Affordability and viabiliity

  • Nonsuch Abbeyfield ('Abbeyfield') is committing £4 million of its own funds to this project.
  • As a charitable social landlord, Abbeyfield is committing voluntarily to nominate 23 affordable units of the building's 60-unit capacity to the Borough and Surrey County Council.
  • To be both viable and affordable Abbeyfield aims to optimise the number of residents (a balance between economies of scale which drive NA to increase unit numbers and our aim of providing a community for each individual) whilst limiting its income from rent and service charges to a level that its target clients can afford.
  • With the whole development estimated to cost £11-12 million, Abbeyfield needs to finance the balance of funding with debt or find other means of reducing the funding.
  • Having assessed the availability of debt, Abbeyfield believes that sufficient short-term (3-4 years) development finance can be raised if it targets to sell 30 of the units to pay down the majority of the debt to approximately £2 million.
  • This remaining amount can then be restructured as long-term debt and repaid from the ongoing cash generated by rents and service charges.
  • The sale of units would be to those with capital resources, but who are still in need of the care and support that the applicant offers.
  • Abbeyfield has preliminary indications of financing from three Banks and The Abbeyfield Society to support this view and expects to obtain committed financing offers once development is approved.
  • Abbeyfield's aim is to provide high quality support services to residents, including the provision of food service. In order to be effective in meeting these aims the building must incorporate a significant amount of common space that is only partly variable if the number of units is reduced, and service provision is largely a fixed
  • Abbeyfield estimates that approximately 33% of the total floor area of the building comprises common areas and facilities. The central facilities do not reduce pro rata with a reduction in the number of units. The estimated average cost of development is £1,760 per square metre. If the number of units were reduced by 10% it is estimated that costs would decrease by only £740,000 but cash income from unit sales would decrease by £1,740,000.
  • In the private sector the minimum number of units in an Extra Care community is thought to be in excess of 60 units (it is generally thought to be at least 80 units) and these are only viable selling at higher prices than we expect to achieve and with higher service charges for a lower level of support than Abbeyfield expects to provide.
  • Despite purchasing the land at a price that is below the rate for general housing land, as evidenced by a Jones Lang LaSalle valuation, and financing the purchase with £4 million of equity contribution on which it needs to achieve a reduced return, and with the benefit of HCA (Government) grant, Abbeyfield's consultants have undertaken viability analyses been that demonstrate that the development is marginally viable if HCA grant can be attracted. In the absence of Government Grant the applicant's consultants have advised that the development is not viable with the current financing structure. If no grant funding is available Abbeyfield will seek alternative funding structures.
  • Faced with the rejection of our initial proposals and also with escalating construction costs (due to inflation) Abbeyfield has amended the mix of units and reduced the scale of the building. Abbeyfield has tried to maintain the number of units in order to optimise the number of residents and hold down service charges to ensure the development remains affordable for its "target market".