National Housing Trust Financial
Model Guide
January 2012
National Housing Trust – Model Guide
January 2012
DISCLAIMER
This financial model (“Model”) was developed by Scottish Futures Trust (“SFT”) pursuant to the National Housing Trust (“NHT”) initiative for the purpose of
evaluating the NHT initiative from a public sector perspective. It is not intended, and should not be used as the basis for investment decision making. The
Model has been developed using data and assumptions from a variety of sources. SFT has not sought to establish the reliability of those sources or verified
the information so provided, nor has the Model been audited by SFT. Accordingly, no representation or warranty of any kind (whether express or implied) is
given by SFT to any person as to the internal consistency or accuracy of the Model nor any output from it. Moreover the Model does not absolve any
recipient from conducting its own audit in order to verify its functionality and/or performance. SFT accepts no duty of care to any person for the development
of the Model, its use, nor in respect of any output from it. Accordingly, regardless of the form of action, whether in contract, delict or otherwise, and to the
extent permitted by applicable law, SFT accepts no liability of any kind and disclaims all responsibility for the consequences of any person acting or refraining
to act in reliance on the Model and/or its output or for any decisions made or not made which are based upon such Model and/or its output.
SFT will not provide any user support or enter into any discussions with users in relation to the Model.
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National Housing Trust – Model Guide
January 2012
Introduction
This Model Guide should be read in conjunction with the Excel Workbooks “SFT Draft NHT Financial Model Jan 2012 70%” (the ‘financial model’ or
‘model’). This is an initiative wide financial model for NHT based upon a 50 Unit requirement. Developers will need to update the model to reflect
such elements as the relevant gearing within the Lot they are bidding (e.g. Lot 10 The Highland Council has a maximum gearing level of 65%) and
their tender specific inputs (e.g. Loan Note Interest Rate).
The Model Guide explains how to use the National Housing Trust (‘NHT’) financial model. In particular it outlines:

The model’s purpose

How the model is structured

How changes are made to the financial model

The financial model’s key assumptions
Purpose of the Financial Model
The financial model is a tool to enable SFT to assess the viability of the NHT proposals. The model takes into account factors such as:

The revenues and costs associated with the project

The proposed funding structure of NHT

The purchase and sale of the NHT housing units

The risk profile and allocation of the initiative
Structure of the Financial Model
The financial model’s structure is as follows:
Worksheet
Summary Purpose
Front Cover
Details the financial model disclaimer
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National Housing Trust – Model Guide
January 2012
Assumptions & Checks
Details the key inputs of the financial model and key checks in relation to the
outturn results
Loan – Property Valuation
Calculates the number and value of properties
Calculates the funding profile of the project over its life
Cash Flow
Details the cash flow of the model on a monthly basis
Profit & Loss
Details the profit & loss of the model on a monthly basis
Balance Sheet
Details the balance sheet of the model on a monthly basis
Taxation
Details the taxation of the model on a monthly basis
Returns
Details the returns of the model on a monthly basis
Ratios
Details the key outturn ratios of the model on a monthly basis
Year – Cash Flow
Details the cash flow of the model on an annual basis
Year – Profit & Loss
Details the profit & loss of the model on an annual basis
Year – Balance Sheet
Details the balance sheet of the model on an annual basis
Year – Loan
Calculates the funding profile of the model on an annual basis
Year – Ratios
Details the key outturn ratios of the model on an annual basis
Sensitivity – Downside
Provides the outturn results for a series of downside sensitivities
Sensitivity – Upside
Provides the outturn results for a series of upside sensitivities
Model Terminology
Incorporates standards terms which are used to populate the model
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National Housing Trust – Model Guide
January 2012
Inputting Data
Key inputs are contained on the following worksheets only:

Assumptions and Checks

Loan – Property Valuation (Rows 6 and 7 only)
Input cells are shaded yellow with blue text. These are the only cells that the user should change.
Cells that are white are calculated cells.
Cells that are shaded blue are checks.
Making Changes to the Model
Should the user wish to make changes, the following process should be followed.
1. Input the revised value (users should ensure that the cell is characterised by a yellow background and blue text)
2. Press F9 (calculations in the model are manual)
3. Review the outturn results in terms of the checks on the Assumptions and Checks worksheet
4. Review the outturn financial statements
5. Review the sensitivity outturn results pages – this will detail key information in relation to the scenario run
Model Support
Please note that the model is provided for information purposes only. As per the Disclaimer at the start of the document, SFT will not provide any user support
or enter into any discussions with users in relation to the Model.
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National Housing Trust – Model Guide
January 2012
Key Financial Model Assumptions
The following details the key assumptions contained within the Generic Financial Model, based upon Local Authority funding 70% of the overall NHT funding
requirements.
Please note that certain assumptions are Local Authority specific e.g. number of units, based LHA rates, reserve account levels, etc.
Inflation assumptions
Year
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
Consumer Price Index
(“CPI”) (A)
3.7%
2.0%
1.9%
2.0%
2.0%
2.0%
2.0%
2.0%
2.0%
2.0%
2.0%
2.0%
Real rent increase (B)
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
Rental inflation (A+B)
3.7%
2.0%
1.9%
2.0%
2.0%
2.0%
2.0%
2.0%
2.0%
2.0%
2.0%
2.0%
Cost inflation (CPI)
Nominal house price
inflation (1)
3.7%
2.0%
1.9%
2.0%
2.0%
2.0%
2.0%
2.0%
2.0%
2.0%
2.0%
2.0%
0.0%
1.0%
3.5%
4.5%
4.5%
4.5%
4.5%
4.5%
4.5%
4.5%
4.5%
4.5%
(1)
House price inflation assumptions are by their very nature speculative. The assumptions used in the model attempt to draw a prudent line between
competing projections.
Contingency
(% of revenue)
2.0%
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National Housing Trust – Model Guide
January 2012
Modelling assumptions used in the base case model
Funding (1) – Based upon the Generic 70% Local Authority Debt Model
Drawdown
split
Split of
overall
surplus
Average
interest
cover
Minimum
interest
cover
Maximum loan
to value
Annual
interest rate
Total funding
Local authority funding
70.0%
Loan note funding
0.0%
5.0%
Equity funding
Total
25.0%
100.0%
100.0%
100.0%
1.31
1.00
63.6%
4.0%
4,029,102
1.10
0.91
68.3%
6.0%
287,793
91.0%
0.0%
1,438,965
5,755,860
1) Based upon 50 houses – 30% 1 bed, 50% 2 bed, 20% 3 bed.
2) The model contains functionality for Loan Note 2 – this facility is not used in the modelling.
3) The above table will differ for different gearing levels e.g. local authority debt at 65%.
Reserve Account - Based upon the Generic 70% Local Authority Debt Model
Number of
bedrooms
Base level
number of
properties
Weekly
variable
cost
Number
of weeks
Total
variable
costs
Total
reserve
13
Total
1
15
£25.89
5,048
2
25
£25.89
8,414
3
10
£25.89
3,366
50
16,828
16,828
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National Housing Trust – Model Guide
January 2012
Modelling assumptions used in the base case model
A cash reserve is set aside in the NHT structure to provide scope to deal with unforeseen events. This Reserve Account has been set at a level equivalent to
13 weeks of variable cost expenditure. The cash is set aside from rental income generated as the NHT initiative commences operating. As per the Members
Agreement, the Reserve Account can be used for the purpose of funding variable cost expenditure relating to the NHT units, or in relation to Part 9 (Funding
of the LLP) of the aforementioned agreement.
Corporation Tax
April
2012
Indicative Taxation Rate
25%
April
2013
24%
April
2014
23%
April
2015
23%
April
2016
23%
Housing stock – Generic NHT Financial Model
Number of
bedrooms
1
2
3
Total
Base level number of
properties
15
25
10
50
The base case model used the following breakdown of housing stock.
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National Housing Trust – Model Guide
January 2012
Modelling assumptions used in the base case model
Housing stock (void levels)
Number of
bedrooms
Base
void
and
bad
debt
levels
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
1
3%
3%
3%
3%
3%
3%
3%
3%
3%
3%
3%
3%
3%
2
3%
3%
3%
3%
3%
3%
3%
3%
3%
3%
3%
3%
3%
3
3%
3%
3%
3%
3%
3%
3%
3%
3%
3%
3%
3%
3%
The standard assumed void level is 3% of the annual gross rental income, inclusive of any allowance for bad debts.
Property rental income per unit – Generic Financial Model
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
MMR
per
week
(£s)
80.78
MMR
per
week
(£s)
82.32
MMR
per
week
(£s)
83.97
MMR
per
week
(£s)
85.64
MMR
per
week
(£s)
87.36
MMR
per
week
(£s)
89.10
MMR
per
week
(£s)
90.89
MMR
per
week
(£s)
92.70
MMR
per
week
(£s)
94.56
MMR
per
week
(£s)
96.45
MMR
per
week
(£s)
98.38
Number of
bedrooms
1
LHA rental
per
week
£88.00
MMR %
90%
MMR
per
week
(£s)
79.20
2
£110.00
90%
99.00
100.98
102.90
104.96
107.06
109.20
111.38
113.61
115.88
118.20
120.56
122.97
3
£130.00
90%
117.00
119.34
121.61
124.04
126.52
129.05
131.63
134.26
136.95
139.69
142.48
145.33
Average rates of LHA have been used to determine the above.
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National Housing Trust – Model Guide
January 2012
Modelling assumptions used in the base case model
Annual variable costs per unit
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
Total
variable
costs
Weekly
variable
cost (£s)
Weekly
variable
cost (£s)
Weekly
variable
cost
(£s)
Weekly
variable
cost
(£s)
Weekly
variable
cost
(£s)
Weekly
variable
cost (£s)
Weekly
variable
cost
(£s)
Weekly
variable
cost
(£s)
Weekly
variable
cost (£s)
Weekly
variable
cost
(£s)
Weekly
variable
cost
(£s)
Weekly
variable
cost
(£s)
1
£1,346
25.89
26.41
26.91
27.45
28.00
28.55
29.13
29.71
30.30
30.91
31.53
32.16
2
£1,346
25.89
26.41
26.91
27.45
28.00
28.55
29.13
29.71
30.30
30.91
31.53
32.16
3
£1,346
25.89
26.41
26.91
27.45
28.00
28.55
29.13
29.71
30.30
30.91
31.53
32.16
Number of
bedrooms
Fixed costs
Central overhead
Per
month
Per
month
Per
month
Per
month
Per
month
Per
month
Per
month
Per
month
Per
month
Per
month
Per
month
Per
month
£300
£306
£312
£318
£324
£331
£338
£344
£351
£358
£365
£373
The ‘central overhead’ fixed cost provides for an estimate of the central running cost of the NHT initiative.
Note: Variable costs
Maintenance per annum (exc
VAT)
Insurance
Management costs per annum
(exc VAT)
Total (exc of VAT)
Total (inc of VAT at 20%)
£
464
175
512
1,151
1,346
The maintenance and management costs are assumed to be annual operating costs following the construction of housing for rent. They are intended to meet
the cost of reactive and cyclical maintenance and housing management.
The model includes the functionality to include major repair costs. These are set at 0 (zero) in the base model.
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National Housing Trust – Model Guide
January 2012
Modelling assumptions used in the base case model
Property value per unit – Based upon the Generic 70% Local Authority Debt Model
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
Plus
stamp
duty/
set up
costs*
(2%)
£
Total
value
£
Total
value
£
Total
value
£
Total
value
£
Total
value
£
Total
value
£
Total
value
£
Total
value
£
Total
value
£
Total
value
£
Total
value
£
Total
value
£
82,800
84,456
92,000
92,920
96,172
100,500
105,022
109,748
114,687
119,848
125,241
130,877
136,767
142,921
2
117,000
119,340
130,000
131,300
135,896
142,011
148,401
155,079
162,058
169,351
176,971
184,935
193,257
201,954
3
147,600
150,552
164,000
165,640
171,437
179,152
187,214
195,639
204,442
213,642
223,256
233,303
243,801
254,772
No of
Beds
Purchase
Price
(Post
applicati
on of a
10% bulk
discount)
£
1
* Assumes inclusion of sums for floor coverings, curtains and white goods as per Management & Maintenance Contract.
Property sales costs per unit
Number of
bedrooms
Sales costs per
unit
1
2.5%
2
2.5%
3
2.5%
The sales costs per unit are assumed to equate to 2.5% of the agreed selling price.
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