 240
49,516 (1,773) (30,795) 16,948
Company
Turnover
2012 £’000
Cost of sales 2012
£’000
Operating
costs 2012
£’000
Operating surplus /
(deficit) 2012 £’000
Social housing lettings 40,634 - (23,588) 17,046 Other social housing activities Current asset property sales 2,741 (2,823) - (82) Charges for support services 253 - (253) - Income from subsidiaries 277 - - 277 Non-social housing activities Lettings 126 - (7) 119 Development 459 - (458) 1 Other 212 - (219) (7)
44,702 (2,823) (24,525) 17,354
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12
3,3
36
M
ajo
r re
pa
irs
838
167
(47)
(1
11)
847
1,0
15
B
ad d
eb
ts
285
14
2
3
304
298
D
epre
cia
tion
of
ho
usin
g p
ropert
ies
3,8
51
153
113
70
4,1
87
3,9
50
E
xceptiona
l item
: a
ccele
rate
d d
epre
cia
tion
of
regen
era
tion p
ropert
ies
3,0
08
777
-
-
3,7
85
- W
rite
off
of
housin
g c
om
ponents
rep
lace
d in th
e
ye
ar
121
-
3
-
124
180
Im
pairm
ent
of
housin
g p
rop
ert
ies
-
-
-
-
-
865
26,0
53
2,6
24
415
638
29,7
30
23,5
88
Opera
ting s
urp
lus
13,9
46
(464)
1,1
45
473
15,1
00
17,0
46
Rent
losses f
rom
void
s
474
145
36
1
6
56
940
TOWN AND COUNTRY HOUSING GROUP NOTES TO THE ACCOUNTS for the year ended 31 March 2013
32
4 Interest receivable
Group Company On loans and bank overdrafts
2013 £’000
2012 £’000
2013 £’000
2012 £’000
Bank interest receivable 28 104 12 92 Net interest receivable from pension assets and liabilities
27 127 27 127
55 231 39 219
5. Interest payable and similar charges
Group Company On loans and bank overdrafts
2013 £’000
2012 £’000
2013 £’000
2012 £’000
On loans to Banks and Building Societies 15,692 15,568 14,482 14,365 Interest payable to subsidiary - - 15 -
15,692 15,568 14,497 14,365
Interest payable capitalised on housing properties under construction
(1,214)
(1,242)
(1,214)
(1,242)
14,478 14,326 13,283 13,123
6. Surplus on ordinary activities before taxation
Group Company Is arrived at after charging
2013 £’000
2012 £’000
2013 £’000
2012 £’000
Depreciation of social housing properties 4,474 4,199 4,187 3,950 Exceptional item: accelerated depreciation on regeneration units
3,785
-
3,785
-
Write off of housing components replaced in year
140
186
124
180
Depreciation of non social housing properties and other tangible fixed assets
544
528
544
528
Auditor’s remuneration (excluding VAT): For audit services: current year audit 44 44 33 32 For audit services: prior year audit 68 - 67 - For other services 51 13 49 10
TOWN AND COUNTRY HOUSING GROUP NOTES TO THE ACCOUNTS for the year ended 31 March 2013
33
7. (Deficit)/surplus on sale of fixed assets
Group Company 2013
£’000 2012
£’000 2013
£’000 2012
£’000 Disposal proceeds on novated contracts - - 1,819 15,777 Carrying value of novated contracts - - (1,819) (15,777)
Other disposal proceeds of fixed assets 13,545 3,221 13,337 1,208 Carrying value (13,887) (2,626) (13,726) (650)
(342) 595 (389) 558
Transferred to recycled capital grant fund (161) (92) (158) (92)
(503) 503 (547) 466
8. Employee information Group Company 2013
No 2012
No 2013
No 2012
No Average number of full time equivalent persons:
Office staff 143 131 143 131 Scheme managers, caretakers, cleaners and operatives
12
12
12
12
155 143 155 143
2013
2012
2013
2012 Staff costs (for the above persons) £000 £000 £’000 £’000
Wages and salaries 5,729 5,067 5,729 5,067 Social security costs 478 506 478 506 Pension costs 586 554 586 554
6,793 6,127 6,793 6,127
All staff are contracted to and paid by TCHG. The cost of the staff engaged on work for subsidiaries are recharged via a service level agreement.
The total of redundancy and severance payments paid, including pension sums, in the year to 31 March 2013 was £105k (2012: £48k).
TOWN AND COUNTRY HOUSING GROUP NOTES TO THE ACCOUNTS for the year ended 31 March 2013
34
8. Employee information (continued)
Higher paid employees
The numbers of employees, including Executive Directors, falling into the following bandings (of salaries excluding pension contributions) are as follows:
8a. Directors’ emoluments
Group 2013
£’000 2012
£’000 Executives Emoluments (including benefits in kind)
673
529
Pension contributions 60 57
These amounts include a payment of £30,000 to a former executive director for loss of office.
The highest paid director during the year was the Chief Executive (2012: Chief Executive), whose remuneration details, including pension contributions, are shown below:
Salary £’000
Pension £’000
Other
benefits £’000
Total 2013
£’000
Total 2012
£’000 Highest paid director
141
23
1
165
153
2013 £
2012 £
Total expenses reimbursed to Executive Directors not chargeable to United Kingdom income tax
1,606
3,182
Four Directors, including the Chief Executive, (2012: four) had pension contributions paid on their behalf under the Group’s defined benefit and/or stakeholder pension schemes.
2013 No.
2012 No.
£60,000- £70,000 4 1
£70,000- £80,000 1 -
£90,000- £100,000 1 4
£100,000- £110,000 4 -
£110,000- £120,000 1 -
£130,000- £140,000 - 1
£140,000- £150,000 1 -
TOWN AND COUNTRY HOUSING GROUP NOTES TO THE ACCOUNTS for the year ended 31 March 2013
35
8b. Non executive board members’ emoluments
Group board members receive additional payments for membership and chairing of subsidiary boards and committees. No benefits in kind are payable to non executive board members. Expenses reimbursed are not chargeable to United Kingdom income tax. (2012: Salaries £50,000, Expenses £9,678).
Salary £
Expenses £
Group Board Members
Nigel Cox (Chair to December 2012) 11,250 1,049
Francis Salway (Chair from December 2012) 5,000 -
Peter Cooke 6,000 406
Mark Easton 5,000 545
Graham Hill 5,167 467
Darren Hughes 7,000 363
Jenine Langrish 6,000 584
Charles Leigh-Dugmore 6,000 843
Jennifer Molloy 6,000 -
Christine Pointer 6,000 1,602
Alan Riddell 5,000 25
Sanaya Robinson 5,000 970
Howard Williams 2,333 215
Subsidiary Board and Committee Members
Patrick Barr 1,000 -
Pauline Hargraves 3,667 227
Tim Holden 1,167 -
Andy MacKay 1,167 84
David Nutley 2,000 138
Isabel Shaw 2,333 259
Karen Southon 2,000 112
Dawn Stanford 2,000 29
Christopher Starke 2,000 -
Simon West 2,000 -
Susan Westlake 2,000 63
David Wood 2,000 -
99,084
7,981
TOWN AND COUNTRY HOUSING GROUP NOTES TO THE ACCOUNTS for the year ended 31 March 2013
36
9. Taxation Analysis of tax charge for the year
Group Company 2013 2012 2013 2012
£’000 £’000 £’000 £’000 Current tax UK corporation tax on surplus for the year
-
103
-
-
Credit arising from gift aid payments (103) - - -
Tax (credit)/charge on surplus on ordinary activities
(103)
103
-
-
Factors affecting the tax (credit)/charge for the year
The tax assessed for the period is lower than the standard rate of corporation tax in the UK (%), as explained below:
Group Company 2013 2012 2013 2012 £’000 £’000 £’000 £’000 Surplus for the year, before tax 2,765 5,362 3,157 4,916
Surplus on ordinary activities multiplied by the standard rate of corporation tax of 24% (2012: 26%)
664 1,394 758 1,278
Effects of: Fixed asset timing differences 59 65 - - Decrease in tax losses (45) (187) - - Credit arising from gift aid payments (103) - - - Surpluses exempt from corporation tax (678) (1,168) (758) (1,278) Marginal rate - (1) - -
Total current tax (credit)/ charge (103) 103 - -
Factors that may affect future tax charges
As the Company is treated as a charity for tax purposes, its surpluses are exempt from corporation tax.
As at 31 March 2013, TCHG Living Limited had tax losses of £14.2m (2012: £14.8m). These losses may be set against certain profits arising in that company in future accounting periods. The deferred tax asset of £3.5m has not been recognised due to uncertainties as to extent and timing of its recovery.
No provision has been made for deferred tax on gains recognised in revaluing TCHG’s property to its market value. Such tax would only be payable if the property were sold without it being possible to reclaim roll over relief. The unprovided deferred tax in relation to the revalued properties amounts to approximately £4m as at 31 March 2013 (2012: £4m).
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TOWN AND COUNTRY HOUSING GROUP NOTES TO THE ACCOUNTS for the year ended 31 March 2013
42
10. Tangible fixed assets – housing stock (continued)
Valuation - Group
The properties have been valued by professional external valuers, Savills (L&P) Limited, Chartered Surveyors of 37-39 Perrymount Road, Haywards Heath, West Sussex, RH16 3BN as at 31 March 2013 in accordance with the Appraisal and Valuation Manual of the Royal Institution of Chartered Surveyors using the following bases:
Group Valuation Bases
Social Housing – Existing Use Value
Intermediate Rent – Market Value Subject to Tenancies
Rent to Homebuy – Market Value Subject to Tenancies
Market Rent – Market Value Vacant Possession
Shared Ownership – Market Value Subject to Tenancies The real discount rate for the shared ownership stock is 4.75% and for intermediate and rent to homebuy 6%. General needs are based on 4.5%.
Rent increases are assumed at RPI + 0.5%. Since the valuation date the Government has announced a revised policy for social rents, based on CPI + 1% with effect from April 2015. After discussion with Savills, we are satisfied that this will make no material difference to the valuation.
Additions to housing properties includes £0.6m (2012: £0.6m) for direct administration costs incurred in the year for which no social housing grants were received. The additions figure also includes a capitalised interest cost of £1.2 million at a rate of 4.02%, which was based on the average interest rate at the beginning of the year, (2012: £1.2 million, 4.02%). No Social Housing Grant was attributable to this cost.
Improvements to properties
Group 2013
£’000
2012
£’000
Replacement of components 2,597 2,136 Other capitalised works to existing properties 200 2,744
2,797 4,880 Improvements taken to income and expenditure account 844 1,026
3,641 5,906
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TOWN AND COUNTRY HOUSING GROUP NOTES TO THE ACCOUNTS for the year ended 31 March 2013
44
10. Tangible fixed assets – housing stock (continued)
Valuation - Company
The properties have been valued by professional external valuers, Savills (L&P) Limited, Chartered Surveyors. of 37-39 Perrymount Road, Haywards Heath, West Sussex, RH16 3BN as at 31 March 2013 in accordance with the Appraisal and Valuation Manual of the Royal Institution of Chartered Surveyors using the following bases:
Company Valuation Bases
Social Housing – Existing Use Value
Intermediate Rent – Market Value Subject to Tenancies
Rent to Homebuy – Market Value Subject to Tenancies
Shared Ownership – Market Value Subject to Tenancies The real discount rate for the shared ownership stock is 4.75% and for intermediate and rent to homebuy 6%. General needs are based on 4.5%.
Rent increases are assumed at RPI + 0.5%.
Additions to housing properties includes £0.4m (2012: £0.2m) for direct administration costs incurred in the year for which no social housing grants were received. The additions figure also includes a capitalised interest cost of £1.2million. (2012: £1.2 million) at a rate of 4.02%, (2012: 4.02%) which was based on the average interest rate at the beginning of the year. No Social Housing Grant was attributable to this cost.
Improvements to properties
Company 2013
£’000
2012
£’000
Replacement of components 2,550 2,124 Other capitalised works to existing properties 200 2,667
2,750 4,791 Improvements taken to income and expenditure account 847 1,015
3,597 5,806
TOWN AND COUNTRY HOUSING GROUP NOTES TO THE ACCOUNTS for the year ended 31 March 2013
45
11. Tangible fixed assets – other assets
Group and Company
Freehold offices & premises
£’000
Community
centre
£’000
Computer equipment and
software
£’000
Office equipment & fixtures
£’000
Total
£’000
Cost At 1 April 2012 2,802 454 3,852 915 8,023’ Additions - - 346 12 358’ Disposals - - (2,739) (382) (3,121)
At 31 March 2013 2,802 454 1,459 545 5,260’
Accumulated depreciation
At 1 April 2012 662 45 3,181 672 4,560' Charge for the year 34 5 397 108 544’ Eliminated on disposals - - (2,739) (382) (3,121)
At 31 March 2013 696 50 839 398 1,983’ ‘
Grants At 1 April 2012 - 305 - - 305’ Additions - - - - -
At 31 March 2013 - 305 - - 305’
Net book value At 31 March 2013 2,106 99 620 147 2,972’
At 31 March 2012 2,140 104 671 243 3,158’
12. Investments
Group Company 2013
£’000 2012
£’000 2013
£’000 2012
£’000 Investment in subsidiary - - 204 -
TCHG holds a 51% share in Countrywise Repairs Ltd, a company incorporated in England. Countrywise was set up with a joint venture partner to carry out repairs and maintenance services to the Group’s properties in the Tunbridge Wells area.
TOWN AND COUNTRY HOUSING GROUP NOTES TO THE ACCOUNTS for the year ended 31 March 2013
46
13. Current assets - properties for sale
Group Company 2013
£’000 2012
£’000 2013
£’000 2012
£’000 Shared ownership properties under construction
2,190
1,527
2,190
1,527
Outright sale properties under construction
1,016
-
-
-
Completed shared ownership properties 672 1,145 672 1,145
3,878 2,672 2,862 2,672
14. Debtors
Group Company 2013
£’000 2012
£’000 2013
£’000 2012
£’000 Due within 1 year Rent debtors 2,767 2,382 2,588 2,189 Less: Provision for bad and doubtful debts (1,034) (836) (921) (711)
1,733 1,546 1,667 1,478
Grant receivable 3,621 4,112 3,621 4,112 Amounts owed by subsidiary undertakings - - 583 172 Prepayments 463 273 436 278 Outstanding insurance claims 29 95 29 95 Sales ledger debtors 96 774 96 744 Disabled grants 42 3 42 3 VAT receivable 192 - 153 - Other debtors 121 281 47 275
6,297 7,084 6,674 7,155
Due after 1 year Amounts owed by subsidiary undertakings - - 8,000 8,000
6,297 7,084 14,674 15,157
Amounts owed by subsidiary undertakings due after one year comprise a loan to TCHG Living Ltd of £8m, which is interest free (2012: £8m).
TOWN AND COUNTRY HOUSING GROUP NOTES TO THE ACCOUNTS for the year ended 31 March 2013
47
15. Creditors: amounts falling due within one year
Group Company 2013
£’000 2012
£’000 2013
£’000 2012
£’000
Accrued loan interest & commitment fees 2,165 1,926 2,030 1,926 Trade creditors 3,297 1,601 2,854 1,585 Accruals 5,426 4,645 4,359 4,497 Amounts owed to subsidiary undertakings - - 374 165 Rent received in advance 957 817 853 715 Retentions on contracts 2,123 2,919 1,356 2,919 Other creditors 76 21 56 11 VAT payable 38 14 38 - Corporation tax payable - 103 - - Other taxation and social security payable 136 146 136 146 Recycled Capital Grant Fund (note 17) 70 71 38 72 Housing loans 476 - 476 -
14,764 12,263 12,570 12,036
There are no unpaid defined benefit contributions within the other taxation and social security payable figure (2012: £nil).
Interest on the inter company balance was charged at 1.12% per annum (2012: 1.12%).
16. Creditors: amounts falling due after more than one year
Group Company 2013 2012 2013 2012’ £’000 £’000 £’000 £’000’
Housing loans: Within 2-5 years 29,626 23,680 27,122 22,011’ In 5 years or more 352,907 351,829 327,591 325,678’
Total housing loans 382,533 375,509 354,713 347,689’
Loan arrangement fees (692) (734) (692) (734) Recycled capital grant fund (note 17) 253 157 250 124’ Disposal proceeds fund (note 18) 52 284 - 232’ Leaseholder monies in respect of future major repairs 168 307 115 257’
382,314 375,523 354,386 347,568
Net pension liability (note 20) 2,600 1,173 2,600 1,173
384,914 376,696 356,986 348,741
Amounts due to banks and building societies are secured by a fixed charge over specified assets of the Group. The Group takes advantage of a mix of fixed and variable interest rates. During the year the average interest rate (including margins, etc.) for the Group was 4.11% (2012: 4.14%) and for the Company it was 4.10% (2012: 4.13%).
Separate bank accounts totalling £169k (Group) and £115k (Company) are maintained to match leaseholder sinking funds. These are included within the balances shown as cash at bank and in hand of £10,145k (Group) and £7,389k (Company) as at 31 March 2013.
TOWN AND COUNTRY HOUSING GROUP NOTES TO THE ACCOUNTS for the year ended 31 March 2013
48
17. Recycled capital grant fund (RCGF)
Group Company
2013 £’000
2012
£’000
2013
£’000
2012
£’000
At 1 April 228 136 196 104 Grants recycled 161 92 158 92 Interest accrued - - - - Withdrawals (66) - (66) -
As at 31 March 323 228 288 196
Due within one year 70 71 38 72 Due within two years 92 65 92 32 Due within three years 161 92 158 92
323 228 288 196
HCA approval has been given to carry over £5k of unspent RCGF as at 31 March 2013 which would otherwise have been due for repayment.
18. Disposals proceeds fund
Group Company
2013
£’000 2012
£’000 2013
£’000 2012
£’000
At 1 April 284 392 232 340 Grants recycled - - - - Interest accrued - - - - Withdrawals (232) (108) (232) (108)
As at 31 March 52 284 - 232
19. Control
The Company is not controlled by any one party as defined by FRS 8 Related Party Transactions.
TOWN AND COUNTRY HOUSING GROUP NOTES TO THE ACCOUNTS for the year ended 31 March 2013
49
20. Pensions
Kent County Council Superannuation Fund
The Group participates in the Kent County Council Superannuation Fund, a funded defined benefit final salary scheme with assets and liabilities held in a separately administered fund.
During the year the Group paid contributions of £357k (2012: £306k). Contributions to the fund are assessed in accordance with the advice of qualified actuaries. The Group contribution rate for future accrual is 17.1% of pensionable salaries. At the latest actuarial valuation the fund was 77% funded and the Group made deficit reduction contributions of £105k in 2012/13.
In order to assess the value of the liabilities the actuarial valuation as at 31 March 2010 has been updated to 31 March 2013 by a qualified actuary. The assets shown are an estimate of the proportion of the Fund’s assets which are attributable to the Group.
Assumptions 31 March 2013 31 March 2012 31 March 2011 Discount rate for pension fund liabilities 4.20% 5.0% 5.60% Rate of general earnings growth 3.80% 3.75% 4.00% Pensions & deferred pension increases 2.30% 2.25% 2.50% Inflation – CPI 2.30% 2.25% 2.50% Inflation – RPI 3.30% 3.25% 3.50%
The Group’s share of the Fund’s assets and the expected return of the main asset classes were as follows:
31 March 2013 31 March 2012 31 March 2011
Rate of Return
Value £000’s
Rate of Return
Value £000’s
Rate of Return
Value £000’s
Equities 6.0% 10,291 6% 9,603 7.05% 9,200 Property 4.0% 1,160 6% 1,210 7.05% 1,082 Bonds 4.1% 1,884 4.85% 1,467 5.50% 1,682 Other 2.7% 1,160 0.50% 407 0.50% 276
Total fair value of scheme assets 5.30% 14,495 5.69% 12,687 6.69% 12,240 Present value of scheme liabilities (17,095) (13,862) (12,399)
FRS 17 pension fund deficit (2,600) (1,175) (159) Related deferred tax asset - 2 2
Net FRS 17 pension fund deficit (2,600) (1,173) (157)
Life expectancy at 65 as at 31/3/2013:
31 March 2013 31 March 2012
Future pensioners – male 22.1 22.0 Current pensioners – male 20.1 20.0 Future pensioners – female 26.0 25.9 Current pensioners – female 24.1 24.0
TOWN AND COUNTRY HOUSING GROUP NOTES TO THE ACCOUNTS for the year ended 31 March 2013
50
20. Pensions (continued)
There is no provision for unitising assets of a fund under the Local Government Pension Scheme. The above assets are allocated to participating bodies on a consistent and reasonable basis.
Pension fund liabilities are valued on an actuarial basis using the projected unit method and pension assets are stated at their fair value.
Analysis of the amount charged to operating surplus
2013 £’000
2012 £’000
Current service cost 280 251 Past service cost - 61
Total operating charge 280 312
Analysis of the amount credited to other income Expected return on pension scheme assets 719 817 Interest on pension scheme liabilities (692) (690)
Net credit to the income and expenditure account 27 127
Analysis of amount recognised in Statement of Total Recognised Surpluses & Deficits (STRSD)
Actual return less expected return on pension scheme assets 1,106 (316) Changes in assumptions underlying the present value of scheme liabilities (2,593) (882)
Actuarial deficit recognised in STRSD (1,487) (1,198)
Reconciliation of present value of liabilities Present values of liabilities at the start of the year (13,862) (12,399) Service cost (280) (251) Past service cost - (61) Interest cost (692) (690) Employee contributions (101) (99) Loss due to change in assumptions (2,593) (882) Losses on curtailments (44) - Benefit payments 477 520
Present value of liabilities at end of year (17,095) (13,862)
Reconciliation of assets Value of assets at start of year 12,687 12,240 Expected return on assets 721 817 Actual less expected return on assets 1,106 (316) Benefit payments (477) (520) Employer contributions 357 367 Employee contributions 101 99
Value of assets at end of year 14,495 12,687
TOWN AND COUNTRY HOUSING GROUP NOTES TO THE ACCOUNTS for the year ended 31 March 2013
51
20. Pensions (continued)
Amounts for the current and previous period are:
2013
2012
2011
2010
2009
£’000 £’000 £’000 £’000 £’000 Pension plan liabilities (17,095) (13,862) (12,399) (16,826) (10,838) Pension plan assets 14,495 12,687 12,240 11,725 8,210
Deficit (2,600) (1,175) (159) (5,101) (2,628)
Experience gains/(losses) on plan assets
1,106
(316)
(275)
3,008
(2,702)
Experience gains/(losses) on plan Liabilities
-
-
2,157
-
-
21. Capital commitments
Group 2013 2012 £000 £000 Capital expenditure contracted for but not provided in the accounts 41,270 24,710
Capital expenditure authorised by the Board but not contracted 27,303 9,951
The above commitments will be financed primarily by borrowings and social housing grant. TCHG has funding facilities in place totalling £447 million with £64 million undrawn.
22. Operating leases
Payments committed within the next year in respect of other operating leases:
Group Company Leases which expire: 2013 2012 2013 2012 £000 £000 £000 £000 Motor vehicles: Within one year - - - - Within two to five years 65 35 65 35
65 35 65 35
Office equipment: Within one year - - - - Within two to five years 77 15 77 15
77 15 77 15
TOWN AND COUNTRY HOUSING GROUP NOTES TO THE ACCOUNTS for the year ended 31 March 2013
52
23. Accommodation in management
The following number of units were in management at the end of the year: Group Company 2013
No. 2012
No. 2013
No. 2012
No. Social housing Owned and directly managed General needs 6,844 7,123 6,748 7,025
Affordable 246 119 244 119
Sheltered 448 496 448 496 Intermediate 247 242 - - Rent to homebuy 180 165 2 - Shared ownership 388 396 - 326 Owned and managed by others General needs 32 32 32 32 Intermediate - - 52 49 Rent to homebuy - - 180 165 Shared ownership - - 276 -
Total owned 8,385 8,573 7,982 8,212 Not owned and managed for others General needs - - 96 98 Affordable - - 2 - Shared ownership - 8 - 78
Total social housing 8,385 8,581 8,080 8,388
Non-social housing
Owned and directly managed Market rented 151 151 - - Owned and managed by others Market rented - - 15 15
Total owned 151 151 15 15 Not owned and managed for others Market rented - - - -
Total non-social housing 151 151 15 15
Total owned 8,536 8,724 7,997 8,227
Total managed 8,504 8,700 7,540 8,142
TOWN AND COUNTRY HOUSING GROUP NOTES TO THE ACCOUNTS for the year ended 31 March 2013
53
24. Reconciliation of operating surplus to net cash inflow from operating activities
Group 2013
£’000 2012
£’000
Operating surplus 17,691 18,954 Non cash items: Depreciation of tangible fixed assets 8,803 5,778 Working capital movements: Properties for sale movement (1,206) 2,779 Decrease/(increase) in debtors 296 (324) Increase/(decrease) in creditors 2,599 (6,641) Difference between pension charge and cash contributions 57 (309)
28,240 20,237
25. Reconciliation of net cash flow to movement in debt
Group 2013
£’000 2012
£’000 Increase/(decrease) in cash 4,156 1,482 Cash inflow from increase in debt (7,500) (23,047)
Changes in net debt (note 26) (3,344) (21,565) Net debt at 1 April (369,520) (347,955)
Net debt at 31 March (372,864) (369,520)
26. Analysis of net debt
Group
At 1 April Non cash At 31 March 2012
£’000 Cash flows
£’000 Movements
£’000 2013
£’000 Cash at bank and in hand 5,989 4,156 - 10,145
Changes in cash 5,989 4,156 - 10,145 Loans due within one year - - (476) (476) Loans due after one year (375,509) (7,500) 476 (382,533)
Changes in debt (375,509) (7,500) - (383,009)
Changes in net debt (369,520) (3,344) - (372,864)
TOWN AND COUNTRY HOUSING GROUP NOTES TO THE ACCOUNTS for the year ended 31 March 2013
54
27. Contingent liabilities
Monson Homes
During the year, TCHG entered into a site option agreement with its subsidiary, Monson Homes Limited, which provides Monson Homes Limited with the option to oblige TCHG to purchase two land sites for a total of £4,490,000, exercisable for up to three years following 12 April 2012. In addition, in relation to the same sites, TCHG entered into a second unit option agreement with Monson Homes Limited which provides Monson Homes Limited with the option to oblige TCHG to purchase the properties on these two sites once they are constructed at their then market value, in this case exercisable for a period of up to six months following the date of notice by Monson Homes Limited.
The Board understands that neither option will be exercised in the event that Monson Homes Limited is able to sell the properties on the open market. Based on the current market position, it is expected that all of the properties will be sold and therefore TCHG will not be required by Monson Homes Limited to purchase these properties. On that basis, no provision has been made for this potential liability in TCHG’s financial statements.
Connaught Partnerships
A claim has been received in respect of an alleged debt from TCHG to Connaught Partnerships Ltd (in administration). TCHG had a contract for the provision of its entire responsive repairs service with this company at the time of its insolvency in September 2010. The claim is for £347k plus VAT. We have robust legal advice, supported by an expert witness report from a Quantity Surveyor, that we have a valid counter claim for more than twice this sum. The directors therefore consider that no provision is necessary.
There are no other contingent liabilities (March 2012: nil).
28. Movement on reserves
Group Revenue
reserve £’000
Revaluation reserve
£’000
Designated reserve*
£’000
Total
£’000
At 1 April 2012 19,484 242,394 465 262,343 Surplus for the year
2,837
-
-
2,837
Surplus on revaluation of properties 1,618 - 1,618 Transfer to Designated Reserve (465) - 465 - Component accounting adjustments relating to
prior years
(1,121)
1,121
-
- Elimination of revaluation on regeneration
schemes - (2,458) - (2,458)
Realisation of property revaluation surpluses 1,112 (1,112) - - Realisation of property revaluation deficits (3,128) 3,128 - - Actuarial loss relating to pension scheme (1,487) - - (1,487)
At 31 March 2013 17,232 244,691 930 262,853
TOWN AND COUNTRY HOUSING GROUP NOTES TO THE ACCOUNTS for the year ended 31 March 2013
55
28. Movement on reserves (continued)
*In accordance with the Board decision in November 2011, a further £465k has been assigned to a designated reserve to future fund the crystallisation of liability at the point of cessation of the membership of the last member of the Kent County Council scheme.
29. Called up share capital – non equity 2013 2012 £ £ At 1 April 11 10 Issued during the year 2 2 Surrendered during the year (2) (1)
As at 31 March 11 11
The shares provide members with the right to vote at general meetings, but are not transferable or withdrawable and carry no rights to interest, dividend or bonus.
30. Related parties
There are two tenant members of the Board, Peter Cooke and Jenny Molloy. Their tenancies are on normal commercial terms and they are not able to use their position to gain advantage.
The Group has transactions and balances with three non registered providers: Monson Homes Ltd., Countrywise Ltd and TCHG Foundation, in order to recharge overhead costs within the Group. These charges are based on a calculation of the actual costs of delivering support services including a reasonable proportion of overheads.
A consistent basis has been used in 2012-13 to that used in prior years. Total amounts recharged were £463k.
In addition Monson Homes constructs and develops housing schemes on behalf of the Group. Monson Homes charges TCHG for its actual costs in procuring construction services plus a 4% mark up. In 2012-13 the amounts charged by Monson on this basis totalled £19,904k.
TCHG also made a £50k donation to TCHG Foundation to cover costs of Foundation’s charitable work.
Company
Revenue reserve
£’000
Revaluation reserve
£’000
Designated reserve*
£’000
Total
£’000
At 1 April 2012 19,928 232,848 465 253,241 Surplus for the year
3,157
-
-
3,157
Surplus on revaluation of properties - 417 - 417 Transfer to Designated Reserve* (465) - 465 - Component accounting adjustments relating to
prior years
(1,058)
1,058 -
- -
- Elimination of revaluation on regeneration
schemes
-
(2,458)
-
(2,458) Realisation of property revaluation surpluses 1,103 (1,103) - - Realisation of property revaluation deficits (3,128) 3,128 - - Actuarial loss on pension scheme (1,487) - - (1,487)
At 31 March 2013 18,050 233,890 930 252,870
TCHG CAPITAL PLC Valuation of Housing Stock for Loan Security Purposes Relating to the Issue of £80,000,000 4.665 per cent. Secured
Bonds due 2045 (the “Bonds”) by TCHG Capital plc (the “Issuer”)
Dated 1 July 2014
Savills Advisory Services Ltd 37 – 39 Perrymount Road
Haywards Heath West Sussex
RH16 3BN
a
CONTENTS 1.0 INTRODUCTION 1
2.0 EXECUTIVE SUMMARY 5
3.0 THE PROPERTIES 5
4.0 RENTS 8
5.0 ENVIRONMENTAL CONSIDERATIONS 8
6.0 TOWN PLANNING 8
7.0 TENURE 9
8.0 PROPERTY MARKET OVERVIEW 9
9.0 EXISTING USE VALUE FOR SOCIAL HOUSING – VALUATION APPROACH 11
10.0 WELFARE REFORM – ADDITIONAL COMMENTARY 13
11.0 MARKET VALUE SUBJECT TO TENANCIES – VALUATION APPROACH 13
12.0 VALUATIONS 15
13.0 LOTTING AND VALUE DISAGGREGATION 16
14.0 SUITABILITY AS LOAN SECURITY 17
APPENDIX 1 SCHEDULE OF SUBJECT PROPERTIES & APPORTIONED VALUES
APPENDIX 2 VALUATION SUMMARY & BREAKDOWN BY SCHEME
APPENDIX 3 PHOTOGRAPHS OF CERTAIN PROPERTIES
APPENDIX 4 GENERAL ASSUMPTIONS, DEFINITIONS AND BASES OF VALUATION
APPENDIX 5 PROPERTY MARKET COMMENTARY
James Tillier FRICSE: [email protected]
DL: +44 (0) 1444 446031F: +44 (0) 1444 446041
37-39 Perrymount RoadHaywards Heath RH16 3BN
T: +44 (0) 1444 446 040savills.com
Offices and associates throughout the Americas, Europe, Asia Pacific, Africa and the Middle East. Savills Advisory Services Limited. Chartered Surveyors. A subsidiary of Savills plc. Registered in England No. 6215875 Registered office: 33 Margaret Street, London W1G 0JD
Dear Sirs REPORTING COMPANY: SAVILLS ADVISORY SERVICES LIMITED VALUATION OF HOUSING STOCK RELATING TO THE ISSUE OF £80,000,000 4.665 PER CENT. SECURED BONDS DUE 2045 (THE “BONDS”) BY TCHG CAPITAL PLC (“THE ISSUER”) 456 UNITS OF TOWN AND COUNTRY HOUSING GROUP LIMITED (“TCHG”) HOUSING STOCK (“THE PROPERTIES”) 1.0 INTRODUCTION
This Valuation is required in connection with the proposed issue by the Issuer of the Bonds.
1 July 2014
To: Prudential Trustee Company Limited Laurence Pountney Hill London EC4R 0HH in its capacity as Security Trustee acting as trustee for and on behalf of itself and the Beneficiaries as defined in the security trust deed originally dated 6 November 2000
(and having been amended and restated on 1 March 2005 and 19 August 2008) between, inter alios, Prudential Trustee Company Limited as security trustee (the “Security Trustee”) and TCHG Capital plc
(as the same may be amended, novated, supplemented, varied or restated from time to time, the “Security Trust Deed”). and: Prudential Trustee Company Limited Laurence Pountney Hill London EC4R 0HH
acting as trustee for and on behalf of itself and the Bondholders as defined in the bond trust deed to be dated on or around 3 July 2014 between, inter alios, Prudential Trustee Company Limited as bond trustee (the “Bond Trustee”) and TCHG Capital plc as issuer (as the same may be amended, novated, supplemented, varied or restated from time to time, the “Bond Trust Deed”).
and: TradeRisks Limited as Arranger and Dealer 27 Great Winchester Street London EC2N 2JA
and: TCHG Capital plc as Issuer Fifth Floor 100 Wood Street London EC2V 7EX
and: Town and Country Housing Group as the Original Borrower Monson House Monson Way Tunbridge Wells Kent TN1 1LQ
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Further to instructions received from the Issuer in March 2014 to value the Properties in order to assess its level of security, we now have pleasure in reporting to the above addressees.
In completing this exercise, we have: a) agreed a full set of property schedule data with the Issuer; b) discussed details as to our approach and methodology; and c) completed our own inspections, research and analysis.
The above has enabled us to arrive at the valuation assumptions which we have adopted in the valuations and final reported figures herein. For the avoidance of doubt, we confirm that it would not be appropriate or possible to compare this valuation with any values appearing in the Issuer’s annual accounts. This Report has been prepared in accordance with the RICS Red Book (as defined herein). The valuations are prepared on this basis so that we can determine the value recoverable if the charges over the properties which are the subject of this Report (the “Properties”) were enforced as at the date of this Report.
We have reviewed the Certificate of Title prepared in respect of the Properties and has been taken into account in preparing the Valuation.
The values for residential properties reported in the Issuer’s accounts are prepared for that purpose on the basis of Existing Use Value for Social Housing by reference to the entire stock of the organisation’s dwellings valued as a single lot, in contrast with the valuation in respect of this Report which only represents the value to a funder-in-possession of a portion of the stock.
As such different assumptions would be applied. Disaggregated shares for individual dwellings derived from differently sized portfolios, and valued for different purposes, may vary, resulting in any comparisons being inaccurate.
1.1 BASES OF VALUATION 1.1.1 In relation to Properties which may be disposed of by a mortgagee-in-possession on an unfettered
basis (meaning subject to tenancies but otherwise vacant possession and not subject to any security interest option or other encumbrance or to any restriction preventing its sale to, or use by, any person for residential use):-
(i) the Market Value of such properties for loan security purposes firstly reflecting the fact or (where
not the case) making an assumption as to the fact that the properties are subject to existing tenancies that grant security of tenure to the occupational tenant. Our valuation will refer to this basis of value as “MV–STT" or “market value, subject to tenancies”; and
1.1.2 In relation to Properties other than those specified in paragraph 1.1.1 above:-
(i) The Existing Use Value for Social Housing (“EUV-SH”) of such properties for loan security
purposes. ESMA 130(vi)
1.2 DEFINITIONS
Market Value is defined by the Royal Institution of Chartered Surveyors’ (“RICS”) Valuation – Professional Standards, (effective from 6 January 2014) (the “Red Book”) as:- “The estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and a willing seller in an arm’s length transaction after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion.”
Existing Use Value for Social Housing is defined by the Royal Institution of Chartered Surveyors’ (“RICS”) Valuation – Professional Standards, (effective from 6 January 2014) (the “Red Book”) as:-
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Existing use value for social housing (“EUV-SH”) is the estimated amount for which a property should exchange on the valuation date between a willing buyer and a willing seller in an arm’s length transaction after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion – subject to the following special assumptions that the property will continue to be let by a body pursuant to delivery of a service for the existing use:
(a) at the valuation date any regulatory body, in applying its criteria for approval, would not unreasonably fetter the vendor’s ability to dispose of the property to organisations intending to manage their housing stock in accordance with that regulatory body’s requirements;
(b) properties temporarily vacant pending re-letting would be valued, if there is a letting demand, on the basis that the prospective purchaser intends to re-let them, rather than with vacant possession; and
(c) any subsequent sale would be subject to all of the above special assumptions. We confirm that there will be no material difference in the MV-STT and EUV-SH valuations between freehold and long leasehold interests and therefore we do not feel that separate summaries are required, this approach being compliant with the RICS Valuation Standards.
1.3 GENERAL ASSUMPTIONS AND CONDITIONS
All our valuations have been carried out on the basis of Savills’ General Assumptions set out in Appendix 4 of this report.
1.4 DATE OF VALUATION
Our opinions of value are as at the date of this Report (the Effective Date), using the property data supplied to us. The importance of the date of valuation must be stressed as property values can change over a relatively short period of time.
ESMA 130(iv) 1.5 PURPOSE OF VALUATION
This Valuation is required for security purposes in connection with the proposed issue by the Issuer of the Bonds.
This Report is issued for the benefit of the addressees and for the inclusion in the Prospectus for the Bonds to be issued by the Issuer and may only be used in connection with the transaction referred to in this Report and for the purposes of the Prospectus.
We hereby give consent to the publication of this Report within the Prospectus and accept responsibility for the information contained in this Report. To the best of our knowledge and belief (having taken all reasonable care to ensure that such is the case) the information given in this report is in accordance with the facts and does not omit anything likely to affect the import of such information.
1.6 CONFLICTS OF INTEREST
We are external valuers and not aware of any conflict of interest in respect of the Properties or the Issuer preventing us from providing you with an independent valuation of the Properties in accordance with the RICS Red Book. ESMA 130(i)
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1.7 VALUER DETAILS AND INSPECTION
In accordance with the requirements of the RICS Red Book, we confirm that this Report has been prepared by James Tillier FRICS and countersigned by Alistair Addison MRICS (RICS Registered Valuers) who have relevant experience to report on this property type. Savills Advisory Services carried out inspections of the stock on 22 July 2013, 29 July 2013, 5 August 2013, 12 August 2013 and 17 June 2014.
Following inspection, market research and comparable sales and lettings evidence was compiled enabling us to build up a detailed knowledge of the locations concerned, the situation of the housing stock and marketability. We have considered the general condition of the stock, the level of fixtures and fittings and have derived our assumptions accordingly.
ESMA 130(i) 1.8 ENQUIRIES AND INFORMATION SOURCES
We have been provided by the Issuer with a schedule of the Properties detailing the addresses and current rents as set out in the property schedule incorporated in Appendix 1. The extent of the enquiries we have undertaken and the sources of the information we have relied upon for purposes of our valuation are stated in the relevant sections of our report below. Savills Advisory Services Limited accepts responsibility for the information contained in this Report and, to the best of its knowledge (having taken all reasonable care to ensure that such is the case), such information is in accordance with the facts and does not omit anything likely to affect the import of such information. The figures and data relating to: (a) Gilt and Bond yields referred to in paragraph 9.4 of the Report were obtained from the publication
Social Housing Volume 26, No. 4, April 2014. We have also reviewed the final form certificate of title (the “Certificate of Title”) for the Properties issued by Cripps LLP dated on or about the date of this valuation report and can confirm that our valuations fully reflect the disclosures contained therein. In particular, in respect of each unit which we have valued on the basis on MV-STT, we confirm that (based on our review of the Certificate of Title) such units may be disposed of by a mortgagee-in-possession on an unfettered basis (meaning subject to existing tenancies but otherwise with vacant possession and not subject to any security interest, option or other encumbrance or to any restriction preventing its sale to, or use by, any person for residential use).
1.9 RICS COMPLIANCE
This report has been prepared in accordance with Royal Institution of Chartered Surveyors’ (“RICS”) Valuation – Professional Standards, the “RICS Red Book”), effective from 6 January 2014, in particular, where relevant, in accordance with the requirements of Valuation Professional Standards VPS3: Valuation Reports, UKVS1: Valuations for financial statements, UKVS1.13: Valuations for Registered Social Landlords, UKVS3: Valuations for Residential Property, UKVS3.11 Affordable Rent and Market Rent, UK Appendix 1: Accounting concepts and terms used in FRS 15 and SSAP 19 and UK Appendix 13: Valuation of registered social housing providers' stock for secured lending purposes.
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2.0 EXECUTIVE SUMMARY
Based on the schedule of properties provided by the Issuer and upon assumptions detailed in this Report, our opinions of value on the bases indicated as at the Effective Date of this Report are as follows:
Unrestricted Stock (451 Units)
• Market Value – Subject to Tenancies - £41,266,000 (forty-one million, two hundred and
sixty-six thousand pounds).
Restricted Stock (5 Units)
• Existing Use Value for Social Housing - £289,500 (two hundred and eighty-nine thousand, five hundred pounds).
A full stock schedule with apportioned values is included at Appendix 1. A summary schedule by scheme is included at Appendix 2.
3.0 THE PROPERTIES ESMA 130(iii)
3.1 Location
The properties are located in the Issuer’s principal areas of operation, and the table below shows the distribution of the stock across the Counties of Kent and East Sussex, the number of towns and villages and the total stock numbers. The Properties are all situated in reasonable residential areas and are within reach of facilities and amenities. Some locations have fewer local facilities and transport communications than others but it is considered there is demand for affordable housing within the developments. Full postal addresses are listed in the Appendix 1.
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Location 1-bed 2-bed 3-bed 4-bed 1-bed 2-bed 1-bed 2-bed 3-bed Totals
ASH 2 7 22 2 33CHATHAM 7 11 18COXHEATH 4 4DOVER 6 6GRAVESEND 4 2 6 12 24HERSDEN 7 4 11MAIDSTONE 1 2 6 4 22 21 56MARGATE 19 8 14 41PEMBURY 1 3 53 57POLEGATE 5 5PRESTON 4 4RUSTHALL 16 1 17SNODLAND 11 22 4 4 41SOUTHBOROUGH 29 1 30SWINGFIELD 4 2 6TONBRIDGE 4 4TUNBRIDGE WELLS 6 1 1 38 7 25 1 79WOODNESBOROUGH 4 5 7 4 20
11 46 97 22 85 69 123 2 1 456
Houses/Bungalows FlatsGeneral Needs Sheltered
Flats
Source: The Issuer
3.2 Property Category
The portfolio comprises a total of 456 units owned by the Issuer. A breakdown by property category is set out below:
Tenure 1-bed 2-bed 3-bed 4-bed 1-bed 2-bed 3-bed Totals
General Needs Social Rented 11 31 85 21 70 61 279
Sheltered Social Rented 123 2 1 126
Affordable Rented 6 1 1 8 1 17
Rent-to-HomeBuy 9 11 7 7 34
11 46 97 22 208 71 1 456
FlatsHouses/Bungalows
Source: The Issuer
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3.3 Bedroom Numbers The Properties comprise the following type and bedroom sizes. The majority of the Properties are
flats with 1 bedroom.
Total PercentageProperty Type 1 2 3 4 Properties of Properties
Bungalow 5 8 1 1 15 3%
Flat 208 71 1 280 61%
House 6 38 96 21 161 35%
Totals 219 117 98 22 456
Bedrooms as Percentage 48% 26% 21% 5% 100%
Number of Bedrooms
Source: The Issuer
3.4 Construction and Condition
The majority of the Properties were built post-1990, and are considered to be of conventional construction for their age and type. Houses are constructed of solid brick, cavity brick or timber frame with roofs being mainly pitched and covered in slate or tile. Flats are low- to mid-rise, constructed of cavity brick, metal or timber frame with roofs being pitched and covered in tile, or mono-pitched and believed to have a membrane or profiled steel covering. The majority of the Properties have modern plastic gutters and downpipes. A high proportion of the Properties have double glazed windows of timber, metal or UPVC casement type and benefit from all mains services and gas fired central heating systems supplying radiators.
On the basis of external and sample inspections, maintenance of the Properties appeared generally to a satisfactory standard. It is understood from the Issuer that the majority of the Properties currently meet the Decent Homes standard as set out by the Communities and Local Government (“CLG”). Properties conform to Decent Homes standard if they are warm and weatherproof and have reasonably modern facilities. Sample photographs of certain properties can be found at Appendix 3.
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4.0 RENTS 4.1 We set out in the table below a comparison of current social and affordable rents with target and
market rents for the various property categories:
No. of Current Target MarketDescription Units Rent Rent Rent
Social Rented General Needs Flats 131 £92.99 £93.99 £130
Social Rented General Needs Houses/Bungalows 148 £110.31 £114.10 £160
Sheltered Flats 126 £75.54 £76.31 £125
Affordable Rent Flats 9 £110.26 - £150
Affordable Rent Houses 8 £165.18 - £200
Rent-to-HomeBuy Flats 14 £127.48 - £145
Rent-to-HomeBuy Houses 20 £170.33 - £185
Source: The Issuer/Savills
4.2 This table demonstrates that on average current rents for the social stock are close to target, but well below current market rents.
5.0 ENVIRONMENTAL CONSIDERATIONS
We have valued the stock on the assumption that the properties have not suffered any land contamination in the past, nor are they likely to become so contaminated in the foreseeable future. However, should it subsequently be established that contamination exists at the property, or on any neighbouring land, then we may wish to review our valuation advice.
We have assumed there to be no adverse ground or soil conditions and that the load bearing qualities of the site are sufficient to support the building constructed thereon.
6.0 TOWN PLANNING
From our review of the final form certificate of title (the “Certificate of Title”) for the Properties issued by Cripps LLP we can confirm that there are no pending planning applications or other planning issues or conditions that would adversely affect the valuation of the Properties.
The existence of all necessary Town Planning and Building Regulation approvals and any remaining NHBC cover or similar building warranty, where appropriate, have also been confirmed in respect of the Properties, with insurances put in place where required.
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7.0 TENURE 7.1 Title Our valuation reflects our opinion of value in aggregate of the freehold or long leasehold interests (in
each case) of the Properties owned by the Issuer and identified as the subject of this Report and scheduled at Appendix 1.
The Certificate of Title discloses Properties that are held leasehold by the Issuer and we consider
these interests do not affect the valuation of the Properties. The Certificate of Title also discloses that five properties at The Aireys, Woodnesborough have been
identified as having restrictions on Title such as to prevent them being sold on the open market. As a consequence these properties have been valued on the basis of Existing Use Value for Social Housing only.
All other stock is unrestricted and has therefore been valued at Market Value Subject to Tenancies.
7.2 Tenancies
The Properties are subject to Assured or Assured Shorthold tenancies. The Issuer’s standard tenancy agreements are assumed to be in a typical format; however they have not been seen. Under the Assured and Assured Shorthold tenancy agreements rents can be reviewed once a year to a market level. The tenant is also assumed to have the usual rights of appeal to the local Rent Assessment Committee.
8.0 PROPERTY MARKET OVERVIEW 8.1 Homes and Communities Agency - General Market Summary
National Overview House Prices: Average house prices continue to increase, led by London and the South-East. Transactions: Housing transactions increased throughout 2012 and 2013, but still remain below their 2007 peak. Numbers of mortgage advances continue to grow rapidly. House Building: The number of residential planning permissions is increasing, and starts on site are at their highest level since 2007. The Economy: The economy continues to grow, with GDP increasing by 0.8% q/q (3.1% y/y) in Q1 2014. Inflation is stable, with CPI at 1.8%, and the unemployment rate remains at 6.9%. Housing Affordability The house price to earnings ratio was 4.77 in April 2014, based on a standardised average property price of £177,648. This is a 0.25 increase on April 2013. This compares to the series high of 5.83 in July 2007, and a low of 3.07 in December 1995. (Halifax and ASHE)
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Transactions There were 81,580 residential property transactions in England in April 2014. Transactions totalled 998,080 over the 12 month period to April 2014. This is 23.6% more than in the previous 12 month period. (HMRC) Supply & Demand In April 2014 the average time taken to sell a home was 6.3 weeks, which is the lowest since the data series began (Jan 2010). The average sale price as a percentage of asking price was a series high of 96.7%. (Hometrack) Average Asking Prices v Marketing Period
Source Publication: Homes and Communities Agency HCA Monthly Housing Market Bulletin May 2014 Please refer to Appendix 4 for additional market commentary.
8.2 Local Market The Properties are in a range of locations and comprise a number of different property types; the general opinion received from local agents is that the market is currently showing some signs for optimism, with slightly increased levels of activity and indications of modest price increases, although this has not yet worked through to the lower end of the market, especially in more remote locations.
Overall, residential values have been generally static in the last twelve months with transaction levels still well below pre-Crunch levels. Recent Government initiatives namely; Funding For Lending and Help to Buy appear to have led to increased activity in the general housing market. It remains to be seen whether these policies have a significant long-term impact. The rental market is relatively buoyant, particularly in London and the South-East, with additional demand therefore to be anticipated from investor purchasers for stock of this type and location.
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9.0 EXISTING USE VALUE FOR SOCIAL HOUSING – VALUATION APPROACH
9.1 Valuation Methodology EUV-SH
EUV-SH assumes the property will be disposed of to another Registered Provider (“RP”). These organisations will calculate their bid according to their projected income and outgoings profile which they would estimate the Properties would produce under their management. This basis assumes social or affordable rents will be charged in perpetuity and all vacant units will be re-let. Owing to the complex income and expenditure profile particular to RPs we consider that the appropriate method of valuation is to use a discounted cash flow (“DCF”). The DCF allows us to project rental income and expenditure over the term of the cash flow to arrive at an annual surplus or deficit, which is then discounted to a net present value.
9.2 Rents and CPI
The Government has announced that from 2015/16 target rents will be allowed to increase at a maximum of CPI + 1% for the following 10 years. The current regime allows RPI + 0.5%. Assuming medium- to long-term rates for CPI and RPI at 2.0% and 2.5% respectively, it seems likely that the effect of this change will be generally neutral and have limited impact on rental growth, and our valuations, where current rents have converged with target, or are due to do so by 2015/16. The situation in regard to current rents that have not yet converged is that the +/- £2 per week rent adjustment has not been extended beyond 2014/15. In the case of loan security valuations we continue to hold the view that a mortgagee-in-possession and successors-in-title would not be bound by the rent regulations and would therefore be able to continue to converge rents to target beyond 2014/15 if necessary. As is the case under current policy, individual housing associations would be able to approach the regulator if adherence to the new regulation would cause financial difficulties.
9.3 DCF Assumptions
DCF assumptions are derived from economic data or information received from the Issuer and have been adopted in our EUV-SH cash-flow of the restricted stock, as set out below:
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Assumption Unit Comment
Inflation RPI - 2.5% pa / CPI - 2% pa
Average Current Rent pw £93.89 52-week year
Average Target Rent pw £95.84 52-week year
Rent Increases RPI + 0.5% / CPI + 1%
Voids & Bad Debts 3.5%
Arrears 1%
Management Cost £500 per unit per annum
Management Cost Inflation RPI + 0.5% per annum
Cyclical Maintenance £250 per unit per annum
Responsive Repairs £400 per unit per annum
Planned Repairs £550 per unit per annum
Repair Cost Inflation 0.25% pa real
Discount Rate 5.75%
Source: The Issuer / Savills
9.4 Discount Rate
There is no hard and fast rule for determining the most appropriate rate to be adopted in a discounted cash flow. The discount rate is probably the most important variable in the model since it determines the net present value of future predicted income and expenditure flows for the property in question. Our role as valuers is to interpret the way in which potential purchasers of the stock would assess their bids. The market for this stock will be within the RP sector. Effectively, the discount rate is representative of both the long-term cost of borrowing for an acquiring organisation and the risks implicit in the property portfolio concerned. The current level of long-term interest rates, and the overall cost of funds, must be reflected in our valuation. In addition to considering the cost of funds, we also need to make an allowance for the risk which attaches to our cash flow assumptions – some of which may be subject to a higher degree of risk than those generally made in the business plans. The margin for risk needs to be considered on a case-by-case basis, having regard to the nature of the stock. Currently the yield on 30-year Gilts is around 3.6%. This is, in effect, the risk-free discount rate. Yields on Housing Association long-dated, rated and un-rated bonds are typically around 4.5% (Source Publication: Social Housing, Volume 26, No. 4, April 2014). The latest public-rated issues from Notting Hill Housing Trust (4.47%, 2054, February 2014) and bpha (4.82%, 2044, March 2014) have achieved “spreads” above their reference gilts of 0.98% and 1.35% respectively. New business plans are being run at nominal interest rates of around 6.5% to 8.5% including margin and fees. The level of margin and fees allowed for is around 1.5% - 2.5% on top of an assumed nominal interest rate of around 5% - 6%. The supply of long-term (25- or 30-year) funding has diminished and is only available from a handful of lenders. Shorter-term funding (5 – 7 years) and funding with in-built options to re-price margins at a future date are becoming more commonplace introducing a new level of re-financing risk to business plans.
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Although interest rates generally, and short-term rates in particular, are lower than we have seen for some time, the increase in lenders’ margins and other charges has resulted in overall long-term funding costs being similar to those which have pertained over the past few years. At the current time we do not propose to alter the general range of the discount rates we are adopting. However they will be kept under close review. Over the past three years our view has been that for good quality, generally non-problematical stock, a discount rate of 5% to 5.75% real is appropriate (over a long-term inflation rate of 2.5%). The margin for risk implicit in this, over and above the cost of funds, is about 1% to 2%.
We have adopted a discount rate of 5.75% real per annum. 10.0 WELFARE REFORM – ADDITIONAL COMMENTARY ON VOIDS, ARREARS & BAD DEBTS
April 2013 saw the remaining provisions of the Welfare Reform Act (changes in Housing Benefit entitlement, the under-occupation cap and the overall benefit cap) come into effect. Universal Credit and direct payment has now been introduced in some parts of the country. These changes will have a significant impact on Registered Providers and their tenants. It is the general view across the sector that both void losses and bad debts will increase and that additional management time will need to be devoted to rent collection. It is necessary to reflect the likely impact of the changes in our valuations and we have therefore assumed modest increases in arrears, void loss and written-off debt in the future.
11.0 MARKET VALUE SUBJECT TO TENANCIES – VALUATION APPROACH 11.1 Valuation Methodology MV-STT
We assess the MV-STT by consideration of a discount to Market Value with Vacant Possession (“MV-VP”) and secondly by considering a yield to rental income. The valuation of properties and portfolios subject to assured and secure tenancies is carried out with direct reference to comparable evidence, gleaned from the sales of similar tenanted portfolios and individual units, sold subject to Protected Tenancies and on Assured Shorthold Tenancies. There is an established body of evidence from portfolios traded on the open market to which we can refer.
The purchasers of residential investments are usually private investors or firms who acquire vacant units and let on Assured Shorthold tenancies (“AST”). Investors tend to base their bid on their ability to “trade out” individual units at market value assuming vacant possession over time. In locations where there is a limited market or where a property is difficult to trade, owing to style or market conditions, investors will base their bid on rental return compared to capital cost. The discount to MV-VP ranges from 10% for prime property to 50% where market conditions are difficult. Typical rates are around a 20% to 30% discount to MV-VP for properties subject to AST tenancies. The yield applied to gross income varies from 5% or less for prime property, to 12% or more for poorer locations. This equates to a yield on net income (after deductions for management, maintenance & voids) of between 4% and 10% and possibly higher for sheltered accommodation.
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The discount and yield applied to assured and secure tenancies are adjusted to reflect the additional security of tenure such tenants benefit from.
11.2 “Rent-to-HomeBuy” Stock 34 properties in Maidstone and Snodland have been let under the Government’s “Rent-to-HomeBuy”
scheme whereby qualifying applicants are granted assured shorthold tenancies at intermediate rent levels and enter into a contractual option to acquire a shared ownership lease at the end of, or within, a specified period, in this case three years.
However, our understanding is that the exercise of this option is not mandatory or guaranteed, as
tenants’ circumstances may change or they may, in the event, be unable to afford the equity purchase. In this case we assume the tenants would be granted a new fixed-term option or would be re-housed in alternative rented accommodation and new applicants brought in under the scheme.
Given, therefore, this uncertainty, we have assumed for valuation purposes that the properties
will remain let at intermediate rents, with no sales of equity or voids. 11.3 “Affordable” Rent Stock
In November 2010 the Government issued a Consultation Paper - “Local Decisions: a fairer future for social housing”. This was followed in March 2011 by the “2011–2015 Affordable Homes Programme – Framework”. The documents propose, inter alia, the introduction of a new more flexible Affordable Rent tenancy. Tenancy terms for existing social tenants will remain unchanged, but a “proportion” of new tenants could be offered rents at up to 80% of the market rent.
The ability to charge the higher rents is linked to participation in new development on a “something for something” basis and reaching a Framework contract with the Homes and Communities Agency. The effects on the value of Social Rented property (in other words the point at which and extent to which the market would reflect any future potential to charge Affordable Rents) is difficult to judge. At present we do not believe the value of Social Rented stock will have increased because the market has yet to mature. We are continuing to monitor the market. The Properties include 17 houses and flats which have been let by TCHG at Affordable Rents equating to approximately 80% of market rent. We have valued these properties at the rents stated but our valuations do not reflect any value which might be attributable to the potential to charge Affordable Rents on other stock. EUV-SH valuations may be affected in future. It should be noted that the MV-STT valuation assumes an increase to market rent levels and is unaffected.
11.4 Principal Assumptions – MV-STT
In establishing the MV-STT value, we assume that rents would convert to a market rent level within a short space of time. We have considered discount to vacant possession value and yield with reference to market comparables. Our MV-STT valuation has been supported with a discounted cash-flow approach with incorporates the following:
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Assumption Unit
Voids & Bad Debts 5% - 7.5%
Arrears 1%
Void / Re-let Rate 5% / 8%
Management Cost 8% - 10% of market rent
Maintenance & Repairs 15% - 20% of market rent
Long-term House Price Inflation 1% real
Gross Yield 7.2% / 10%
Net Yield 5.2% / 7.2%
Source: Savills
11.5 MV-STT Statement
With reference to Section 7 on Tenure, it is essential that confirmation be obtained that the property is capable of being let at a Market Rent and disposed of free from restrictions. If there are restrictions in title, planning conditions, Section 106 agreements or nomination agreements which limit disposal to RPs and which would be binding upon a mortgagee-in-possession, then the correct valuation basis may be EUV-SH and not MV-STT. It should be noted that the MV-STT valuation may only be attainable by a mortgagee-in-possession, selling the properties tenanted, outside the RP sector. The valuation basis is dependant upon the subsequent purchaser being able to sell vacant units and charge a market rent to existing tenants. Current rental income (as advised by the Issuer and subject to comments above) is set out at Appendix 1 but we make no warranty that the current income is sufficient to support lending against an MV-STT basis either on individual valuation groups or against all the Properties.
12.0 VALUATIONS
ESMA 130(v) Please note that the valuations set out below must only be read in conjunction with the rest of this report including all Appendices. The valuations expressed below are also set out in the Executive Summary of Valuation at Section 2. Unrestricted Stock (451 Units)
• Market Value – Subject to Tenancies - £41,266,000 (forty-one million, two hundred and
sixty-six thousand pounds).
Restricted Stock (5 Units)
• Existing Use Value for Social Housing - £289,500 (two hundred and eighty-nine thousand, five hundred pounds).
a
Page 16
Freehold and Leasehold Properties ESMA 130 (v)
In accordance with paragraph 130(v) of the ESMA update of the CESR recommendations (23 March 2011 ESMA/2011/81), we set out below a breakdown of the valuations by tenure, reflecting the bases which will be relied upon for the purpose of this exercise. Freehold • 443 Units at Market Value – Subject to Tenancies is £40,161,500 (forty million, one
hundred and sixty-one thousand, five hundred pounds).
• 5 Units at Existing Use Value for Social Housing is £289,500 (two hundred and eighty-nine thousand, five hundred pounds).
Leasehold • 8 Units at Market Value – Subject to Tenancies is £1,104,500 (one million, one hundred
and four thousand, five hundred pounds). Market Value with Vacant Possession (MV-VP) For Information Purposes Only The MV-VP figure should not be relied upon for lending as this figure does not represent what a Lender / Investor could sell the portfolio for and is provided as instructed purely for indicative purposes only. The aggregate MV-VP of the 456 units is £64,637,500. The valuations are apportioned by scheme at Appendix 2 and by individual property valuations at Appendix 1. Please note that the inclusion of the MV-VP valuation figures in this Report is purely for information purposes only (and specifically not to be relied on or represented for any purpose connected with loan security or similar purposes), being an estimate of the aggregate Market Value, of the Properties (as defined below), making assumptions:
• that the Properties are available for sale at the date of valuation with full vacant possession (notwithstanding that the Properties are in reality occupied by tenants with probable security of tenure);
• that the Properties would be free from any encumbrances that limit their use to affordable housing as mentioned above.
Given these assumptions, the MV-VP valuation figures are significantly higher than the EUV-SH and MV-STT valuation figures and hence the MV-VP figures provide, for information, a broad reference point for contrast to the EUV-SH and MV-STT valuation figures.
13.0 LOTTING AND VALUE DISAGGREGATION
We have valued the Properties in lots according to type / location. Within Appendix 1 we include individual EUV-SH or MV-STT figures against each of the properties listed. These figures are apportionments, directly related to the current rents passing or to the vacant possession value. For this reason, the apportioned figures are not valuations of the individual units and should not be regarded as such.
a
Page 17
14.0 SUITABILITY AS LOAN SECURITY
14.1 Funders’ Responsibility
It is usual for a valuer to be asked to express an opinion as to the suitability of a property as security for a loan, debenture, bond or mortgage. However, it is a matter for a funder to assess the risks involved and make its own assessment in fixing the terms of the loan, such as the percentage of value to be advanced, the provision for repayment of the capital, and the interest rate.
14.2 Property Specific Risks
In this report we refer to all matters that are within our knowledge and which may assist you in your assessment of the risk.
14.3 Suitability as Security
We are of the opinion that the Properties do form adequate security for the Bonds. We would stress however that it is up to the addressees to assess the level of borrowing which the Properties support and to assess the risk not directly associated with the property itself.
~~~~~~~~~~~~~~~~
We trust that this report is acceptable for your purposes. Should you have any queries, please do not hesitate to contact us. Yours faithfully Countersigned
James Tillier FRICS Alistair Addison MRICS Director Associate Director RICS Registered Valuer RICS Registered Valuer For and on behalf of For and on behalf of Savills Advisory Services Limited Savills Advisory Services Limited Appendices Appendix 1 Schedules of Subject Properties and Apportioned Values Appendix 2 Valuation Summary and Breakdown by Scheme Appendix 3 Photographs of Certain Properties Appendix 4 General Assumptions, Definitions and Conditions Appendix 5 Property Market Overview
Ref
no.
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ess
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dres
s 2
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st C
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s (0
=Bed
sit)
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t £pw
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et
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t £pw
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ated
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cant
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sses
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Va
lue
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e Su
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ool R
oad
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Kent
CT3
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96.4
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296
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l Roa
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310
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hool
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land
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9810
0700
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land
Lan
eAs
hKe
ntC
T3 2
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312
1.78
£
12
1.78
£
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,000
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,170
9810
0900
0N9
Mol
land
Lan
eAs
hKe
ntC
T3 2
JAH
312
1.78
£
12
1.78
£
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,000
£115
,170
9810
1100
0N11
Mol
land
Lan
eAs
hKe
ntC
T3 2
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312
1.78
£
12
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£
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,000
£115
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9810
0500
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land
Lan
eAs
hKe
ntC
T3 2
JAH
310
8.06
£
10
8.06
£
£180
,000
£115
,170
9810
05A0
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land
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eAs
hKe
ntC
T3 2
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310
8.06
£
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£180
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£115
,170
3310
0100
00Fl
at 1
Man
nette
Hou
seC
hath
amKe
ntM
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DQ
F1
82.0
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82.0
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500
£61,
940
MV-
STT
Soci
al
Ref
no.
Addr
ess
1Ad
dres
s 2
Addr
ess
3Po
st C
ode
Type
(H
/ F
/ S)
Bed
s (0
=Bed
sit)
Ren
t £pw
(5
2 w
eeks
)
Targ
et
Ren
t £pw
(5
2 w
eeks
)
Estim
ated
Va
cant
Po
sses
sion
Va
lue
Mar
ket
Valu
e Su
bjec
t to
Tena
ncie
s33
1002
0000
Flat
2 M
anne
tte H
ouse
Cha
tham
Kent
ME4
6D
QF
292
.50
£
92
.50
£
£1
11,5
00£7
1,57
033
1003
0000
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3 M
anne
tte H
ouse
Cha
tham
Kent
ME4
6D
QF
182
.02
£
82
.02
£
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6,50
0£6
1,94
033
1004
0000
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4 M
anne
tte H
ouse
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tham
Kent
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6D
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182
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82
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£
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6,50
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1,94
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anne
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ouse
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tham
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292
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anne
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tham
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7 M
anne
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tham
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6D
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292
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92
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anne
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anne
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10
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nette
Hou
seC
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570
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at 1
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anne
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tham
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nette
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570
3310
1400
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at 1
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anne
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tham
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15
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nette
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seC
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570
3310
1600
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at 1
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tte H
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Cha
tham
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182
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033
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17
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nette
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seC
hath
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92.5
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3310
1800
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at 1
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anne
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tham
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ranv
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treet
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nville
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etD
over
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£
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7,50
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031
3009
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9 G
ranv
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treet
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erKe
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1000
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nville
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etD
over
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9,59
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3011
0000
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ranv
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treet
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nville
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etD
over
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6 2Q
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nkin
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lose
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vese
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ins
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seG
rave
send
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1 7H
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294
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£
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£
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4,93
044
2003
0000
3 Je
nkin
s C
lose
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vese
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94.9
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930
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0400
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send
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1 7H
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294
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£
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£
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4,93
044
2005
0000
5 Je
nkin
s C
lose
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vese
ndKe
ntD
A11
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94.9
8£
98.4
1£
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930
4420
0600
006
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ins
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seG
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send
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DA1
1 7H
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294
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£
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£
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17,0
00£7
4,93
044
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0000
7 Je
nkin
s C
lose
Gra
vese
ndKe
ntD
A11
7HA
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88.3
7£
98.4
1£
£117
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930
4420
0800
008
Jenk
ins
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seG
rave
send
Kent
DA1
1 7H
AF
294
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£
98
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£
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17,0
00£7
4,93
044
2009
0000
9 Je
nkin
s C
lose
Gra
vese
ndKe
ntD
A11
7HA
F2
88.3
7£
98.4
1£
£117
,000
£74,
930
4420
1000
0010
Jen
kins
Clo
seG
rave
send
Kent
DA1
1 7H
AF
293
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£
98
.41
£
£1
17,0
00£7
4,93
044
2011
0000
11 J
enki
ns C
lose
Gra
vese
ndKe
ntD
A11
7HA
F2
98.4
1£
98.4
1£
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,000
£74,
930
4420
1200
0012
Jen
kins
Clo
seG
rave
send
Kent
DA1
1 7H
AF
288
.37
£
98
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£
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17,0
00£7
4,93
0
MV-
STT
Soci
al
Ref
no.
Addr
ess
1Ad
dres
s 2
Addr
ess
3Po
st C
ode
Type
(H
/ F
/ S)
Bed
s (0
=Bed
sit)
Ren
t £pw
(5
2 w
eeks
)
Targ
et
Ren
t £pw
(5
2 w
eeks
)
Estim
ated
Va
cant
Po
sses
sion
Va
lue
Mar
ket
Valu
e Su
bjec
t to
Tena
ncie
s44
4027
0000
27 L
awra
nce
Squa
reG
rave
send
Kent
DA1
1 7H
WH
312
2.40
£
12
2.70
£
£208
,000
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,210
4440
2900
0029
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ranc
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uare
Gra
vese
ndKe
ntD
A11
7HW
H3
122.
70£
122.
70£
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93,0
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0044
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31 L
awra
nce
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reG
rave
send
Kent
DA1
1 7H
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312
2.40
£
12
2.70
£
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,000
£123
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4440
3300
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ranc
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vese
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35 L
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send
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312
2.40
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12
2.70
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4440
3700
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ranc
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vese
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122.
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70£
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08,0
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33,2
1044
3002
0000
2 H
ayne
s R
oad
Gra
vese
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ntD
A11
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89.3
4£
89.3
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4430
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004
Hay
nes
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rave
send
Kent
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1 7H
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189
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89
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62,5
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04,0
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1 Fi
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rtG
rave
send
Kent
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210
4.34
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10
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£117
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ourt
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104.
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3 Fi
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192
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92
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4 Fi
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192
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92
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62,5
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1000
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hequ
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ree
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312
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12
8.35
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£111
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7670
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Che
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Her
sden
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124.
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14
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Che
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Her
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Che
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Her
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Che
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Her
sden
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413
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14
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Che
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lose
Her
sden
Kent
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135.
92£
140.
53£
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11 C
hequ
er T
ree
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seH
ersd
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ntC
T3 4
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312
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12
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£
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2220
0100
001
Cal
listo
Cou
rtM
aids
tone
Kent
ME1
6 8J
GB
179
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79
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£
£1
62,5
00£1
06,2
4022
2002
0000
2 C
allis
to C
ourt
Mai
dsto
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ntM
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115.
19£
115.
19£
£1
67,5
00£1
09,5
0022
2003
0000
3 C
allis
to C
ourt
Mai
dsto
neKe
ntM
E16
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124.
17£
124.
17£
£1
67,5
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09,5
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2004
0000
4 C
allis
to C
ourt
Mai
dsto
neKe
ntM
E16
8JG
F1
79.2
8£
79.2
8£
£111
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£72,
890
2220
0500
005
Cal
listo
Cou
rtM
aids
tone
Kent
ME1
6 8J
GF
179
.28
£
79
.28
£
£1
11,5
00£7
2,89
022
2006
0000
6 C
allis
to C
ourt
Mai
dsto
neKe
ntM
E16
8JG
F1
79.2
8£
79.2
8£
£111
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£72,
890
2220
0700
007
Cal
listo
Cou
rtM
aids
tone
Kent
ME1
6 8J
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179
.28
£
79
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£
£1
11,5
00£7
2,89
022
2008
0000
8 C
allis
to C
ourt
Mai
dsto
neKe
ntM
E16
8JG
F1
79.2
8£
79.2
8£
£111
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£72,
890
2220
0900
009
Cal
listo
Cou
rtM
aids
tone
Kent
ME1
6 8J
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179
.28
£
79
.28
£
£1
11,5
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2,89
022
2010
0000
10 C
allis
to C
ourt
Mai
dsto
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ntM
E16
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F1
79.2
8£
79.2
8£
£111
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£72,
890
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1100
0011
Cal
listo
Cou
rtM
aids
tone
Kent
ME1
6 8J
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179
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79
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11,5
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2,89
0
MV-
STT
Soci
al
Ref
no.
Addr
ess
1Ad
dres
s 2
Addr
ess
3Po
st C
ode
Type
(H
/ F
/ S)
Bed
s (0
=Bed
sit)
Ren
t £pw
(5
2 w
eeks
)
Targ
et
Ren
t £pw
(5
2 w
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)
Estim
ated
Va
cant
Po
sses
sion
Va
lue
Mar
ket
Valu
e Su
bjec
t to
Tena
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s45
3016
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16 L
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E15
9GD
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119.
86£
121.
59£
£1
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25,8
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3018
0000
18 L
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lose
Mai
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E15
9GD
H3
119.
86£
121.
59£
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25,8
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20 L
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lose
Mai
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E15
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110.
88£
121.
59£
£1
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25,8
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0000
22 L
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lose
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E15
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125.
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134.
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24 L
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134.
90£
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26 L
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E15
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124.
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134.
90£
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28 L
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125.
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134.
90£
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3030
0000
30 L
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lose
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dsto
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ntM
E15
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H3
119.
86£
121.
59£
£1
92,5
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25,8
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3032
0000
32 L
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lose
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E15
9GD
H3
121.
59£
121.
59£
£1
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25,8
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3034
0000
34 L
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lose
Mai
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ntM
E15
9GD
H3
119.
86£
121.
59£
£1
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25,8
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Flat
1 S
herlo
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107.
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71£
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Flat
2 S
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107.
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71£
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Flat
3 S
herlo
ck H
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Mai
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88.7
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96.1
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£111
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890
4710
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at 4
She
rlock
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seM
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tone
Kent
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5 9G
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210
0.14
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10
7.71
£
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£83,
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0500
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at 5
She
rlock
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seM
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tone
Kent
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5 9G
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210
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10
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£
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£83,
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at 6
She
rlock
Hou
seM
aids
tone
Kent
ME1
5 9G
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210
7.71
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10
7.71
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at 7
She
rlock
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seM
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Kent
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5 9G
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210
7.41
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10
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£127
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00Fl
at 8
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rlock
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seM
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tone
Kent
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5 9G
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210
7.71
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10
7.71
£
£127
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4710
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00Fl
at 9
She
rlock
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seM
aids
tone
Kent
ME1
5 9G
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195
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£
96
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£
£1
11,5
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2,89
047
1010
0000
Flat
10
Sher
lock
Hou
seM
aids
tone
Kent
ME1
5 9G
BF
210
7.71
£
10
7.71
£
£127
,000
£83,
030
4710
1100
00Fl
at 1
1 Sh
erlo
ck H
ouse
Mai
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E15
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107.
41£
107.
71£
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27,0
00£8
3,03
047
1012
0000
Flat
12
Sher
lock
Hou
seM
aids
tone
Kent
ME1
5 9G
BF
210
5.91
£
10
7.71
£
£127
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£83,
030
3180
0100
00Ap
artm
ent 1
Bria
r Hou
seM
aids
tone
Kent
ME1
4 2U
SF
294
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£
94
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£
£1
16,5
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6,16
031
8002
0000
Apar
tmen
t 2 B
riar H
ouse
Mai
dsto
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ntM
E14
2US
F1
86.5
1£
86.5
1£
£101
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£66,
360
3180
0300
00Ap
artm
ent 3
Bria
r Hou
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aids
tone
Kent
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4 2U
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186
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86
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01,5
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6,36
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tmen
t 4 B
riar H
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94.7
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94.7
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£116
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3180
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ent 5
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aids
tone
Kent
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4 2U
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186
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86
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tmen
t 6 B
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86.5
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86.5
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£101
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360
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ent 7
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294
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94
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6,16
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tmen
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94.7
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2173
6A00
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tone
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7 4D
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211
9.35
£
12
2.33
£
£215
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£140
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2173
6B00
0N36
b H
untin
gton
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aids
tone
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7 4D
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212
2.33
£
12
2.33
£
£215
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£140
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2175
2A00
0N52
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untin
gton
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tone
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7 4D
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212
2.33
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12
2.33
£
£215
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£140
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2175
2B00
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b H
untin
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tone
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7 4D
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212
2.33
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12
2.33
£
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£140
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MV-
STT
Soci
al
Ref
no.
Addr
ess
1Ad
dres
s 2
Addr
ess
3Po
st C
ode
Type
(H
/ F
/ S)
Bed
s (0
=Bed
sit)
Ren
t £pw
(5
2 w
eeks
)
Targ
et
Ren
t £pw
(5
2 w
eeks
)
Estim
ated
Va
cant
Po
sses
sion
Va
lue
Mar
ket
Valu
e Su
bjec
t to
Tena
ncie
sBD
3039
0015
157
All S
aint
s Av
enue
Mar
gate
Kent
CT9
5FE
H3
124.
52£
124.
52£
£1
85,0
00£1
20,7
50BD
3039
0016
159
All S
aint
s Av
enue
Mar
gate
Kent
CT9
5FE
H3
124.
52£
124.
52£
£1
85,0
00£1
20,7
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3039
0017
161
All S
aint
s Av
enue
Mar
gate
Kent
CT9
5FE
H3
124.
52£
124.
52£
£1
85,0
00£1
20,7
50BD
3039
0018
163
All S
aint
s Av
enue
Mar
gate
Kent
CT9
5FE
H3
124.
52£
124.
52£
£1
85,0
00£1
20,7
50BE
3039
0019
165
All S
aint
s Av
enue
Mar
gate
Kent
CT9
5FE
H3
124.
52£
124.
52£
£1
85,0
00£1
20,7
50BE
3039
0020
167
All S
aint
s Av
enue
Mar
gate
Kent
CT9
5FE
H3
124.
52£
124.
52£
£1
85,0
00£1
20,7
50BE
3039
0021
169
All S
aint
s Av
enue
Mar
gate
Kent
CT9
5FE
H3
124.
52£
124.
52£
£1
85,0
00£1
20,7
50BE
3031
0012
17 D
alby
Squ
are
Mar
gate
Kent
CT9
2ER
H3
117.
62£
117.
62£
£1
75,0
00£1
14,2
20BE
3031
0013
18 D
alby
Squ
are
Mar
gate
Kent
CT9
2ER
H3
117.
62£
117.
62£
£1
75,0
00£1
14,2
20BE
3031
0014
19 D
alby
Squ
are
Mar
gate
Kent
CT9
2ER
H3
117.
62£
117.
62£
£1
75,0
00£1
14,2
20BE
3031
0015
20 D
alby
Squ
are
Mar
gate
Kent
CT9
2ER
H3
117.
62£
117.
62£
£1
75,0
00£1
14,2
20BE
3031
0016
21 D
alby
Squ
are
Mar
gate
Kent
CT9
2ER
H3
117.
62£
117.
62£
£1
75,0
00£1
14,2
20BE
3031
0017
22 D
alby
Squ
are
Mar
gate
Kent
CT9
2ER
H3
112.
02£
112.
02£
£1
75,0
00£1
14,2
20BE
3031
0018
23 D
alby
Squ
are
Mar
gate
Kent
CT9
2ER
H3
117.
62£
117.
62£
£1
75,0
00£1
14,2
20BF
3031
0009
13 D
alby
Roa
dM
arga
teKe
ntC
T9 2
ENH
311
5.04
£
11
5.04
£
£175
,000
£114
,220
BF30
3100
1015
Dal
by R
oad
Mar
gate
Kent
CT9
2EN
H3
115.
04£
115.
04£
£1
75,0
00£1
14,2
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3031
0011
17 D
alby
Roa
dM
arga
teKe
ntC
T9 2
ENH
311
5.04
£
11
5.04
£
£175
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£114
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BD30
3100
01Fl
at 1
21
Arth
ur R
oad
Mar
gate
Kent
CT9
2EN
F2
96.8
8£
96.8
8£
£97,
500
£63,
640
BD30
3100
02Fl
at 2
21
Arth
ur R
oad
Mar
gate
Kent
CT9
2EN
F2
96.8
8£
96.8
8£
£97,
500
£63,
640
BD30
3100
03Fl
at 3
21
Arth
ur R
oad
Mar
gate
Kent
CT9
2EN
F2
96.8
8£
96.8
8£
£97,
500
£63,
640
BD30
3100
04Fl
at 4
21
Arth
ur R
oad
Mar
gate
Kent
CT9
2EN
F2
96.8
8£
96.8
8£
£97,
500
£63,
640
BC30
3100
05Fl
at 1
23
Arth
ur R
oad
Mar
gate
Kent
CT9
2EN
F2
96.8
8£
96.8
8£
£97,
500
£63,
640
BC30
3100
06Fl
at 2
23
Arth
ur R
oad
Mar
gate
Kent
CT9
2EN
F2
96.8
8£
96.8
8£
£97,
500
£63,
640
BC30
3100
07Fl
at 3
23
Arth
ur R
oad
Mar
gate
Kent
CT9
2EN
F2
96.8
8£
96.8
8£
£97,
500
£63,
640
BC30
3100
08Fl
at 4
23
Arth
ur R
oad
Mar
gate
Kent
CT9
2EN
F2
96.8
8£
96.8
8£
£97,
500
£63,
640
BG30
3100
1925
Arth
ur R
oad
Mar
gate
Kent
CT9
2EN
H3
115.
04£
115.
04£
£1
75,0
00£1
14,2
20BG
3031
0020
27 A
rthur
Roa
dM
arga
teKe
ntC
T9 2
ENH
311
5.04
£
11
5.04
£
£175
,000
£114
,220
BC30
3900
01Fl
at 1
Rol
ler C
oast
er H
ouse
Mar
gate
Kent
CT9
5FE
F1
91.4
2£
91.4
2£
£102
,500
£66,
900
BC30
3900
02Fl
at 2
Rol
ler C
oast
er H
ouse
Mar
gate
Kent
CT9
5FE
F1
91.4
2£
91.4
2£
£102
,500
£66,
900
BC30
3900
03Fl
at 3
Rol
ler C
oast
er H
ouse
Mar
gate
Kent
CT9
5FE
F2
106.
50£
106.
50£
£1
30,0
00£8
4,85
0BC
3039
0004
Flat
4 R
olle
r Coa
ster
Hou
seM
arga
teKe
ntC
T9 5
FEF
210
6.50
£
10
6.50
£
£130
,000
£84,
850
BC30
3900
05Fl
at 5
Rol
ler C
oast
er H
ouse
Mar
gate
Kent
CT9
5FE
F1
91.4
2£
91.4
2£
£102
,500
£66,
900
BC30
3900
06Fl
at 6
Rol
ler C
oast
er H
ouse
Mar
gate
Kent
CT9
5FE
F1
91.4
2£
91.4
2£
£102
,500
£66,
900
BC30
3900
07Fl
at 7
Rol
ler C
oast
er H
ouse
Mar
gate
Kent
CT9
5FE
F2
106.
50£
106.
50£
£1
30,0
00£8
4,85
0
MV-
STT
Soci
al
Ref
no.
Addr
ess
1Ad
dres
s 2
Addr
ess
3Po
st C
ode
Type
(H
/ F
/ S)
Bed
s (0
=Bed
sit)
Ren
t £pw
(5
2 w
eeks
)
Targ
et
Ren
t £pw
(5
2 w
eeks
)
Estim
ated
Va
cant
Po
sses
sion
Va
lue
Mar
ket
Valu
e Su
bjec
t to
Tena
ncie
sBC
3039
0008
Flat
8 R
olle
r Coa
ster
Hou
seM
arga
teKe
ntC
T9 5
FEF
210
6.50
£
10
6.50
£
£130
,000
£84,
850
BC30
3900
09Fl
at 9
Rol
ler C
oast
er H
ouse
Mar
gate
Kent
CT9
5FE
F1
91.4
2£
91.4
2£
£102
,500
£66,
900
BC30
3900
10Fl
at 1
0 R
olle
r Coa
ster
Hou
seM
arga
teKe
ntC
T9 5
FEF
191
.42
£
91
.42
£
£1
02,5
00£6
6,90
0BC
3039
0011
Flat
11
Rol
ler C
oast
er H
ouse
Mar
gate
Kent
CT9
5FE
F2
103.
29£
103.
29£
£1
30,0
00£8
4,85
0BC
3039
0012
Flat
12
Rol
ler C
oast
er H
ouse
Mar
gate
Kent
CT9
5FE
F2
106.
50£
106.
50£
£1
30,0
00£8
4,85
0BC
3039
0013
Flat
13
Rol
ler C
oast
er H
ouse
Mar
gate
Kent
CT9
5FE
F1
91.4
2£
91.4
2£
£102
,500
£66,
900
BC30
3900
14Fl
at 1
4 R
olle
r Coa
ster
Hou
seM
arga
teKe
ntC
T9 5
FEF
191
.42
£
91
.42
£
£1
02,5
00£6
6,90
0O
RI4
4020
0010
Sun
hill
Cou
rtPe
mbu
ryKe
ntTN
2 4N
TF
174
.11
£
74
.11
£
£1
05,0
00£6
8,60
0O
RI4
4030
0011
Sun
hill
Cou
rtPe
mbu
ryKe
ntTN
2 4N
TF
174
.11
£
74
.11
£
£1
05,0
00£6
8,60
0O
RI4
4040
0012
Sun
hill
Cou
rtPe
mbu
ryKe
ntTN
2 4N
TF
166
.42
£
72
.98
£
£1
05,0
00£6
8,60
0O
RI4
4050
0013
Sun
hill
Cou
rtPe
mbu
ryKe
ntTN
2 4N
TF
180
.81
£
94
.41
£
£1
05,0
00£6
8,60
0O
RI4
4060
0014
Sun
hill
Cou
rtPe
mbu
ryKe
ntTN
2 4N
TF
174
.11
£
74
.11
£
£1
05,0
00£6
8,60
0O
RI4
4070
0015
Sun
hill
Cou
rtPe
mbu
ryKe
ntTN
2 4N
TF
174
.11
£
74
.11
£
£1
05,0
00£6
8,60
0O
RI4
4080
0016
Sun
hill
Cou
rtPe
mbu
ryKe
ntTN
2 4N
TF
174
.11
£
74
.11
£
£1
05,0
00£6
8,60
0O
RI4
4090
0017
Sun
hill
Cou
rtPe
mbu
ryKe
ntTN
2 4N
TF
174
.11
£
74
.11
£
£1
05,0
00£6
8,60
0O
RI4
4100
0018
Sun
hill
Cou
rtPe
mbu
ryKe
ntTN
2 4N
TF
174
.11
£
74
.11
£
£1
05,0
00£6
8,60
0O
RI4
4110
0019
Sun
hill
Cou
rtPe
mbu
ryKe
ntTN
2 4N
TF
165
.05
£
72
.98
£
£1
05,0
00£6
8,60
0O
RI4
4120
002
Sunh
ill C
ourt
Pem
bury
Kent
TN2
4NT
F1
74.1
1£
74.1
1£
£105
,000
£68,
600
OR
I441
3000
20 S
unhi
ll C
ourt
Pem
bury
Kent
TN2
4NT
F1
72.9
8£
72.9
8£
£105
,000
£68,
600
OR
I441
4000
21 S
unhi
ll C
ourt
Pem
bury
Kent
TN2
4NT
F1
74.1
1£
74.1
1£
£105
,000
£68,
600
OR
I441
5000
22 S
unhi
ll C
ourt
Pem
bury
Kent
TN2
4NT
F1
74.1
1£
74.1
1£
£105
,000
£68,
600
OR
I441
6000
23 S
unhi
ll C
ourt
Pem
bury
Kent
TN2
4NT
F1
74.1
1£
74.1
1£
£105
,000
£68,
600
OR
I441
7000
24 S
unhi
ll C
ourt
Pem
bury
Kent
TN2
4NT
F1
74.1
1£
74.1
1£
£105
,000
£68,
600
OR
I441
8000
25 S
unhi
ll C
ourt
Pem
bury
Kent
TN2
4NT
F1
74.1
1£
74.1
1£
£105
,000
£68,
600
OR
I441
9000
26 S
unhi
ll C
ourt
Pem
bury
Kent
TN2
4NT
F1
74.1
1£
74.1
1£
£105
,000
£68,
600
OR
I442
0000
27 S
unhi
ll C
ourt
Pem
bury
Kent
TN2
4NT
F1
74.1
1£
74.1
1£
£105
,000
£68,
600
OR
I442
1000
28 S
unhi
ll C
ourt
Pem
bury
Kent
TN2
4NT
F1
74.1
1£
74.1
1£
£105
,000
£68,
600
OR
I442
2000
29 S
unhi
ll C
ourt
Pem
bury
Kent
TN2
4NT
F1
74.1
1£
74.1
1£
£105
,000
£68,
600
OR
I442
3000
3 Su
nhill
Cou
rtPe
mbu
ryKe
ntTN
2 4N
TF
174
.11
£
74
.11
£
£1
05,0
00£6
8,60
0O
RI4
4240
0030
Sun
hill
Cou
rtPe
mbu
ryKe
ntTN
2 4N
TF
174
.11
£
74
.11
£
£1
05,0
00£6
8,60
0O
RI4
4250
0031
Sun
hill
Cou
rtPe
mbu
ryKe
ntTN
2 4N
TF
174
.11
£
74
.11
£
£1
05,0
00£6
8,60
0O
RI4
4260
0032
Sun
hill
Cou
rtPe
mbu
ryKe
ntTN
2 4N
TF
174
.11
£
74
.11
£
£1
05,0
00£6
8,60
0O
RI4
4270
0033
Sun
hill
Cou
rtPe
mbu
ryKe
ntTN
2 4N
TF
174
.11
£
74
.11
£
£1
05,0
00£6
8,60
0O
RI4
4280
0034
Sun
hill
Cou
rtPe
mbu
ryKe
ntTN
2 4N
TF
191
.06
£
94
.41
£
£1
05,0
00£6
8,60
0
MV-
STT
Soci
al
Ref
no.
Addr
ess
1Ad
dres
s 2
Addr
ess
3Po
st C
ode
Type
(H
/ F
/ S)
Bed
s (0
=Bed
sit)
Ren
t £pw
(5
2 w
eeks
)
Targ
et
Ren
t £pw
(5
2 w
eeks
)
Estim
ated
Va
cant
Po
sses
sion
Va
lue
Mar
ket
Valu
e Su
bjec
t to
Tena
ncie
sO
RI4
4290
0035
Sun
hill
Cou
rtPe
mbu
ryKe
ntTN
2 4N
TF
192
.33
£
94
.41
£
£1
05,0
00£6
8,60
0O
RI4
4300
0036
Sun
hill
Cou
rtPe
mbu
ryKe
ntTN
2 4N
TF
174
.11
£
74
.11
£
£1
05,0
00£6
8,60
0O
RI4
4310
0037
Sun
hill
Cou
rtPe
mbu
ryKe
ntTN
2 4N
TF
174
.11
£
74
.11
£
£1
05,0
00£6
8,60
0O
RI4
4320
0038
Sun
hill
Cou
rtPe
mbu
ryKe
ntTN
2 4N
TF
174
.11
£
74
.11
£
£1
05,0
00£6
8,60
0O
RI4
4330
0039
Sun
hill
Cou
rtPe
mbu
ryKe
ntTN
2 4N
TF
194
.41
£
94
.41
£
£1
05,0
00£6
8,60
0O
RI4
4340
004
Sunh
ill C
ourt
Pem
bury
Kent
TN2
4NT
F1
91.0
6£
94.4
1£
£105
,000
£68,
600
OR
I443
5000
40 S
unhi
ll C
ourt
Pem
bury
Kent
TN2
4NT
F1
74.1
1£
74.1
1£
£105
,000
£68,
600
OR
I443
6000
41 S
unhi
ll C
ourt
Pem
bury
Kent
TN2
4NT
F1
74.1
1£
74.1
1£
£105
,000
£68,
600
OR
I443
7000
42 S
unhi
ll C
ourt
Pem
bury
Kent
TN2
4NT
F1
74.1
1£
74.1
1£
£105
,000
£68,
600
OR
I443
8000
43 S
unhi
ll C
ourt
Pem
bury
Kent
TN2
4NT
F1
74.1
1£
74.1
1£
£105
,000
£68,
600
OR
I443
9000
44 S
unhi
ll C
ourt
Pem
bury
Kent
TN2
4NT
F1
88.0
7£
94.4
1£
£105
,000
£68,
600
OR
I444
0000
45 S
unhi
ll C
ourt
Pem
bury
Kent
TN2
4NT
F1
74.1
1£
74.1
1£
£105
,000
£68,
600
OR
I444
1000
46 S
unhi
ll C
ourt
Pem
bury
Kent
TN2
4NT
F1
74.1
1£
74.1
1£
£105
,000
£68,
600
OR
I444
2000
47 S
unhi
ll C
ourt
Pem
bury
Kent
TN2
4NT
F1
74.1
1£
74.1
1£
£105
,000
£68,
600
OR
I444
3000
48 S
unhi
ll C
ourt
Pem
bury
Kent
TN2
4NT
F1
74.1
1£
74.1
1£
£105
,000
£68,
600
OR
I444
4000
49 S
unhi
ll C
ourt
Pem
bury
Kent
TN2
4NT
F1
74.1
1£
74.1
1£
£105
,000
£68,
600
OR
I444
5000
5 Su
nhill
Cou
rtPe
mbu
ryKe
ntTN
2 4N
TF
164
.32
£
72
.98
£
£1
05,0
00£6
8,60
0O
RI4
4460
0050
Sun
hill
Cou
rtPe
mbu
ryKe
ntTN
2 4N
TF
174
.11
£
74
.11
£
£1
05,0
00£6
8,60
0O
RI4
4470
0051
Sun
hill
Cou
rtPe
mbu
ryKe
ntTN
2 4N
TF
187
.96
£
94
.41
£
£1
05,0
00£6
8,60
0O
RI4
4480
0052
Sun
hill
Cou
rtPe
mbu
ryKe
ntTN
2 4N
TF
174
.11
£
74
.11
£
£1
05,0
00£6
8,60
0O
RI4
4490
0053
Sun
hill
Cou
rtPe
mbu
ryKe
ntTN
2 4N
TF
187
.96
£
94
.41
£
£1
05,0
00£6
8,60
0O
RI4
4500
0054
Sun
hill
Cou
rtPe
mbu
ryKe
ntTN
2 4N
TF
174
.11
£
74
.11
£
£1
05,0
00£6
8,60
0O
RI4
4510
006
Sunh
ill C
ourt
Pem
bury
Kent
TN2
4NT
F1
74.1
1£
74.1
1£
£105
,000
£68,
600
OR
I445
2000
7 Su
nhill
Cou
rtPe
mbu
ryKe
ntTN
2 4N
TF
174
.11
£
74
.11
£
£1
05,0
00£6
8,60
0O
RI4
4530
008
Sunh
ill C
ourt
Pem
bury
Kent
TN2
4NT
F1
74.1
1£
74.1
1£
£105
,000
£68,
600
OR
I445
4000
9 Su
nhill
Cou
rtPe
mbu
ryKe
ntTN
2 4N
TF
190
.87
£
94
.41
£
£1
05,0
00£6
8,60
017
9015
000O
15 H
igh
Stre
etPe
mbu
ryKe
ntTN
2 4P
HH
414
3.24
£
14
8.99
£
£285
,000
£186
,780
1790
1700
0O17
Hig
h St
reet
Pem
bury
Kent
TN2
4PH
H4
143.
24£
148.
99£
£2
85,0
00£1
86,7
8017
9019
000O
19 H
igh
Stre
etPe
mbu
ryKe
ntTN
2 4P
HH
414
5.28
£
14
8.99
£
£285
,000
£186
,780
1790
2100
0O21
Hig
h St
reet
Pem
bury
Kent
TN2
4PH
H3
133.
99£
133.
99£
£2
40,0
00£1
57,2
90BG
2080
0016
7 Br
amle
y R
oad
Pole
gate
Suss
exBN
26 6
JSH
280
.31
£
80
.31
£
£1
65,0
00£1
08,1
30BG
2080
0017
8 Br
amle
y R
oad
Pole
gate
Suss
exBN
26 6
JSH
280
.31
£
80
.31
£
£1
65,0
00£1
08,1
30BH
2080
0018
9 Br
amle
y R
oad
Pole
gate
Suss
exBN
26 6
JSH
280
.31
£
80
.31
£
£1
65,0
00£1
08,1
30BI
2080
0019
11 B
ram
ley
Roa
dPo
lega
teSu
ssex
BN26
6JS
H2
78.9
3£
78.9
3£
£165
,000
£108
,130
MV-
STT
Soci
al
Ref
no.
Addr
ess
1Ad
dres
s 2
Addr
ess
3Po
st C
ode
Type
(H
/ F
/ S)
Bed
s (0
=Bed
sit)
Ren
t £pw
(5
2 w
eeks
)
Targ
et
Ren
t £pw
(5
2 w
eeks
)
Estim
ated
Va
cant
Po
sses
sion
Va
lue
Mar
ket
Valu
e Su
bjec
t to
Tena
ncie
sBI
2080
0020
12 B
ram
ley
Roa
dPo
lega
teSu
ssex
BN26
6JS
H2
80.2
1£
80.2
1£
£165
,000
£108
,130
9660
1000
0N10
Cou
rt La
nePr
esto
nKe
ntC
T3 1
DJ
H3
118.
21£
118.
21£
£1
85,0
00£1
18,3
7096
6012
000N
12 C
ourt
Lane
Pres
ton
Kent
CT3
1D
JH
311
8.21
£
11
8.21
£
£185
,000
£118
,370
9660
1300
0N13
Cou
rt La
nePr
esto
nKe
ntC
T3 1
DJ
H3
118.
21£
118.
21£
£1
85,0
00£1
18,3
7096
6014
000N
14 C
ourt
Lane
Pres
ton
Kent
CT3
1D
JH
311
8.21
£
11
8.21
£
£185
,000
£118
,370
5940
4000
0040
Chu
rch
Fiel
dSn
odla
ndKe
ntM
E6 5
FBF
176
.50
£
88
.50
£
£9
1,00
0£5
8,41
059
4042
0000
42 C
hurc
h Fi
eld
Snod
land
Kent
ME6
5FB
F1
88.5
0£
88.5
0£
£91,
000
£58,
410
5940
4400
0044
Chu
rch
Fiel
dSn
odla
ndKe
ntM
E6 5
FBF
176
.50
£
88
.50
£
£9
1,00
0£5
8,41
059
4046
0000
46 C
hurc
h Fi
eld
Snod
land
Kent
ME6
5FB
F1
70.9
3£
88.5
0£
£91,
000
£58,
410
5940
4800
0048
Chu
rch
Fiel
dSn
odla
ndKe
ntM
E6 5
FBH
410
1.88
£
12
9.26
£
£182
,500
£117
,150
5940
5000
0050
Chu
rch
Fiel
dSn
odla
ndKe
ntM
E6 5
FBH
410
0.33
£
12
9.26
£
£182
,500
£117
,150
5940
5200
0052
Chu
rch
Fiel
dSn
odla
ndKe
ntM
E6 5
FBH
395
.28
£
11
9.89
£
£167
,500
£107
,520
5940
5400
0054
Chu
rch
Fiel
dSn
odla
ndKe
ntM
E6 5
FBH
393
.66
£
11
9.89
£
£167
,500
£107
,520
5940
5600
0056
Chu
rch
Fiel
dSn
odla
ndKe
ntM
E6 5
FBH
395
.28
£
11
9.89
£
£167
,500
£107
,520
5940
5800
0058
Chu
rch
Fiel
dSn
odla
ndKe
ntM
E6 5
FBH
410
1.88
£
12
9.26
£
£182
,500
£117
,150
5940
6000
0060
Chu
rch
Fiel
dSn
odla
ndKe
ntM
E6 5
FBH
410
1.88
£
12
9.26
£
£182
,500
£117
,150
5940
6200
0062
Chu
rch
Fiel
dSn
odla
ndKe
ntM
E6 5
FBH
395
.28
£
11
9.89
£
£167
,500
£107
,520
5940
6400
0064
Chu
rch
Fiel
dSn
odla
ndKe
ntM
E6 5
FBH
395
.28
£
11
9.89
£
£167
,500
£107
,520
5940
6600
0066
Chu
rch
Fiel
dSn
odla
ndKe
ntM
E6 5
FBH
395
.28
£
11
9.89
£
£167
,500
£107
,520
5940
6800
0068
Chu
rch
Fiel
dSn
odla
ndKe
ntM
E6 5
FBH
395
.28
£
11
9.89
£
£167
,500
£107
,520
5940
7000
0070
Chu
rch
Fiel
dSn
odla
ndKe
ntM
E6 5
FBH
388
.80
£
11
9.89
£
£167
,500
£107
,520
5940
7200
0072
Chu
rch
Fiel
dSn
odla
ndKe
ntM
E6 5
FBH
395
.28
£
11
9.89
£
£167
,500
£107
,520
5940
7400
0074
Chu
rch
Fiel
dSn
odla
ndKe
ntM
E6 5
FBH
395
.28
£
11
9.89
£
£167
,500
£107
,520
5940
7600
0076
Chu
rch
Fiel
dSn
odla
ndKe
ntM
E6 5
FBH
292
.85
£
11
0.53
£
£137
,000
£87,
940
5940
7800
0078
Chu
rch
Fiel
dSn
odla
ndKe
ntM
E6 5
FBH
292
.85
£
11
0.53
£
£137
,000
£87,
940
5940
8000
0080
Chu
rch
Fiel
dSn
odla
ndKe
ntM
E6 5
FBH
395
.28
£
11
9.89
£
£167
,500
£107
,520
BE30
2700
053
Laira
ge C
otta
ges
Swin
gfie
ldKe
ntC
T15
7GY
H2
106.
37£
106.
37£
£1
65,0
00£1
05,5
70BE
3027
0006
4 La
irage
Cot
tage
sSw
ingf
ield
Kent
CT1
5 7G
YH
210
6.37
£
10
6.37
£
£165
,000
£105
,570
BD30
2700
042
Laira
ge C
otta
ges
Swin
gfie
ldKe
ntC
T15
7GY
H3
114.
23£
114.
23£
£1
95,0
00£1
24,7
70BC
3027
0001
1 La
irage
Clo
seSw
ingf
ield
Kent
CT1
5 7G
YB
210
6.37
£
10
6.37
£
£190
,000
£121
,570
BC30
2700
022
Laira
ge C
lose
Swin
gfie
ldKe
ntC
T15
7GY
B2
106.
37£
106.
37£
£1
90,0
00£1
21,5
70BD
3027
0003
1 La
irage
Cot
tage
sSw
ingf
ield
Kent
CT1
5 7G
YH
311
4.23
£
11
4.23
£
£195
,000
£124
,770
4760
0100
001
Fitz
gilb
ert H
ouse
Tonb
ridge
Kent
TN10
3TA
F2
106.
37£
106.
37£
£1
72,5
00£1
12,7
7047
6002
0000
2 Fi
tzgi
lber
t Hou
seTo
nbrid
geKe
ntTN
10 3
TAF
210
6.37
£
10
6.37
£
£172
,500
£112
,770
MV-
STT
Soci
al
Ref
no.
Addr
ess
1Ad
dres
s 2
Addr
ess
3Po
st C
ode
Type
(H
/ F
/ S)
Bed
s (0
=Bed
sit)
Ren
t £pw
(5
2 w
eeks
)
Targ
et
Ren
t £pw
(5
2 w
eeks
)
Estim
ated
Va
cant
Po
sses
sion
Va
lue
Mar
ket
Valu
e Su
bjec
t to
Tena
ncie
s47
6003
0000
3 Fi
tzgi
lber
t Hou
seTo
nbrid
geKe
ntTN
10 3
TAF
210
4.35
£
10
7.27
£
£172
,500
£112
,770
4760
0400
004
Fitz
gilb
ert H
ouse
Tonb
ridge
Kent
TN10
3TA
F2
107.
27£
107.
27£
£1
72,5
00£1
12,7
70O
RI4
5050
001
Nel
lingt
on C
ourt
Tunb
ridge
Wel
lsKe
ntTN
4 8S
ZF
172
.98
£
72
.98
£
£1
05,0
00£6
8,60
0O
RI4
5060
0010
Nel
lingt
on C
ourt
Tunb
ridge
Wel
lsKe
ntTN
4 8S
ZF
172
.98
£
72
.98
£
£1
05,0
00£6
8,60
0O
RI4
5070
0011
Nel
lingt
on C
ourt
Tunb
ridge
Wel
lsKe
ntTN
4 8S
ZF
172
.98
£
72
.98
£
£1
05,0
00£6
8,60
0O
RI4
5080
0012
Nel
lingt
on C
ourt
Tunb
ridge
Wel
lsKe
ntTN
4 8S
ZF
172
.98
£
72
.98
£
£1
05,0
00£6
8,60
0O
RI4
5090
0013
Nel
lingt
on C
ourt
Tunb
ridge
Wel
lsKe
ntTN
4 8S
ZF
172
.98
£
72
.98
£
£1
05,0
00£6
8,60
0O
RI4
5100
0014
Nel
lingt
on C
ourt
Tunb
ridge
Wel
lsKe
ntTN
4 8S
ZF
172
.98
£
72
.98
£
£1
05,0
00£6
8,60
0O
RI4
5110
0015
Nel
lingt
on C
ourt
Tunb
ridge
Wel
lsKe
ntTN
4 8S
ZF
172
.98
£
72
.98
£
£1
05,0
00£6
8,60
0O
RI4
5120
0016
Nel
lingt
on C
ourt
Tunb
ridge
Wel
lsKe
ntTN
4 8S
ZF
172
.98
£
72
.98
£
£1
05,0
00£6
8,60
0O
RI4
5130
0017
Nel
lingt
on C
ourt
Tunb
ridge
Wel
lsKe
ntTN
4 8S
ZF
394
.53
£
94
.53
£
£1
50,0
00£9
8,00
0O
RI4
5140
002
Nel
lingt
on C
ourt
Tunb
ridge
Wel
lsKe
ntTN
4 8S
ZF
172
.98
£
72
.98
£
£1
05,0
00£6
8,60
0O
RI4
5150
003
Nel
lingt
on C
ourt
Tunb
ridge
Wel
lsKe
ntTN
4 8S
ZF
172
.98
£
72
.98
£
£1
05,0
00£6
8,60
0O
RI4
5160
004
Nel
lingt
on C
ourt
Tunb
ridge
Wel
lsKe
ntTN
4 8S
ZF
172
.98
£
72
.98
£
£1
05,0
00£6
8,60
0O
RI4
5170
005
Nel
lingt
on C
ourt
Tunb
ridge
Wel
lsKe
ntTN
4 8S
ZF
172
.98
£
72
.98
£
£1
05,0
00£6
8,60
0O
RI4
5180
006
Nel
lingt
on C
ourt
Tunb
ridge
Wel
lsKe
ntTN
4 8S
ZF
172
.98
£
72
.98
£
£1
05,0
00£6
8,60
0O
RI4
5190
007
Nel
lingt
on C
ourt
Tunb
ridge
Wel
lsKe
ntTN
4 8S
ZF
172
.78
£
72
.98
£
£1
05,0
00£6
8,60
0O
RI4
5200
008
Nel
lingt
on C
ourt
Tunb
ridge
Wel
lsKe
ntTN
4 8S
ZF
172
.98
£
72
.98
£
£1
05,0
00£6
8,60
0O
RI4
5210
009
Nel
lingt
on C
ourt
Tunb
ridge
Wel
lsKe
ntTN
4 8S
ZF
172
.98
£
72
.98
£
£1
05,0
00£6
8,60
0O
RI4
5290
001
Penn
ingt
on M
anor
Tunb
ridge
Wel
lsKe
ntTN
4 0S
PF
174
.11
£
74
.11
£
£1
05,0
00£6
8,60
0O
RI4
5300
0010
Pen
ning
ton
Man
orTu
nbrid
ge W
ells
Kent
TN4
0SP
F1
71.3
0£
71.3
0£
£105
,000
£68,
600
OR
I453
1000
11 P
enni
ngto
n M
anor
Tunb
ridge
Wel
lsKe
ntTN
4 0S
PF
174
.11
£
74
.11
£
£1
05,0
00£6
8,60
0O
RI4
5320
0012
Pen
ning
ton
Man
orTu
nbrid
ge W
ells
Kent
TN4
0SP
F1
74.1
1£
74.1
1£
£105
,000
£68,
600
OR
I453
3000
13 P
enni
ngto
n M
anor
Tunb
ridge
Wel
lsKe
ntTN
4 0S
PF
171
.30
£
71
.30
£
£1
05,0
00£6
8,60
0O
RI4
5340
0014
Pen
ning
ton
Man
orTu
nbrid
ge W
ells
Kent
TN4
0SP
F1
71.3
0£
71.3
0£
£105
,000
£68,
600
OR
I453
6000
16 P
enni
ngto
n M
anor
Tunb
ridge
Wel
lsKe
ntTN
4 0S
PF
171
.30
£
71
.30
£
£1
05,0
00£6
8,60
0O
RI4
5370
0017
Pen
ning
ton
Man
orTu
nbrid
ge W
ells
Kent
TN4
0SP
F1
74.8
8£
85.3
8£
£105
,000
£68,
600
OR
I453
8000
18 P
enni
ngto
n M
anor
Tunb
ridge
Wel
lsKe
ntTN
4 0S
PF
171
.30
£
71
.30
£
£1
05,0
00£6
8,60
0O
RI4
5390
0019
Pen
ning
ton
Man
orTu
nbrid
ge W
ells
Kent
TN4
0SP
F1
71.3
0£
71.3
0£
£105
,000
£68,
600
OR
I454
0000
2 Pe
nnin
gton
Man
orTu
nbrid
ge W
ells
Kent
TN4
0SP
F1
85.3
8£
85.3
8£
£105
,000
£68,
600
OR
I454
1000
20 P
enni
ngto
n M
anor
Tunb
ridge
Wel
lsKe
ntTN
4 0S
PF
171
.30
£
71
.30
£
£1
05,0
00£6
8,60
0O
RI4
5420
0021
Pen
ning
ton
Man
orTu
nbrid
ge W
ells
Kent
TN4
0SP
F1
91.6
0£
91.6
0£
£105
,000
£68,
600
OR
I454
3000
22 P
enni
ngto
n M
anor
Tunb
ridge
Wel
lsKe
ntTN
4 0S
PF
172
.98
£
72
.98
£
£1
05,0
00£6
8,60
0O
RI4
5440
0023
Pen
ning
ton
Man
orTu
nbrid
ge W
ells
Kent
TN4
0SP
F1
71.3
0£
71.3
0£
£105
,000
£68,
600
MV-
STT
Soci
al
Ref
no.
Addr
ess
1Ad
dres
s 2
Addr
ess
3Po
st C
ode
Type
(H
/ F
/ S)
Bed
s (0
=Bed
sit)
Ren
t £pw
(5
2 w
eeks
)
Targ
et
Ren
t £pw
(5
2 w
eeks
)
Estim
ated
Va
cant
Po
sses
sion
Va
lue
Mar
ket
Valu
e Su
bjec
t to
Tena
ncie
sO
RI4
5450
0024
Pen
ning
ton
Man
orTu
nbrid
ge W
ells
Kent
TN4
0SP
F1
71.3
0£
71.3
0£
£105
,000
£68,
600
OR
I454
6000
25 P
enni
ngto
n M
anor
Tunb
ridge
Wel
lsKe
ntTN
4 0S
PF
171
.30
£
71
.30
£
£1
05,0
00£6
8,60
0O
RI4
5470
0026
Pen
ning
ton
Man
orTu
nbrid
ge W
ells
Kent
TN4
0SP
F1
71.3
0£
71.3
0£
£105
,000
£68,
600
OR
I454
8000
27 P
enni
ngto
n M
anor
Tunb
ridge
Wel
lsKe
ntTN
4 0S
PF
171
.30
£
71
.30
£
£1
05,0
00£6
8,60
0O
RI4
5490
0028
Pen
ning
ton
Man
orTu
nbrid
ge W
ells
Kent
TN4
0SP
F1
71.3
0£
71.3
0£
£105
,000
£68,
600
OR
I455
0000
29 P
enni
ngto
n M
anor
Tunb
ridge
Wel
lsKe
ntTN
4 0S
PF
174
.88
£
85
.38
£
£1
05,0
00£6
8,60
0O
RI4
5510
003
Penn
ingt
on M
anor
Tunb
ridge
Wel
lsKe
ntTN
4 0S
PF
277
.83
£
77
.83
£
£1
35,0
00£8
8,20
0O
RI4
5520
0030
Pen
ning
ton
Man
orTu
nbrid
ge W
ells
Kent
TN4
0SP
F1
71.3
0£
71.3
0£
£105
,000
£68,
600
OR
I455
3000
31 P
enni
ngto
n M
anor
Tunb
ridge
Wel
lsKe
ntTN
4 0S
PF
174
.11
£
74
.11
£
£1
05,0
00£6
8,60
0O
RI4
5540
004
Penn
ingt
on M
anor
Tunb
ridge
Wel
lsKe
ntTN
4 0S
PF
174
.11
£
74
.11
£
£1
05,0
00£6
8,60
0O
RI4
5550
005
Penn
ingt
on M
anor
Tunb
ridge
Wel
lsKe
ntTN
4 0S
PF
171
.30
£
71
.30
£
£1
05,0
00£6
8,60
0O
RI4
5560
006
Penn
ingt
on M
anor
Tunb
ridge
Wel
lsKe
ntTN
4 0S
PF
171
.30
£
71
.30
£
£1
05,0
00£6
8,60
0O
RI4
5570
007
Penn
ingt
on M
anor
Tunb
ridge
Wel
lsKe
ntTN
4 0S
PF
171
.30
£
71
.30
£
£1
05,0
00£6
8,60
0O
RI4
5580
008
Penn
ingt
on M
anor
Tunb
ridge
Wel
lsKe
ntTN
4 0S
PF
171
.30
£
71
.30
£
£1
05,0
00£6
8,60
0O
RI4
5590
009
Penn
ingt
on M
anor
Tunb
ridge
Wel
lsKe
ntTN
4 0S
PF
171
.30
£
71
.30
£
£1
05,0
00£6
8,60
0O
RI5
4720
001
Furn
ival
Cou
rtTu
nbrid
ge W
ells
Kent
TN2
5PF
F1
75.8
0£
75.8
0£
£100
,000
£65,
330
OR
I547
3000
10 F
urni
val C
ourt
Tunb
ridge
Wel
lsKe
ntTN
2 5P
FF
175
.80
£
75
.80
£
£1
00,0
00£6
5,33
0O
RI5
4740
0011
Fur
niva
l Cou
rtTu
nbrid
ge W
ells
Kent
TN2
5PF
F1
74.6
9£
74.6
9£
£100
,000
£65,
330
OR
I547
5000
12 F
urni
val C
ourt
Tunb
ridge
Wel
lsKe
ntTN
2 5P
FF
175
.80
£
75
.80
£
£1
00,0
00£6
5,33
0O
RI5
4760
0013
Fur
niva
l Cou
rtTu
nbrid
ge W
ells
Kent
TN2
5PF
F1
75.8
0£
75.8
0£
£100
,000
£65,
330
OR
I547
7000
14 F
urni
val C
ourt
Tunb
ridge
Wel
lsKe
ntTN
2 5P
FF
175
.80
£
75
.80
£
£1
00,0
00£6
5,33
0O
RI5
4780
0015
Fur
niva
l Cou
rtTu
nbrid
ge W
ells
Kent
TN2
5PF
F1
75.8
0£
75.8
0£
£100
,000
£65,
330
OR
I547
9000
16 F
urni
val C
ourt
Tunb
ridge
Wel
lsKe
ntTN
2 5P
FF
199
.50
£
99
.50
£
£1
00,0
00£6
5,33
0O
RI5
4800
0017
Fur
niva
l Cou
rtTu
nbrid
ge W
ells
Kent
TN2
5PF
F1
75.8
0£
75.8
0£
£100
,000
£65,
330
OR
I548
1000
18 F
urni
val C
ourt
Tunb
ridge
Wel
lsKe
ntTN
2 5P
FF
192
.59
£
99
.50
£
£1
00,0
00£6
5,33
0O
RI5
4820
0019
Fur
niva
l Cou
rtTu
nbrid
ge W
ells
Kent
TN2
5PF
F1
75.8
0£
75.8
0£
£100
,000
£65,
330
OR
I548
3000
2 Fu
rniv
al C
ourt
Tunb
ridge
Wel
lsKe
ntTN
2 5P
FF
175
.80
£
75
.80
£
£1
00,0
00£6
5,33
0O
RI5
4840
0020
Fur
niva
l Cou
rtTu
nbrid
ge W
ells
Kent
TN2
5PF
F1
75.8
0£
75.8
0£
£100
,000
£65,
330
OR
I548
5000
21 F
urni
val C
ourt
Tunb
ridge
Wel
lsKe
ntTN
2 5P
FF
175
.80
£
75
.80
£
£1
00,0
00£6
5,33
0O
RI5
4860
0022
Fur
niva
l Cou
rtTu
nbrid
ge W
ells
Kent
TN2
5PF
F1
75.8
0£
75.8
0£
£100
,000
£65,
330
OR
I548
7000
23 F
urni
val C
ourt
Tunb
ridge
Wel
lsKe
ntTN
2 5P
FF
175
.80
£
75
.80
£
£1
00,0
00£6
5,33
0O
RI5
4880
0024
Fur
niva
l Cou
rtTu
nbrid
ge W
ells
Kent
TN2
5PF
F1
75.8
0£
75.8
0£
£100
,000
£65,
330
OR
I548
9000
25 F
urni
val C
ourt
Tunb
ridge
Wel
lsKe
ntTN
2 5P
FF
175
.80
£
75
.80
£
£1
00,0
00£6
5,33
0O
RI5
4900
0026
Fur
niva
l Cou
rtTu
nbrid
ge W
ells
Kent
TN2
5PF
F2
82.3
5£
82.3
5£
£125
,000
£81,
670
MV-
STT
Soci
al
Ref
no.
Addr
ess
1Ad
dres
s 2
Addr
ess
3Po
st C
ode
Type
(H
/ F
/ S)
Bed
s (0
=Bed
sit)
Ren
t £pw
(5
2 w
eeks
)
Targ
et
Ren
t £pw
(5
2 w
eeks
)
Estim
ated
Va
cant
Po
sses
sion
Va
lue
Mar
ket
Valu
e Su
bjec
t to
Tena
ncie
sO
RI5
4910
003
Furn
ival
Cou
rtTu
nbrid
ge W
ells
Kent
TN2
5PF
F1
75.8
0£
75.8
0£
£100
,000
£65,
330
OR
I549
2000
4 Fu
rniv
al C
ourt
Tunb
ridge
Wel
lsKe
ntTN
2 5P
FF
175
.80
£
75
.80
£
£1
00,0
00£6
5,33
0O
RI5
4930
005
Furn
ival
Cou
rtTu
nbrid
ge W
ells
Kent
TN2
5PF
F1
75.8
0£
75.8
0£
£100
,000
£65,
330
OR
I549
4000
6 Fu
rniv
al C
ourt
Tunb
ridge
Wel
lsKe
ntTN
2 5P
FF
175
.80
£
75
.80
£
£1
00,0
00£6
5,33
0O
RI5
4950
007
Furn
ival
Cou
rtTu
nbrid
ge W
ells
Kent
TN2
5PF
F1
75.8
0£
75.8
0£
£100
,000
£65,
330
OR
I549
6000
8 Fu
rniv
al C
ourt
Tunb
ridge
Wel
lsKe
ntTN
2 5P
FF
174
.69
£
74
.69
£
£1
00,0
00£6
5,33
0O
RI5
4970
009
Furn
ival
Cou
rtTu
nbrid
ge W
ells
Kent
TN2
5PF
F1
75.8
0£
75.8
0£
£100
,000
£65,
330
2510
0100
00Fl
at 1
Gro
sven
or P
lace
Tunb
ridge
Wel
lsKe
ntTN
1 2E
HF
194
.28
£
94
.28
£
£1
55,0
00£1
01,5
8025
1002
0000
Flat
2 G
rosv
enor
Pla
ceTu
nbrid
ge W
ells
Kent
TN1
2EH
F1
94.2
8£
94.2
8£
£155
,000
£101
,580
2510
0300
00Fl
at 3
Gro
sven
or P
lace
Tunb
ridge
Wel
lsKe
ntTN
1 2E
HF
194
.28
£
94
.28
£
£1
55,0
00£1
01,5
8025
1004
0000
Flat
4 G
rosv
enor
Pla
ceTu
nbrid
ge W
ells
Kent
TN1
2EH
F1
94.2
8£
94.2
8£
£155
,000
£101
,580
2510
0500
00Fl
at 5
Gro
sven
or P
lace
Tunb
ridge
Wel
lsKe
ntTN
1 2E
HF
187
.03
£
87
.03
£
£1
55,0
00£1
01,5
8025
1006
0000
Flat
6 G
rosv
enor
Pla
ceTu
nbrid
ge W
ells
Kent
TN1
2EH
F1
87.0
3£
87.0
3£
£155
,000
£101
,580
2510
0700
00Fl
at 7
Gro
sven
or P
lace
Tunb
ridge
Wel
lsKe
ntTN
1 2E
HF
210
9.49
£
10
9.49
£
£175
,000
£114
,690
2510
0800
00Fl
at 8
Gro
sven
or P
lace
Tunb
ridge
Wel
lsKe
ntTN
1 2E
HF
210
9.49
£
10
9.49
£
£175
,000
£114
,690
2510
0900
00Fl
at 9
Gro
sven
or P
lace
Tunb
ridge
Wel
lsKe
ntTN
1 2E
HF
194
.28
£
94
.28
£
£1
55,0
00£1
01,5
8025
1010
0000
Flat
10
Gro
sven
or P
lace
Tunb
ridge
Wel
lsKe
ntTN
1 2E
HF
194
.28
£
94
.28
£
£1
55,0
00£1
01,5
8025
1011
0000
Flat
11
Gro
sven
or P
lace
Tunb
ridge
Wel
lsKe
ntTN
1 2E
HF
211
0.58
£
11
0.58
£
£175
,000
£114
,690
1940
0100
0NFl
at 1
, 1 M
olyn
eux
Park
Roa
dTu
nbrid
ge W
ells
Kent
TN4
8DG
F1
99.4
5£
99.4
5£
£192
,500
£126
,160
1940
0200
0NFl
at 2
, 1 M
olyn
eux
Park
Roa
dTu
nbrid
ge W
ells
Kent
TN4
8DG
F2
124.
50£
124.
50£
£2
27,5
00£1
49,0
9019
4003
000N
Flat
3, 1
Mol
yneu
x Pa
rk R
oad
Tunb
ridge
Wel
lsKe
ntTN
4 8D
GF
199
.45
£
99
.45
£
£1
92,5
00£1
26,1
6019
4004
000N
Flat
4, 1
Mol
yneu
x Pa
rk R
oad
Tunb
ridge
Wel
lsKe
ntTN
4 8D
GF
110
9.76
£
10
9.76
£
£192
,500
£126
,160
1940
0500
0NFl
at 5
, 1 M
olyn
eux
Park
Roa
dTu
nbrid
ge W
ells
Kent
TN4
8DG
F2
124.
50£
124.
50£
£2
27,5
00£1
49,0
9019
8001
000N
Flat
1, 3
Mol
yneu
x Pa
rk R
oad
Tunb
ridge
Wel
lsKe
ntTN
4 8D
GF
110
9.76
£
10
9.76
£
£192
,500
£126
,160
1980
0200
0NFl
at 2
, 3 M
olyn
eux
Park
Roa
dTu
nbrid
ge W
ells
Kent
TN4
8DG
F1
99.4
5£
99.4
5£
£192
,500
£126
,160
1980
0300
0NFl
at 3
, 3 M
olyn
eux
Park
Roa
dTu
nbrid
ge W
ells
Kent
TN4
8DG
F1
99.4
5£
99.4
5£
£192
,500
£126
,160
1980
0400
0NFl
at 4
, 3 M
olyn
eux
Park
Roa
dTu
nbrid
ge W
ells
Kent
TN4
8DG
F1
109.
76£
109.
76£
£1
92,5
00£1
26,1
6019
8005
000N
Flat
5, 3
Mol
yneu
x Pa
rk R
oad
Tunb
ridge
Wel
lsKe
ntTN
4 8D
GF
110
9.76
£
10
9.76
£
£192
,500
£126
,160
BC20
8000
011
Labu
rnum
Cou
rtTu
nbrid
ge W
ells
Kent
TN2
3AP
F1
69.1
2£
69.1
2£
£125
,000
£81,
920
BC20
8000
022
Labu
rnum
Cou
rtTu
nbrid
ge W
ells
Kent
TN2
3AP
F1
69.1
2£
69.1
2£
£125
,000
£81,
920
BC20
8000
066
Labu
rnum
Cou
rtTu
nbrid
ge W
ells
Kent
TN2
3AP
F1
69.1
2£
69.1
2£
£125
,000
£81,
920
BC20
8000
077
Labu
rnum
Cou
rtTu
nbrid
ge W
ells
Kent
TN2
3AP
F1
69.1
2£
69.1
2£
£125
,000
£81,
920
BC20
8000
088
Labu
rnum
Cou
rtTu
nbrid
ge W
ells
Kent
TN2
3AP
F1
80.3
1£
80.3
1£
£125
,000
£81,
920
BC20
8000
099
Labu
rnum
Cou
rtTu
nbrid
ge W
ells
Kent
TN2
3AP
F1
69.1
2£
69.1
2£
£125
,000
£81,
920
MV-
STT
Soci
al
Ref
no.
Addr
ess
1Ad
dres
s 2
Addr
ess
3Po
st C
ode
Type
(H
/ F
/ S)
Bed
s (0
=Bed
sit)
Ren
t £pw
(5
2 w
eeks
)
Targ
et
Ren
t £pw
(5
2 w
eeks
)
Estim
ated
Va
cant
Po
sses
sion
Va
lue
Mar
ket
Valu
e Su
bjec
t to
Tena
ncie
sBC
2080
0010
10 L
abur
num
Cou
rtTu
nbrid
ge W
ells
Kent
TN2
3AP
F1
69.1
2£
69.1
2£
£125
,000
£81,
920
BC20
8000
1111
Lab
urnu
m C
ourt
Tunb
ridge
Wel
lsKe
ntTN
2 3A
PF
169
.12
£
69
.12
£
£1
25,0
00£8
1,92
0BC
2080
0012
12 L
abur
num
Cou
rtTu
nbrid
ge W
ells
Kent
TN2
3AP
F1
69.1
2£
69.1
2£
£125
,000
£81,
920
2430
0A00
00Fl
at A
Gro
ve H
ill H
ouse
Tunb
ridge
Wel
lsKe
ntTN
1 1S
AF
197
.04
£
97
.04
£
£1
97,5
00£1
29,4
3024
300B
0000
Flat
B G
rove
Hill
Hou
seTu
nbrid
ge W
ells
Kent
TN1
1SA
F2
107.
99£
107.
99£
£2
50,0
00£1
63,8
4024
300C
0000
Flat
C G
rove
Hill
Hou
seTu
nbrid
ge W
ells
Kent
TN1
1SA
F1
97.0
4£
97.0
4£
£197
,500
£129
,430
2430
0D00
00Fl
at D
Gro
ve H
ill H
ouse
Tunb
ridge
Wel
lsKe
ntTN
1 1S
AF
197
.04
£
97
.04
£
£1
97,5
00£1
29,4
3024
300E
0000
Flat
E G
rove
Hill
Hou
seTu
nbrid
ge W
ells
Kent
TN1
1SA
F1
97.9
7£
97.9
7£
£197
,500
£129
,430
2430
0F00
00Fl
at F
Gro
ve H
ill H
ouse
Tunb
ridge
Wel
lsKe
ntTN
1 1S
AF
197
.04
£
97
.04
£
£1
97,5
00£1
29,4
3024
300G
0000
Flat
G G
rove
Hill
Hou
seTu
nbrid
ge W
ells
Kent
TN1
1SA
F2
107.
99£
107.
99£
£2
50,0
00£1
63,8
4024
300H
0000
Flat
H G
rove
Hill
Hou
seTu
nbrid
ge W
ells
Kent
TN1
1SA
F1
95.2
2£
95.2
2£
£197
,500
£129
,430
9630
0100
0N1
Foxb
orou
gh C
lose
Woo
dnes
boro
ugh
Kent
CT1
3 0N
PH
412
8.43
£
12
8.43
£
£220
,000
£140
,760
9630
0200
0N2
Foxb
orou
gh C
lose
Woo
dnes
boro
ugh
Kent
CT1
3 0N
PH
310
9.53
£
10
9.53
£
£185
,000
£118
,370
9630
0300
0N3
Foxb
orou
gh C
lose
Woo
dnes
boro
ugh
Kent
CT1
3 0N
PH
310
9.53
£
10
9.53
£
£185
,000
£118
,370
9630
0400
0N4
Foxb
orou
gh C
lose
Woo
dnes
boro
ugh
Kent
CT1
3 0N
PH
310
9.53
£
10
9.53
£
£185
,000
£118
,370
9630
0500
0N5
Foxb
orou
gh C
lose
Woo
dnes
boro
ugh
Kent
CT1
3 0N
PH
310
9.53
£
10
9.53
£
£185
,000
£118
,370
9630
0600
0N6
Foxb
orou
gh C
lose
Woo
dnes
boro
ugh
Kent
CT1
3 0N
PH
310
5.79
£
10
5.79
£
£200
,000
£127
,960
9630
0700
0N7
Foxb
orou
gh C
lose
Woo
dnes
boro
ugh
Kent
CT1
3 0N
PH
412
8.43
£
12
8.43
£
£220
,000
£140
,760
9630
0800
0N8
Foxb
orou
gh C
lose
Woo
dnes
boro
ugh
Kent
CT1
3 0N
PH
310
9.53
£
10
9.53
£
£185
,000
£118
,370
9630
0900
0N9
Foxb
orou
gh C
lose
Woo
dnes
boro
ugh
Kent
CT1
3 0N
PH
310
9.53
£
10
9.53
£
£185
,000
£118
,370
9630
1000
0N10
Fox
boro
ugh
Clo
seW
oodn
esbo
roug
hKe
ntC
T13
0NP
H1
79.6
9£
79.6
9£
£132
,500
£84,
780
9630
1100
0N11
Fox
boro
ugh
Clo
seW
oodn
esbo
roug
hKe
ntC
T13
0NP
H1
79.6
9£
79.6
9£
£132
,500
£84,
780
9630
1200
0N12
Fox
boro
ugh
Clo
seW
oodn
esbo
roug
hKe
ntC
T13
0NP
H2
103.
14£
103.
14£
£1
60,0
00£1
02,3
7096
3013
000N
13 F
oxbo
roug
h C
lose
Woo
dnes
boro
ugh
Kent
CT1
3 0N
PH
210
3.14
£
10
3.14
£
£160
,000
£102
,370
9630
1400
0N14
Fox
boro
ugh
Clo
seW
oodn
esbo
roug
hKe
ntC
T13
0NP
H4
128.
43£
128.
43£
£1
95,0
00£1
24,7
7096
3015
000N
15 F
oxbo
roug
h C
lose
Woo
dnes
boro
ugh
Kent
CT1
3 0N
PH
413
1.12
£
13
1.12
£
£195
,000
£124
,770
MV-
STT
Soci
al
Ref
no.
Addr
ess
1Ad
dres
s 2
Addr
ess
3Po
st C
ode
Type
(H
/ F
/ S)
Bed
s (0
=Bed
sit)
Ren
t £pw
(5
2 w
eeks
)
Targ
et R
ent
£pw
(52
wee
ks)
Tena
ncy
(FR
/ A
/ M
/ SO
)
Vaca
nt
Poss
essi
on
Valu
eEU
V-SH
2330
0100
001
The
Aire
ysW
oodn
esbo
roug
hSa
ndw
ich
CT1
3 0Q
DH
186
.78
£
86
.78
£
A£1
32,5
00£5
1,53
023
3002
0000
2 Th
e Ai
reys
Woo
dnes
boro
ugh
Sand
wic
hC
T13
0QD
H1
81.8
7£
86.7
8£
A
£132
,500
£48,
610
2330
0300
003
The
Aire
ysW
oodn
esbo
roug
hSa
ndw
ich
CT1
3 0Q
DH
210
6.24
£
106.
24£
A£1
60,0
00£6
3,08
023
3004
0000
4 Th
e Ai
reys
Woo
dnes
boro
ugh
Sand
wic
hC
T13
0QD
H2
106.
24£
10
6.24
£
A
£160
,000
£63,
080
2330
0500
005
The
Aire
ysW
oodn
esbo
roug
hSa
ndw
ich
CT1
3 0Q
DH
210
6.24
£
106.
24£
A£1
60,0
00£6
3,08
0
EUV-
SH S
ocia
l
Ref
no.
Addr
ess
1Ad
dres
s 2
Addr
ess
3Po
st C
ode
Type
(H
/ F
/ S)
Bed
s (0
=Bed
sit)
Ren
t £pw
(5
2 w
eeks
)
Tar
get
Ren
t £pw
(5
2 w
eeks
)
Estim
ated
Va
cant
Po
sses
sion
Va
lue
Mar
ket
Valu
e Su
bjec
t to
Tena
ncie
s
3180
0800
00Ap
artm
ent 8
Bria
r Hou
seM
aids
tone
Kent
ME1
4 2U
SF
110
4.41
£
104.
41£
£1
01,5
00£9
0,94
033
1019
0000
Flat
19
Man
nette
Hou
seM
aids
tone
Kent
ME4
6D
QF
211
6.47
£
116.
47£
£1
11,5
00£1
01,4
50BC
3019
0001
1 Lo
tt C
lose
Tunb
ridge
Wel
lsKe
ntTN
4 9B
FF
110
8.16
£
108.
16£
£1
45,0
00£9
4,21
0BC
3019
0002
2 Lo
tt C
lose
Tunb
ridge
Wel
lsKe
ntTN
4 9B
FF
110
8.16
£
108.
16£
£1
45,0
00£9
4,21
0BC
3019
0003
3 Lo
tt C
lose
Tunb
ridge
Wel
lsKe
ntTN
4 9B
FF
110
8.16
£
108.
16£
£1
45,0
00£9
4,21
0BC
3019
0004
4 Lo
tt C
lose
Tunb
ridge
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RTH
B
TOWN & COUNTRY HOUSING GROUP
BOND ISSUE 2014
SUMMARY VALUATION SCHEDULE Appendix 2
Scheme Units VP MV-STT EUV-SH
All Saints Avenue, Margate 7 £1,295,000 £845,000 £565,000Bramley Road, Polegate 5 £825,000 £540,500 £243,000Briar House, Maidstone 8 £872,000 £570,000 £470,500Briar House, Maidstone 1 £101,500 £91,000 £62,000Callisto Court, Maidstone 11 £1,389,500 £908,500 £618,500Chequer Tree Close, Hersden 11 £2,025,000 £1,295,500 £889,000Church Field, Snodland 21 £3,210,500 £2,061,000 £1,267,500Church Field, Snodland RTHB 20 £3,085,500 £1,850,500 £1,850,500Court Lane, Preston 4 £740,000 £473,500 £296,500Dalby Square, Margate 20 £2,880,000 £1,880,000 £1,405,000Field Court, Gravesend 4 £691,000 £442,500 £255,500Fitzgilbert House, Tonbridge 4 £690,000 £451,000 £275,500Foxborough Close, Woodnesborough 15 £2,725,000 £1,743,500 £1,031,500Furnival Court, Tunbridge Wells 26 £2,625,000 £1,715,000 £876,500Granville Street, Dover 6 £465,000 £297,500 £309,000Grosvenor Place, Tunbridge Wells 11 £1,765,000 £1,156,500 £650,000Grove Hill House, Tunbridge Wells 8 £1,685,000 £1,104,500 £485,000High Street, Pembury 4 £1,095,000 £717,500 £344,000Huntingdon Road, Coxheath 4 £860,000 £562,000 £315,500Jenkins Close, Gravesend 12 £1,404,000 £899,000 £730,000Laburnum Court, Tunbridge Wells 9 £1,125,000 £737,500 £385,000Laburnum Court, Tunbridge Wells 3 £375,000 £295,000 £201,500Lairage Close/Cottages, Swingfield 6 £1,100,000 £704,000 £410,000Lairage Close/Cottages, Swingfield 6 £1,100,000 £704,000 £410,000Lawrance Square, Gravesend 8 £1,513,000 £969,000 £592,500Lott Close, Tunbridge Wells 12 £2,360,000 £1,528,000 £1,043,000Lynley Close, Maidstone 10 £2,015,000 £1,317,500 £788,000Lynley Close, Maidstone RTHB 2 £245,000 £132,500 £132,500Manette House, Chatham 17 £1,791,000 £1,149,000 £976,500Manette House, Chatham 1 £111,500 £101,500 £69,000Molland Lane, Ash 6 £1,080,000 £691,000 £432,500Molland Lea, Ash 7 £1,155,000 £739,000 £421,000Molyneux Park Road, Tunbridge Wells 10 £1,995,000 £1,307,500 £660,000Nellington Court, Rusthall 17 £1,830,000 £1,195,500 £548,500Pennington Manor, Southborough 30 £3,180,000 £2,077,500 £957,500Rollercoaster House, Margate 14 £1,600,000 £1,044,500 £886,000School Road, Ash 20 £3,475,000 £2,223,500 £1,315,500Sherlock House, Maidstone 12 £1,493,000 £976,000 £806,500Sherlock House, Maidstone RTHB 12 £1,455,000 £837,000 £837,000Sunhill Court, Pembury 53 £5,565,000 £3,636,000 £1,755,500The Airey's, Woodnesborough 5 £745,000 - £289,500
456 £64,637,500 £41,266,000 £26,447,500
TCHG Capital plc Valuation for Secured Bonds - 2014
Page 1
Appendix 3
Molland Lane, Ash
School Road, Ash
TCHG Capital plc Valuation for Secured Bonds - 2014
Page 3
Huntingdon Road, Coxheath
Granville Street, Dover
TCHG Capital plc Valuation for Secured Bonds - 2014
Page 4
Field Court, Gravesend
Lawrance Square, Gravesend
TCHG Capital plc Valuation for Secured Bonds - 2014
Page 5
Jenkins Close, Gravesend
Chequer Tree Close, Hersden
TCHG Capital plc Valuation for Secured Bonds - 2014
Page 6
Briar House, Maidstone
Callisto Court Maidstone
TCHG Capital plc Valuation for Secured Bonds - 2014
Page 7
Lynley Close, Maidstone
Sherlock House, Maidstone
TCHG Capital plc Valuation for Secured Bonds - 2014
Page 8
All Saints Avenue, Margate
Dalby Square, Margate
TCHG Capital plc Valuation for Secured Bonds - 2014
Page 9
Rollercoaster House, Margate
High Street, Pembury
TCHG Capital plc Valuation for Secured Bonds - 2014
Page 10
Sunhill Court, Pembury
Bramley Road, Polegate
TCHG Capital plc Valuation for Secured Bonds - 2014
Page 11
Court Lane, Preston
Nellington Court, Rusthall
TCHG Capital plc Valuation for Secured Bonds - 2014
Page 12
Churchfields, Snodland
Pennington Manor, Southborough
TCHG Capital plc Valuation for Secured Bonds - 2014
Page 13
Lairage Close, Swingfield
Lairage Cottages, Swingfield
TCHG Capital plc Valuation for Secured Bonds - 2014
Page 14
Fitzgilbert House, Tonbridge
Lott Close, Tunbridge Wells
TCHG Capital plc Valuation for Secured Bonds - 2014
Page 15
Furnival Court, Tunbridge Wells
Grove Hill House, Tunbridge Wells
TCHG Capital plc Valuation for Secured Bonds - 2014
Page 16
Laburnum Court, Tunbridge Wells
Grosvenor Place, Tunbridge Wells
TCHG Capital plc Valuation for Secured Bonds - 2014
Page 17
Molyneux Park Road, Tunbridge Wells
Foxborough Close, Woodnesborough
a
1
BASES OF VALUE & GENERAL ASSUMPTIONS AND CONDITIONS 1. Basis of Valuation - definitions Depreciated Replacement Cost: The current cost of replacing an asset with its modern equivalent asset less deductions for physical deterioration and all relevant forms of obsolescence and optimisation. Existing Use Value: The estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and a willing seller in an arm’s length transaction after proper marketing and where the parties had acted knowledgeably, prudently and without compulsion, assuming that the buyer is granted vacant possession of all parts of the asset required by the business and disregarding potential alternative uses and any other characteristics of the asset that would cause its market value to differ from that needed to replace the remaining service potential at least cost. Existing Use Value is to be used only for valuing property that is owner occupied by a business, or other entity, for inclusion in financial statements.
Existing Use Value For Social Housing: The estimated amount for which a property should exchange on the valuation date between a willing buyer and a willing seller in an arm’s length transaction after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion - subject to the following special assumptions that the property will continue to be let by a body pursuant to delivery of a service for the existing use:
I. at the valuation date any regulatory body in applying its criteria for approval, would not unreasonably fetter the vendor’s ability to dispose of the property to organisations intending to manage their housing stock in accordance with that regulatory body’s requirements;
II. properties temporarily vacant pending re-letting would be valued, if there is a letting demand, on the basis that the prospective purchaser intends to re-let them, rather than with vacant possession; and
III. any subsequent sale would be subject to all of the above special assumptions. Fair Value: Valuations based on Fair Value will adopt one of two definitions – depending upon the purpose, namely: The IVS 2013 definition: The estimated price for the transfer of an asset or liability between identified knowledgeable and willing parties that reflects the respective interests of those parties, or The IFRS 13 definition: The price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants at the measurement date. Gross development value (GDV) - The aggregate Market Value of the proposed development assessed on the special assumption that the development is complete as at the date of valuation in the market conditions prevailing at that date. Investment value: Investment value is the value of an asset to the owner or prospective owner for individual investment or operational purposes. Market Rent: The estimated amount for which an interest in real property should be leased on the valuation date between a willing lessor and a willing lessee on appropriate lease terms in an arm’s length transaction, after proper marketing and where the parties had each acted knowledgably, prudently and without compulsion. Market Value: The estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and a willing seller in an arm’s length transaction, after proper marketing and where the parties had each acted knowledgably, prudently and without compulsion.
a
2
2. General assumptions and conditions applicable to all valuations Our Valuation will be carried out on the basis of the following general assumptions and conditions in relation to each Property that is the subject of our Report. If any of the following assumptions or conditions are not valid, this may be that it has a material impact on the figure(s) reported and in that event we reserve the right to revisit our calculations. 1. That the Property is not subject to any unusual or especially onerous restrictions, encumbrances or
outgoings contained in the Freehold Title. Should there be any mortgages or charges, we have assumed that the property would be sold free of them. We have not inspected the Title Deeds or Land Registry Certificate.
2. That we have been supplied with all information likely to have an effect on the value of the Property, and that the information supplied to us and summarised in this report is both complete and correct.
3. That the building(s) has/have been constructed and is/are used in accordance with all statutory and bye-law requirements, and that there are no breaches of planning control and any future construction or use will be lawful.
4. That the Property is not adversely affected, nor likely to become adversely affected, by any highway, town planning or other schemes or proposals, and that there are no matters adversely affecting value that might be revealed by a local search, replies to usual enquiries, or by any statutory notice (other than those points referred to above).
5. That the building(s) is/are structurally sound, and that there are no structural, latent or other material defects, including rot and inherently dangerous or unsuitable materials or techniques, whether in parts of the building(s) we have inspected or not, that would cause us to make allowance by way of capital repair (other than those points referred to above). Our inspection of the Property and our Report do not constitute a building survey or any warranty as to the state of repair of the Property.
6. That the Property is connected, or capable of being connected without undue expense, to the public services of gas, electricity, water, telephones and sewerage.
7. That in the construction or alteration of the building(s) no use was made of any deleterious or hazardous materials or techniques, such as high alumina cement, calcium chloride additives, woodwool slabs used as permanent shuttering and the like (other than those points referred to above). We have not carried out any investigations into these matters.
8. That the Property has not suffered any land contamination in the past, nor is it likely to become so contaminated in the foreseeable future. We have not carried out any soil tests or made any other investigations in this respect, and we cannot assess the likelihood of any such contamination.
9. In the case of a Property where we have been asked to value the site under the special assumption that the Property will be developed, there are no adverse site or soil conditions, that the Property is not adversely affected by the Town and Country Planning (Assessment of Environmental Effects) Regulations 1988, that the ground does not contain any archaeological remains, nor that there is any other matter that would cause us to make any allowance for exceptional delay or site or construction costs in our valuation.
10. In the case of a new property, the construction of which has not been completed, that the construction will be satisfactorily complete. Furthermore, for any newly constructed property, that the builder is a registered member of the NHBC or equivalent and has registered the subject property in accordance with the scheme concerned.
a
3
11. Where grants (from the private or public sector) have been given and/or pledged to purchase, build and/or refurbish the subject property, we have assumed that these grants append to title and/or would not have to be repaid by the purchaser.
12. That where the proposed security comprises any leasehold flats or maisonettes, that the costs of repairs and maintenance or the building and grounds are shared equitably between the flats or maisonettes for the block, that there are suitable mutually enforceable covenants between all leaseholders (who are assumed to be jointly responsible) and the freeholder.
13. We will not make any allowance for any Capital Gains Tax or other taxation liability that might arise upon a sale of the Property.
14. Our Valuation will be exclusive of VAT (if applicable).
15. No allowance will be made for any expenses of realisation.
16. Excluded from our Valuation will be any additional value attributable to goodwill, or to fixtures and fittings which are only of value in situ to the present occupier.
17. Energy Performance Certificates (EPCs) are required for the sale, letting, construction or alteration of all residential buildings, and from 1 October 2008 on non-domestic residential buildings over 538 sq ft (50 sq m) in England and Wales. EPCs are also required on all buildings in Scotland from 4 January 2009. The effect of EPCs on value appears to be limited. We will not consider the Property’s EPC rating(s) in forming our opinion of value. However, should EPCs become a significant consideration in the future then we reserve the right to revisit this.
18. The Property will be valued as a single lot and no allowance will be made, either positive or negative, should it be disposed of in smaller lot sizes.
19. In the case of a Property where there is a distressed loan we will not take account of any possible effect that the appointment of either an Administrative Receiver or a Law of Property Act Receiver might have on the perception of the Property in the market and its/their subsequent valuation, or the ability of such a Receiver to realise the value of the property(ies) in either of these scenarios.
20. No allowance will be been made for rights, obligations or liabilities arising under the Defective Premises Act 1972, and it will be assumed that all fixed plant and machinery and the installation thereof complies with the relevant UK and EEC legislation.
21. Our Valuation will be based on market evidence which has come into our possession from numerous sources, including other agents and valuers and from time to time this information is provided verbally. Some comes from databases such as the Land Registry or computer databases to which Savills subscribes. In all cases, other than where we have had a direct involvement with the transactions being used as comparables in our Report, we are unable to warrant that the information on which we have relied is correct.
a
4
3. General assumptions applicable to valuations of leasehold properties only
1 Where the Property comprises flats or maisonettes, unless instructed or otherwise aware to the contrary, we will assume that:
(a) The costs of repairs and maintenance or the building and grounds are shared equitably between
the flats and maisonettes. (b) There are suitable enforceable covenants between all leaseholders or through the landlord or
the owner. (c) There are no onerous liabilities outstanding. (d) There are no substantial defects or other matters requiring expenditure (in excess of the current
amount of assumed amount of service charge payable on an annual basis), expected to result in charges to the leaseholder, or owner of the Property, during the next five years, equivalent to 10% or more of the reported Market Value.
2 Where the dwelling is leasehold and it is not possible to inspect the lease or details have not been
provided to us, the following further assumptions will be made, unless instructed to the contrary:
(a) The unexpired term of the lease is 70 years, and no action has been taken by any eligible party with a view to acquiring the freehold or to extending the lease term.
(b) That there are no exceptionally onerous covenants upon the leaseholder. (c) The lease cannot be determined except on the grounds of a serious breach of covenants in the
existing lease agreement. (d) If there are separate freeholders, head and/or other sub-head leaseholders, the terms and
conditions of all the leases are in the same form and contain the same terms and conditions. (e) The lease terms are mutually enforceable against all parties concerned. (f) There are no breaches of covenants or disputes between the various interests concerned. (g) The leases of all the properties in the building/development are materially the same. (h) The ground rent stated or assumed is not subject to review and is payable throughout the
expired lease term. (i) In the case of blocks of flats or maisonettes of over six dwellings, the freeholder manages the
property directly or there is an appropriate management structure in place. (j) There is a dutyholder, as defined in the Control of Asbestos Regulations 2006, and there are in
place an asbestos register and affective management plan, which does not require any immediate expenditure, pose a significant risk to health or breach of the Health and Safety Executive (HSE) regulations.
(k) Where the Property forms part of a mixed residential or commercially used block or
development, there will be no significant changes in the existing pattern of use. (l) Where the Property forms part of a development containing separate blocks of dwellings, the
lease terms of the Property apply only to the block. There will be no requirement to contribute towards costs relating to the other parts of the development, other than in respect of common roads, paths, communal grounds and services.
a
5
(m) Where the Property forms part of a larger development, the ownership of which has since been divided, all necessary rights and reservations have been reserved.
(n) There are no unusual restrictions on assignment or sub-letting of the Property for residential
purposes. (o) There are no outstanding claims or litigation concerning the lease of the Property or any others
within the same development. (p) Where the Property benefits from additional facilities within a development, the lease makes
adequate provision for the lessee to continue to enjoy them with exceptional restriction, for the facilities to be maintained adequately, and that there are no charges over and above the service charge for such use and maintenance.
3 In respect of insurance the following assumptions will be made, unless instructed otherwise:
(a) The Property can be insured under all-risks cover for the current reinstatement cost and is
available on normal terms. (b) There are no outstanding claims or disputes. (c) Where individuals in a block makes separate insurance arrangements, the leases make
provision for mutual enforceability of insurance and repairing obligations (d) Any landlord responsible for insurance is required to rebuild the Property with the alterations that
may be necessary to comply with current Building Regulations and planning requirements.
Savills’ Housing Investment Consultancy Market Commentary May 2014 The Nationwide House Price Index May 2014 reported;
• Annual house price growth edges up in May • UK house prices increased by 0.7% in May and were 11.1% higher than May 2013 • First time buyers increasingly important in driving the recovery, Help to Buy playing a supporting
rather than a starring role
Headlines May-14 Apr-14
Monthly Index* 368.2 365.4
Monthly Change* 0.70% 1.20%
Annual Change 11.10% 10.90%
Average Price £186,512 £183,577
Seasonally Adjusted*
Commenting on the figures, Robert Gardner, Nationwide's Chief Economist, said: “First time buyers are playing an increasingly important role in the housing market recovery. First time buyers accounted for 48% of house purchase activity in March, a record high well above the long run average of 38%. Data from DCLG suggests that the Help to Buy scheme is providing support to first time buyers, who accounted for over 80% of Help to Buy loans to date. “However, the modest numbers involved so far suggest that Help to Buy is unlikely to be the main factor behind the recent pickup in the wider housing market. “Low mortgage rates and growing buyer confidence on the back of improving labour market conditions and the brighter economic outlook are probably playing a much greater role in stimulating buyer demand. “Moreover, the evidence suggests that higher priced areas have been seeing the largest percentage increases in house prices, especially in London and the South East Graph: Long Term House Price Trends
Source: Nationwide House Price Index May 2014
Savills Residential Property Focus Bulletin Q2 2014 reported the following; Executive Summary
• With wide swathes of the UK's housing market now returning to growth, average house prices rose 10.9% in the year to the end of April, according to the Nationwide. See pages 04/05
• The increase in demand from both buyers moving out of London and those who are already living in the local market has resulted in all prime regions recording positive annual house price growth for the first time since September 2010. See pages 06/07
• The English Housing Survey tells us that since 2001 levels of home ownership among the under
• 35s have fallen by 41%. It doesn’t stop there. Those same levels of home ownership have fallen by 17% among the 35 to 44 year-olds See pages 08/09
• The exact effects of the new MMR rules remain up for debate. Lenders have claimed that they were already operating under the new rules prior to their introduction on April 26th. If this is the case then it appears unlikely we will see a significant slowdown in market activity in coming months. See page 10
• Despite this call for a more positive attitude to development, Savills analysis reveals that very few Local Planning Authorities have embraced a growth agenda and planned for more housing.
'Apparent' boom conditions at the beginning of a housing market recovery are almost inevitable Some commentators have become increasingly concerned that the UK housing market is entering bubble territory. Certainly, house price rises have been significant in recent months – but current growth has been from a low base. Even now, average UK house prices are still -21.1% below their 2007 peak in real terms according to Nationwide. Lucian Cook explores whether prices are rising too quickly on page 4 and likens the market now to that in 1996.
Savills average regional house price forecast Q2 2014
Forecasts 2014 2015 2016 2017 2018 5 year total PRIME LONDON 4.5% -0.5% 7.0% 7.0% 4.5% 22.7% Prime Regional 4.5% 1.0% 5.0% 5.5% 5.0% 22.7% Mainstream UK 6.5% 5.0% 4.5% 4.0% 3.0% 2.5.5% Mainstream London 8.5% 6.5% 4.0% 2.0% 2.0% 24.4%
Residential Letting Q1 2014 The private rented sector grew by some two million households in the UK in the decade to 2011, much of the largest growth being in the mortgage rationed period since 2007. Despite initiatives to support home ownership, we expect the sector to grow by a further one million households in the next five years. Our recent survey of 2,800 existing private sector tenants, in association with YouGov, indicates that renting is still seen as an intermediate step to home ownership by a large percentage of private renters. It shows that the main reason for renting is the prohibitive cost of raising a deposit to buy a property.
In 2012/13, the private rented sector accounted for four million or 18% of households according to the English Housing Survey. A significant proportion considering the sector accounted for 10% of households throughout the 1980s and 1990s. On the other hand, homeownership fell to its lowest level in 25 years in 2012/13 with the most significant fall since 2011 seen among those under the age of 44. Property price growth in the first half of the past decade combined with mortgage constraints in the last five years have contributed to the decline in homeownership among younger people. Under 35s now account for just 9% of the country’s home owning population, down from 15% ten years ago, while in the private rented sector they now make up just over half of all households.
Forecasts Year to Q3 2013 2014 2015 2016 2017 2018
5 years to end 2018
UK MAINSTREAM 1.20% 2.00% 2.00% 4.00% 5.50% 5.50% 21.00%
London Mainstream 3.60% 3.50% 3.50% 4.50% 6.00% 6.00% 25.80%
Prime London 1.10% 2.50% 3.00% 4.50% 4.50% 4.50% 20.40% Source: Savills Residential Property Focus Bulletin Q2 2014
ISSUER
TCHG Capital plc Fifth Floor
100 Wood Street London EC2V 7EX
BOND TRUSTEE AND SECURITY TRUSTEE
Prudential Trustee Company Limited Laurence Pountney Hill
London EC4R 0HH
PRINCIPAL PAYING AGENT, ACCOUNT BANK, CUSTODIAN
The Bank of New York Mellon, London Branch One Canada Square London E14 5AL
ARRANGER AND DEALER
TradeRisks Limited 21 Great Winchester Street
London EC2N 2JA
LEGAL ADVISERS
To the Arranger, the Dealer, as to English law K&L Gates LLP One New Change
London EC4M 9AF
To the Bond Trustee and the Security Trustee as to English law
K&L Gates LLP One New Change
London EC4M 9AF
To the Issuer and the Original Borrower as to English law
Trowers & Hamlins LLP 3 Bunhill Row
London EC1Y 8YZ
Cripps LLP Wallside House
112 Mount Ephraim Road Tunbridge Wells Kent TN1 1EG
AUDITORS
To the Issuer and the Original Borrower Nexia Smith & Williamson
25 Moorgate London EC2R 6AY
I-A13.4.11
I-A13.5.2
I-A13.7.1
I-A7.2.1 A-A9.2.1