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YorSpace

YorSpace 2019 community shares offer

£250 minimum

Risk factors

All investment and commercial activities carry risk, and investors should consider whether YorSpace is a suitable investment for them in light of their own personal circumstances.

You should remember that your investment is primarily for the purpose of supporting the society rather than making an investment return. As a Society, the maximum return offered to investors will always be limited.

This offer is not covered by the Financial Services Compensation Scheme.


General investment risks

The YorSpace business plan outlines an analysis of business opportunities & threats and provides details of how YorSpace will manage and mitigate risks. As part of this analysis they have identified a number of external factors with associated risks. These include the increased risk of a no deal brexit, how Yorspace intends to manage the minimal risk of the MHOS not being able to afford to make repayments and what would happen if the MHOS received less money from Homes England than planned.

It is important that you understand the following general points about holding community shares in YorSpace:

  • As a Registered Society under the Co-operatives and Community Benefit Societies Act 2014, YorSpace is registered with, but not authorised or regulated by, the Financial Conduct Authority. Any money you pay for shares is not safeguarded by any depositor protection or dispute resolution scheme. In particular, you have no right of complaint to the Financial Ombudsman Service, nor any access or entitlement to the Financial Services Compensation Scheme.
  • An investment in community shares is an at-risk investment in a trading business, not a loan or a deposit, and rates of return are not guaranteed. This investment should be considered as a medium to long term investment with a primarily social objective. Your shares may not be readily convertible to cash should you need to withdraw them.
  • As a member and shareholder of YorSpace you could, if the business is unable to meet its debts or other liabilities, lose some or all of your investment held in shares. However, your liability is limited to the amount that you have paid for your shares. Whilst it is the Society’s intention to pay interest on shares at the rate advertised in this offer, community shares do not enjoy any capital growth.

Brexit

There is now an increasing risk of a no deal exit. This would have three main implications for the development:

● Interest rates - in view of the impact on the economy, interest rates are likely to be held lower for a longer time than currently assumed in the MHOS business plan which will reduce the amount of interest payments.

● Disposable income – recent falls in the value of the pound have started to factor in a no deal exit which will increase the costs of goods from abroad. World trade arrangements could add to these increased costs especially for food. The Government has already indicated that it would consider reducing this impact by having zero tariffs on some food imports. Lower interest rates would mitigate the impact of lower disposable income.

● Security of employment – the York economy is mainly service based and therefore will not experience the impact of a no deal Brexit where there is a greater base of manufacturing industries and jobs with substantial supplier chains with the EU. York has a significant tourism industry which benefits from the fall in the pound.


MHOS unable to make repayments

A similar development, LILAC, has operated successfully for over 6 years demonstrating risks are minimal. The main risk is earlier on in the term of the loan as the MHOS’s equity in the development increases to provide a cushion after the first few years. In order to minimise the risk of the MHOS being unable to make repayments, YorSpace would place conditions on the loan, that would require:-

  • the Lowfield Green MHOS to have undertaken financial checks on the residents;
  • residents to take out insurance to mitigate against a resident being unable to make payments in the event of loss of employment or serious illness; and
  • the Lowfield Green MHOS to provide regular financial information in order to provide early warning of any issues to allow YorSpace to offer support to the work MHOS to ensure repayments of loans are made.

In the highly unlikely event of a foreclosure of the MHOS precipitated by the mortgage lender, then the arrangements would first involve selling the development to another MHOS or equivalent where residents would continue to live, or sale on the open market, with residents offered the first option to buy. In both cases there would be sufficient equity in the development (valued as at least £4.2m) to repay the mortgage lender and YorSpace.


MHOS receiving a lower amount or no capital funding from Homes England

All the indications are that the development will receive capital funding from Homes England. The development meets the criteria for capital funding. Its innovative nature means that it would be a high priority for funding. The amount included is based on amounts that other developments in the area have received. This type of development is a high government priority as well as those across the political spectrum as part of the drive to deliver more housing.

A no deal Brexit could have a negative impact on government spending. This could lead to an expectation of funding at half the amount in the current MHOS plan. Under this scenario, the development can proceed through extra mortgage lending albeit at higher costs for residents. In the highly unlikely event that the MHOS development not receiving any funding from Homes England, then it would be possible to proceed with a higher loan and higher deposits (15% rather than 10%), again at higher costs to residents. No development would progress without all the funding in place including the commitments from residents. If this was not possible, then YorSpace would enter into discussions with its share subscribers to consider the use of funding for alternative purposes or to simply repay the funding received.


Business Risks for YorSpace and Lowfield Green

You should also examine the full risk analysis for YorSpace and its tenant Society Lowfield Green MHOS.  Risk analysis is available at these links:

£385,35081%
Applied for to date, of
£475,000 target

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