Placefirst | PRSfair value family homes for rentDavid Smith-MilneJuly 2014

• Immediate plan is to build, own and operate a portfolio of 1,000 PRS units across the North of England.

• Focus is on customers that find themselves in a growing gap between social or affordable housing and home ownership.

• These are low income, working households

• We work in areas where low to middle income families, who are not benefit dependent, face few choices other than “amateur landlords”.

• Not “affordable” housing, but it is high quality, well designed and energy efficient housing that is accessible to people on low incomes – we call this “fair value housing”.

0ur strategic plan

• Closely tracking business models from around the World, including USA:

• Invitation (PE Backed)

• Waypoint (PE Backed)

• …private equity backed acquirers of distressed and / or foreclosed housing to create large portfolios of “institutionally managed” single family rental homes for rent.

• 2 years of planning and site acquisition and perfecting the implementation model across a “buy, fix and manage” business cycle.

• Currently on site with schemes valued at £25m of GDV. Targeting another £25m in next 12 months.

• Business plan targeting £100m of assets.

our strategic plan

placefirst development portfolio

Active project

Pipeline project

Chatsworth Gardens, Morecambe• 91 units

Woodnook, Accrington• 150+ units

Walton, Colne• 27 units

Vine House, Seaforth• 36 units

Carr Street, Hartlepool• circa 100+ units

Compstall• 121 units

Centenary House, North Lancs• 15 units

why this market?

•Nationally the PRS serves 4 markets:

• those that cannot become homeowners because of their current life-cycle stage e.g. young with insufficient savings, students – generally mobile

• those temporarily leaving owner occupation, because of say a job move or a divorce

• those that cannot afford owner occupation because of a sharp surges in house prices, as occurred in the last housing market boom, or because of increases in deposit requirements, as has occurred since the 2007/8 credit crunch

• those who cannot ever expect to be able to afford to become homeowners due to the level and/or variability of income

why this market?

• Competition can be beaten:

• “mum and dad” investors and small portfolio builders; or

• Registered Providers / Housing Associations

• Both highly variable in terms of quality and neither operate with any brand.

• Some RPs tend not to act strategically, follow a “bid and deliver” regime, deliver variable quality housing and are failing to rise to the challenges set by Government. Output is inconsistent and highly tied to political imperatives.

• Relatively easy to build a product that competes strongly in these sectors in terms of property, services, quality and security of tenure.

• Can produce attractive yields, contingent upon the land acquisition model.

• Customers are “low income, working households”.

• They are not housing benefit claimants

• They are generally quite young: 50% of this cohort nationally is under the age of 40 (just 10% HB claimants under 25)

• They do not form part of your traditional “low income stereotype”: just 5% are lone parents (32% HB claimants)

• They are well educated: 43% have degrees (47% HB claimants have no qualifications)

• These are people in work, with aspiration, well read and educated.

• They aspire for quality.

target demographic

• Our customer is a household with gross income between £25,000 and £40,000

• That household can support rent of between

• £482 PCM and

• £879 PCM

• …depending on %age of net income allocated to housing costs (e.g. 35%)

• These rental ranges allow us to spend between:

• £87k and

• £132k

• …on “all in” development costs to create an asset yielding 6%

financial model

• Branded housing for low income working families:

• Thoughtfully designed

• Aspirational

• Responsible landlord

• Excellent management & services

• Energy efficient

• Built at scale, enhances communities

• Rent that represents excellent value

0ur product

private renting just got a whole lot better…

our affordable homes don’t look

like affordable homes

make your next rented house a home…

features & measures

• Well insulated building envelope: ground floor, external & party walls, roof

• U-values between 0.15 – 0.3

• LED lighting to kitchens and bathrooms

• A** rated gas combination boiler

• Refurbished homes at Woodnook will be 50-60% cheaper to run

• EPC Energy Efficiency Rating – from 21 to 78

• EPC CO2 Rating – from 21 to 81

• BREEAM Domestic Refurbishment Very Good

• As a builder and operator of rented homes, this offers significant benefits to both landlord & tenant

• we never set out to deliver low carbon development

• we have sought to set a new standard in this sector (design, liveability, cost to end user)

• we know properties that are Built to Rent needed a different approach to Build To Sell

• keep utility bills as low as possible for our customers

• future proof homes against rising utility costs

• create a distinctive offer to attract families to Woodnook

• in challenging projects it is easy to default back to doing the minimum required

• sticking to your principles requires innovation in how you do things, strong partnerships that encourage challenge and a managed approach to risk

final thoughts