Tag Archives: prs

Right to Manage – The Outcome (Part 5)

Early last year we started the Right to Manage process for a scheme where Young London manage all the privately  rented units, with the remainder occupied by the owners. The freehold is owned by The Consensus Group (part of the Vincent Tchenguiz empire).

On completion in summer 2008, County Estates (one of the Peverel/Consensus Group companies) was appointed to be the managing agents. As we had a good relationship with the developer we tended to deal with the developer for a year of so post completion rather than County Estates when there were any issues to deal with.

However in late 2009 we felt that the block could be managed better, both in terms of service and cost. We spoke with the managing agent  Chainbow and worked with them to set up a Right To Manage company. My earlier blogs show how we went about this – you can read parts one, two, three and four here. Then, in the summer of 2010 when we had a resounding level of support, we served the appropriate notices on the incumbent managing agent. The response from County Estates was to challenge the notice. However, following some further communications, it was agreed that Chainbow could take over the block management on 1st January 2011.

It is a case now of not expecting all the issues of the past to be solved overnight, or for the improvements we want to be in place immediately. It is a case of being able to work with a company (Chainbow) who we can plan with, and further enhance the quality of the scheme.

Along with the other owners, we are pleased we went through this process. Although it takes sometime, we feel this demonstrates how a good asset manager can add value for the owners, and enhance the development for the residents. Landlords in general also recognise the importance of good property management, something we noticed in the results of our quarterly Young Index survey towards the end of 2010.

IPD Residential Index – 10 years old

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Yesterday, the results for the Investment Property Databank (IPD) Residential Index for 2010 were released at One Moorgate Place.

Mark Weedon, Head of UK Residential at IPD presented the results, Trevor Moross from Dorrington responded, then there was a panel who gave their thoughts on the results followed by some questions from the audience. The panelists were from Allsop (Alan Collett) , AXA REIM (Alan Patterson) and myself from Young Group.

The key results I pulled out were:

  1. Over 10 years residential annualised returns were 10.1% – property is a long term investment, this is a strong consistent return
  2. Returns across the UK (9-10% annualised) were similar over the last decade
  3. Over the last year, Central London was leading the way with returns of over 13% – adopting what seems to be its usual role of leading the property market upwards after a downturn
  4. Most regions had an annualised income return in excess of 4% over the last decade
  5. Annualised capital growth across the UK was over 6% – strong for such a volatile decade
  6. 2008 was the only year in the last 10 that the index was negative
  7. Over the last 5 & 10 years residential property showed greater returns than any other mainstream asset class
  8. Gilts was the only asset class with a lower risk profile than residential property

Additionally, I commented (as I often do) that population growth and the rise of the solo household is set to grow at a faster rate going forward thus supporting the argument for future returns in this sector.

Finally, pleasingly for me, was that the best performing region was ‘inner London’ – broadly defined as travelzones 1 and 2 excluding West End, The City and Midtown. Exactly the area we at Young Group have been investing in with our clients and our own portfolio.

It was a real pleasure to be on the panel. Any way that I can assist in encouraging more people to invest in this asset class is worthwhile. Bringing more investment to the private rented sector not only generates returns but also has a social benefit and that cannot be said about many asset classes.

Where is the Residential Investor Market?

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Earlier in the month I presented at a conference entitled “Residential Money – Funding to unlock development 2011“.

There was a strong array of speakers from Savills, GVA, Investec, Council of Mortgage Lenders and Santander to name a few. The conference was attended by 150+ senior executives from Banks, Developers, etc.

The day ran through the current state of play in funding. In summary there are only about five lenders worth approaching for development funding according to a number of the speakers. They are Barclays, Close Brothers, HSBC, RBS and Investec. Others may entertain a conversation, however, the banks are looking at cashflow of the project and the track record of those involved. Where you would have an advantage is if you have dealt with one of the banks before.

My presentation was entitled “The Residential Investor Market”. I started by running through the current dominance of the private investor in the private rented sector (PRS), risk/returns of investing in the PRS and the demographic changes in the next 20 years which will have a huge impact on housing demand.

I then showed how investors in the PRS are looking at the asset class as a long term investment. I talked through the different investors in the market, and how Young Group are looking at raising money to buy land so we can build more stock for the PRS.

The slide below gives a summary of my presentation, and also an overview for the whole day.

Next up, I am on the panel on Wednesday (16th March) at the IPD Residential Index Launch. This will be the 10th year IPD have issued the index, and will be interesting information. Let me know if you wish to attend.

Goodbye MIPIM, Hello London

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My MIPIM 2011 is over, and I am back in the office. So, how was it?

As ever, there was the mix of seminars, networking, events and meeting people – some new, some from the past. Visitor numbers were up 6%, and there was an array of stands from lots of cities with buildings planned dotted all over them. The UK was the country of honour this year, although from what I saw this seemed to be read as the Republic of London not the UK.

There seemed to be a realism around, that the market/lending environment has stabilised and it will stay at the current level for sometime – I tend to agree with this. Lenders were talking about lending on cashflow, so not the speculative lending of the past, but back to focusing on where the money will be coming from to pay the loans/bills. Not rocket science.

The seminars were very good, I attended one regarding real estate as an asset class going forward. It was far more bullish than I expected. The economist had a very good grasp of many economies, and was making a clear distinction between economies that were reliant on natural resources rather than industries. To this point, he felt that Russia should not be grouped with the other BRIC countries (Brazil,  India and China). His reason was that Russia was very reliant on natural resources, and this benefit was not shared for the greater good of the country therefore not building long term benefit.

The Mayor of London, Boris Johnson, attended on Tuesday, and spoke at various events during the day. He certainly has his own style, but I think it is fair to say nobody who heard him could leave without thinking there are some great investment opportunities in London and that the city is busy growing with many areas of regeneration, including The Royal Docks, Earls Court and Kings Cross. Of course, the Olympics was a key part of the London message, and the fact that the development is on time and on budget is a strong selling point for London. In fact, the Mayor suggested the Olympics could take place this year!

I often found myself taking about the Private Rented Sector (PRS), and as MIPIM is predominately a commercial property event I found the usual pushback on why back in the UK more institutions do not invest in it. I still find these arguments astounding. I am on the panel for the IPD residential index results next Wednesday, and this will provide another opportunity to push the case for greater investment in the PRS – just look at he UK demographics!

Finally, social media was a topic that was discussed quite a lot. There are some using it, however they are a minority. The depth of scepticism surprised me – wake up property industry! And, finally, finally, the other area that needs addressing is service within the property industry, especially if we are to engage more with the tenants / occupiers of the buildings in the UK, an area social media can help so much with.