INFRASTRUCTURE_INVESTMENT - Accounts

The directors of the group have elected not to include a copy of the income statement within the financial statements.

These financial statements have been prepared in accordance with the provisions applicable to companies subject to the small companies' regime as set out within Part 15 of the Companies Act 2006 and in accordance with the provisions of FRS 102 1A - small entities.

As permitted by s408 Companies Act 2006, the company has not presented its own profit and loss account and related notes. The company’s loss for the year was £912,818 (2019 - £964,585 profit).

Infrastructure Investments (Leicester) Limited (“the company”) is a private limited company limited by shares, domiciled and incorporated in England and Wales. The registered office address and registered number can be found on the Company Information page.

The group consists of Infrastructure Investments (Leicester) Limited and its subsidiary.

The Company's functional and presentational currency is GBP.

The financial statements have been prepared under the historical cost convention unless otherwise specified within these accounting policies and in accordance with Section 1A of Financial Reporting Standard 102, the Financial Reporting Standard applicable in the UK and the Republic of Ireland and the Companies Act 2006.

The preparation of financial statements in compliance with FRS 102 requires the use of certain critical accounting estimates. It also requires group management to exercise judgement in applying the group's accounting policies (see Note 2).

The company is a qualifying entity for the purposes of FRS 102, being a member of a group where the parent of that group prepares publicly available consolidated financial statements, including this company, which are intended to give a true and fair view of the assets, liabilities, financial position and profit or loss of the group. The parent company has therefore taken advantage of exemptions from the following disclosure requirements:

• Section 7 ‘Statement of Cash Flows’ – Presentation of a statement of cash flow and related notes and disclosures;

• Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instrument Issues’ – the information is provided with the consolidated financial statements of the group in which the entity is consolidated and the relevant disclosures are included in; and

• Section 33 ‘Related Party Disclosures’ – Compensation for key management personnel.

The company, and the group headed by it, qualify as small as set out in section 383 of the Companies Act 2006 and the group is therefore considered eligible for the exemption to prepare consolidated statement of cash flows.

The following principal accounting policies have been applied:

The consolidated financial statements present the results of the company and its subsidiary ('the group') as they form a single entity. Intercompany transactions and balances between group companies are therefore eliminated in full.

The consolidated financial statements incorporate the results of business combinations using the purchase method. In the Statement of Financial Position, the acquiree's identifiable assets, liabilities and contingent liabilities are initially recognised at their fair values at the acquisition date. The results of acquired operations are included in the Consolidated Statement of Comprehensive Income from the date of which control is obtained. They are deconsolidated from the date control ceases.

At the time of approving the financial statements, the directors have a reasonable expectation that the group and company has adequate resources to continue in operational existence for the foreseeable future.

The directors have reviewed cashflow forecasts for at least the 12-month period from the date of signing and assessed the current and potential impact of the ongoing COVID-19 pandemic, to ensure the group can maintain its day-to-day services, fulfil its statutory obligations and meet future obligations to funders and other stakeholders.

The directors' forecast reflects an objective assessment of the impact of COVID-19, with a number of actions taken as a consequence, including restructuring its operations, cash retention and the deferment of fees, until such time as the crisis is over and steady state of operation is achieved.

The group’s tenants represent a mix of industries and uses including hotel, student accommodation, gym, restaurant, offices and private residential. Although the leisure related businesses are heavily impacted by COVID-19, £1m of rental income is derived from office space which is occupied by an essential financial services business and is expected to continue. There is likely to be further impact on rent receipts from student accommodation due to ongoing COVID-19 pandemic, but this impact has been reflected within the look-forward cashflow, at present the accommodation is 50% full, which is in line with predictions. There is also strong demand for the residential accommodation, however some reduction in receipts is expected.

The directors feel that the measures adopted to combat negative impacts stand the company in good stead going forward as a leaner operation, with the savings through the facilities management flowing through in future years, allowing the company to be even more robust, both in the event of a crisis such as COVID-19 or the loss of revenue, giving more cash coverage and negotiating power, should the need arrive in future events.

At 31 December 2020 the group has cash balances of £1.5m which, even if a significant portion of rent were not to be received, is sufficient to maintain a positive cash position and meet the group’s liabilities as they fall due for at least 12 months from the balance sheet date, based upon current expectations.

In addition, the group has further security of the Guarantee (see Note 10). Investment Company Eastbourne Limited has guaranteed to cover the Debt Service Obligations of the parent company, should it be required.

In addition, the directors have considered the financial covenant requirements under the group’s borrowing arrangements, in light of COVID-19 and have assessed their ability to comply with the financial covenants. Compliance with covenants is sensitive to the timing of cashflow, however the directors expect that compliance will be maintained, and if issues were expected to materialise, that the lender would be amenable to a short-term waiver, should the need arise.

The directors are confident that all operations and commitments will be met going forward and with the on-going implementation of the COVID-19 vaccine, which should bring about more certainty in the coming months, together with the conservative approach and cash reserves, the directors are confident of no issues going forward.

The directors believe the group will continue to be a going concern.

Turnover comprises rental income, service charge income, recharged expenditure due in the period, and property sales exclusive of Value Added Tax.

Any income in respect of property sales are recognised on completion.

Turnover is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. Turnover is measured as the fair value of the consideration received or receivable, excluding discounts, rebates, value added tax and other sales taxes. The following criteria must also be met before turnover is recognised:

Rendering of services

Turnover from a contract to provide services is recognised in the period in which the services are provided in accordance with the stage of completion of the contract when all of the following conditions are satisfied:

• the amount of turnover can be measured reliably;

• it is probable that the group will receive the consideration due under the contract;

• the stage of completion of the contract at the end of the reporting period can be measured reliably; and

• the costs incurred and the costs to complete the contract can be measured reliably.

Rental income is recognised on the basis of the amount receivable for the year. Rents and service charges in advance are shown as deferred income in the Statement of Financial Position.

Tangible fixed assets under the cost model, other than investment properties, are stated at historical cost less accumulated depreciation and any accumulated impairment losses. Historical cost includes expenditure that is directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management.

Depreciation is recognised so as to write off the cost or valuation of assets less their residual values over their useful lives on the following bases:

The assets' residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, or if there is an indication of a significant change since the last reporting date.

The gain or loss arising on the disposal of an asset is determined as the difference between the sale proceeds and the carrying value of the asset, and is recognised in the income statement.

Investment property is carried at fair value determined annually by the directors after input from external valuers and derived from the current market rents and investment property yields for comparable real estate, adjusted if necessary for any difference in the nature, location or condition of the specific asset. No depreciation is provided. Changes in fair value are recognised in profit or loss and then transferred to the revaluation reserve, net of any deferred taxation.

The group has elected to apply the provisions of Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instruments Issues’ of FRS 102 to all of its financial instruments.

Financial instruments are recognised in the group's statement of financial position when the group becomes party to the contractual provisions of the instrument.

Financial assets and liabilities are offset and the net amounts presented in the financial statements when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.

Basic financial assets, which include debtors and cash and bank balances, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest method unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest. Financial assets classified as receivable within one year are not amortised.

Financial assets, other than those held at fair value through profit and loss, are assessed for indicators of impairment at each reporting end date.

Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows have been affected. If an asset is impaired, the impairment loss is the difference between the carrying amount and the present value of the estimated cash flows discounted at the asset’s original effective interest rate. The impairment loss is recognised in profit or loss.

If there is a decrease in the impairment loss arising from an event occurring after the impairment was recognised, the impairment is reversed. The reversal is such that the current carrying amount does not exceed what the carrying amount would have been, had the impairment not previously been recognised. The impairment reversal is recognised in profit or loss.

Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the group after deducting all of its liabilities.

Basic financial liabilities, including creditors, bank loans and loans from fellow group companies, are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future payments discounted at a market rate of interest. Financial liabilities classified as payable within one year are not amortised.

Debt instruments are subsequently carried at amortised cost, using the effective interest rate method.

Trade creditors are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Amounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade creditors are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.

Financial liabilities are derecognised when the group's contractual obligations expire or are discharged or cancelled.

The tax expense represents the sum of the tax currently payable and deferred tax.

Tax is recognised in the Consolidated statement of comprehensive income, except that a charge attributable to an item of income and expense recognised as other comprehensive income or to an item recognised directly in equity is also recognised in other comprehensive income or directly in equity respectively.

The current income tax charge is calculated on the basis of tax rates and laws that have been enacted or substantively enacted by the reporting date in the countries where the company and the group operate and generate income.

Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date where transactions or events that result in an obligation to pay more tax in the future or a right to pay less tax in the future have occurred at the balance sheet date. Timing differences are differences between the company's taxable profits and its results as stated in the financial statements that arise from the inclusion of gains and losses in tax assessments in periods different from those in which they are recognised in the financial statements.

Unrelieved tax losses and other deferred tax assets are recognised only to the extent that, on the basis of all available evidence, it can be regarded as more likely than not that there will be suitable taxable profits from which they are recognised in the financial statements.

Deferred tax is measured using the tax rates and laws that have been enacted or substantively enacted by the balance sheet date that are expected to apply to the reversal of the timing difference. Deferred tax relating to investment property is measured using the tax rates and allowances that apply to the sale of the asset. In other cases, the measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the company expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

Current tax assets and liabilities are offset only when there is a legally enforceable right to set off the amounts and the company intends either to settle on a net basis or to realise the asset and settle the liability simultaneously.

Deferred tax assets and liabilities are offset only if: (a) the company has a legally enforceable right to set off current tax assets against current tax liabilities; and (b) the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities which intend either to settle current tax liabilities and assets on a net basis, or to realise the assets and settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax liabilities or assets are expected to be settled or recovered.

Rental income from operating leases is credited to the Consolidated statement of comprehensive income on a straight line basis over the term of the relevant lease.

Amounts paid and payable as an incentive to sign an operating lease are recognised as a reduction to income over the lease term on a straight line basis, unless another systematic basis is representative of the time pattern over which the lessor's benefit from the leased asset is diminished.

Finance costs are charged to the Consolidated statement of comprehensive income over the term of the debt using the effective interest method so that the amount charged is at constant rate on the carrying amount.

All borrowing costs are recognised in the Consolidated statement of comprehensive income in the year in which they are incurred unless, any of those borrowing costs are directly attributable to the construction or production of a qualifying asset. Those borrowing costs are recognised as part of the cost of that asset.

Costs incurred in the raising of loan finance are recorded as a deduction from the loan and subsequently amortised to profit and loss over the term of the loan using the amortised cost model and the effective interest rate unless the loan is measured at fair value where the costs are expensed as incurred.

In the application of the group’s accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods.

The estimates and assumptions which have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities are as follows.

The market value of Investment property is determined by an independent property valuation expert to be the estimated amount for which the property should exchange on the date of the valuation in an arms-length transaction. When investment properties are revalued certain judgements are made which are based on the covenant strength of tenants, remainder of lease term of tenancy, location, and other developments which have taken place in the form of open market lettings, rent reviews, lease renewals and planning consents.

The company has not revalued the property in 2020. The valuation is defined by the term of the local authority’s contingent loan / income guarantee. Whilst this is one year less, this is off-set by a reduction in the yields for local authority guaranteed income, as the benchmark gilt lowered over the year. Arguably, the valuation may show a marginal increase due to the slightly lower yield. However, all things considered, the directors believe it would be prudent to hold the valuation at the same level.

The average monthly number of persons (including directors) employed by the group and company during the year was:

Their aggregate remuneration comprised:

Details of the company's subsidiaries at 31 December 2020 are as follows:

In May 2018, at the time of the Company refinancing its loan facilities, the Company entered into a Rental Deed of Guarantee ('the Guarantee') with Investment Company Eastbourne Limited. Under the Guarantee, Investment Company Eastbourne Limited has guaranteed that in the event that the net rental income, as defined in the Guarantee, is less than £1,850,000, index linked, per annum an amount equal to the difference will be credited to the Company. The Guarantee has a 30 year term. The investment property has been valued, by the directors, taking into account the benefit of the guarantee.

Investment Company Eastbourne Limited has a charge over the freehold land and buildings of the Company.

The Company has also entered into a Development and Asset Management Agreement with Investment Company Eastbourne Limited. Should the Company default on its obligations under this agreement then Investment Company Eastbourne Limited would be entitled to buy the investment property for a pre agreed default price.

During the year, borrowing costs of £Nil (2019: £Nil) were capitalised and included within cost. Total borrowing costs capitalised to date are £1,528,227 (2019: £1,528,227).

The historic cost of the investment property is £33,333,686 (2019: £33,333,686).

Secured loans

The bank loan bears interest at a variable rate plus margin of 2% and is secured against the investment property held by the Parent Company known as St Georges Tower and the assets and reserves of Infrastructure Investments (Leicester 2) Limited. Unamortised issue costs of £863,148 (2019: £894,536) have been capitalised and are included as a deduction from the loan balance.

The bank loan is due for repayment in full on 17 May 2048. The whole loan may be voluntarily prepaid by the Company, provided that prior written notice of 20 business days is given to the bank. The Company must settle the loan in full. If part of the loan is repaid, the Company will incur accrued interest on the loan and all other amounts outstanding will become immediately due and payable on demand.

Revaluation reserve

The revaluation reserve represents the cumulative value of revaluations movements from cost, net of deferred taxation.

Profit & loss account

This reserve relates to the cumulative retained earnings less amounts distributed to shareholders.

As the profit & loss account has been omitted from the filing copy of the financial statements, the following

information in relation to the audit report on the statutory financial statements is provided in accordance

with s444(5B) of the Companies Act 2006:

The auditor's report was unqualified.

Emphasis of matter - impact of COVID-19

We draw attention to Note 1.3 of the financial statements, which describes the impact of COVID-19 on the parent company and the group. Our opinion is not modified in respect of this matter.

At the reporting end date the group had outstanding commitments for future minimum lease payments receivable under non-cancellable operating leases, as follows:

During the year the Company incurred management charges of £644,941 (2019: £380,000) from a company under common control. At the year end £324,941 remained outstanding (2019: £28,517).

During the year £Nil (2019: £100,000) was advanced to the directors. The amount outstanding at the reporting date was £Nil (2019: £20,260). No interest was charged and there are no fixed repayment terms.

During the year the Company incurred guarantee fees of £311,219 (2019: £307,700) from its shareholder, Investment Company Eastbourne Limited under the Rental Deed of Guarantee explained in notes 4, 10 and 19. At the year end £487,169 remained outstanding (2019: £328,200).

In line with the requirements of FRS 102 the Company is not required to disclose transactions with group companies on the grounds that these companies are wholly owned within the Group.