MANAGING RISK

If we reach our maximum fundraising target, we will be able to extend the building to include two additional rooms. This extension will primarily take place outside the existing structure, meaning it can be carried out with minimal disruption to residents and without delaying the delivery of the core project. The Gather Inn remains fully viable with 12 studios, and construction of the extension will only proceed if the maximum target is met.

As with any capital-intensive development, there are inherent financial and operational risks. Lemon Leopard has adopted a robust approach to risk management, grounded in prudent financial planning, collaboration with experienced professionals, and realistic forecasting. We are committed to transparency and long-term sustainability and have taken extensive steps to mitigate risks throughout the project’s lifecycle.

Capital Cost Overruns and Delays

Refurbishing an older building can present unexpected costs or delays, particularly in the early stages. These may include inflation-related price increases, unforeseen structural  issues, or contractor availability challenges. We have built contingency allowances into our budget and timeline to manage such eventualities proactively. 

 To mitigate these risks:

Lemon Leopard has secured experienced architects, surveyors, and contractors with a track record of working on listed and heritage buildings.

A contingency fund has been built into the cost plan to absorb inflation or unexpected build expenses.

A phased development plan ensures that works can be scaled or re-sequenced if needed to preserve cash flow.

A detailed project delivery timeline has been developed and is overseen by an independent project manager, with milestone-based financial oversight.

Interest Rate Risk 

Interest rate variation is a known risk. Our initial fixed rate will allow us to build a Capital Fund surplus which will buffer against any significant above-average future rate rises. Rent rises, where inflation is also above market trends, will allow us further liquidity. Our tertiary, in extremis, strategy would be to decrease the size of our common facilities and create two Air BnB units as a pro tem measure to inject liquidity. Our risk limits are well within the parameters of other comparable projects.

Equity Sale 

Equity Rent is designed to offer long-term stability and a pathway to ownership for residents, but we also recognise that individuals' circumstances can change over time. For this reason, a clear and fair equity resale mechanism is central to the model.

1. Member Equity Accrual:

Each resident contributes rent that not only covers operational costs and the mortgage but also accrues equity value over time. This value is tied to a transparent formula based on:

• The proportion of rent attributed toward equity
• The number of years of residency

A capped uplift in the value of the overall asset (linked to a local housing index or inflation-based measure to prevent speculation)

2. Exit Rights:

Residents can exit the co-housing community at any time, but equity release is structured to protect the sustainability of the project and ensure continuity:

• A tapered early exit charge applies within the first five years 
• Upon leaving, the resident’s equity share is calculated and returned only after year ten.
• All members are aware that equity share will not be available until after the bond is paid back in full. 

3. Equity Transfer Process:

Departing residents do not sell their stake on the open market. Instead:

• The Charitable Community Benefit Society (CCBS) facilitates the transfer of equity to a new incoming member from the waiting list.
• The incoming resident begins contributing through rent and assumes the equity pathway, creating a smooth succession without inflating the property's value.
• The outgoing resident is reimbursed their accrued equity from either CCBS dedicated equity fund, after year 10. 

4. Protecting Affordability in Perpetuity:

To ensure Equity Rent remains affordable over the long term:

• There is a cap on equity gain, preventing housing from becoming a speculative asset.
• All units remain within the equity rent framework, with no opportunity for private resale or windfall profit.

5. Risks and Limitations:

While every effort is made to maintain liquidity and ensure residents can retrieve their equity, repayments are subject to the overall financial health of the CCBS and may be delayed in

exceptional circumstances (e.g. if a new resident is not yet in place, or during refinancing).