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Mustard Seed Property

Financial performance

This section sets out a summary of MSP’s track record in paying returns to community shareholders, historic financial performance, as well as the Society’s investment plans. The comprehensive operating and investment plans (including detailed financial forecasts and commentary) are set out in a separate document: MSP’s ‘Investment Plan’ which is available to download from the Mustard Seed 2020 Share Offer Product page.

Track Record - Returns to community shareholders

The table below shows how much member share capital MSP manages and the return made to shareholders.

 

Notes

Whilst an investment in Mustard Seed Property should not primarily be seen as a finance first investment, the board has been diligent in recognising its commitment to MSP shareholders that their investment deserves a regular return. As such, investors have been paid a return every year without fail for over a decade.

The target interest rate was set at 3.50% in the three historic years shown, and is expected to be maintained at this rate for the current financial year (ending 30 September 2020) and next financial year (ending 30 September 2021), before rising to 4.50% for the financial year ending 30 September 2022, once the new properties are generating income.

MSP’s current policy is to re-invest all share interest as a new share issue for all members that have less than the maximum of £100,000 of share capital. Each year investors will receive an additional share certificate to the value of the re-invested amount and they will earn share interest on those new shares in subsequent years. Members have the option to opt out of this every year so they can receive cash returns.

MSP generated a loss of c. £19k in the last full financial year to 30 September 2019, expects a loss of c. £19k this year (to 30 September 2020) and to generate a larger loss of c. £52k in the next financial year (to 30 September 2021). This is planned for and expected - as property is purchased and funds are spent on raising new capital.

The Board are committed to continuing to pay a return to community shareholders and consider this sensible given the stable existing revenues and the projected financial performance – see ‘Investment Plan’ – with healthy profits generated from October 2021 as new properties are fully let to operational partners.

The target interest rate will therefore be maintained at 3.50% and only increased to 4.50% once profits are again generated.

Historic financial performance

The table below shows MSP’s historic financial performance; for the three financial years ending (FYE) 30th September 2017, 2018 and 2019.

 

Notes

Steady growth in revenue from rental agreement on Property One which historically provided for increase in rent p.a. of CPI plus 2%. The new rental arrangement provides for rent increases of CPI each year.

Revenue in FYE17 includes a revenue grant of c. £9k.

Net loss in FYE19 due to the costs of raising finance (community share raise) as well as legal and professional fees.

Cash holdings are more than sufficient to meet all financial obligations (capital repayments and interest payments on debt, and shareholder interest payments and withdrawals).

Fixed assets equate to the value of Property #1 and a small amount of plant & equipment (solar panels) which provide an income of c. £800 p.a. and are depreciated over time.

Long-term liabilities comprise of mortgage with Triodos on Property #1 (comfortably secured against an estimated property valuation of c. £340k).

MSP paid off a £54k loan from Longmead Trust in FYE19.

Investment

The tables below shows the capital MSP expects to raise and deploy based on the minimum and maximum target community share capital raises for the existing and planned properties.

 

Notes

Property status: Property #1 operational and fully let, Property #2 has been purchased (with refurbishment underway), Property #3 in identification and appraisal process.

Capital raise: Minimum target of £150k, maximum target of £600k.

Cash available on balance sheet from previous raise will also contribute to development plans.

£350k facility in place with OpenBox Developments (socially-minded lender) for part-refurbishment of Property #2.

Other debt: £50k re-mortgage on Property #1 agreed in principle, £150k mortgage on Property #3, will be arranged once property operational and fully let.

 

Notes

Refurbishment status: Property #1 (agreed); Property #2 (detailed design in place with input from QS & Architect's report); Property #3 (estimated based on properties identified to date).

Purchase of Property #3: Preliminary discussions with new partner and team have identified several properties that may be suitable. Purchase planned for late 2020 / early 2021.

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