Market rent The rationale and out approach James Gibson Sovereign Housing
Growth in demand Post credit crunch PRS thriving 2006-2013 PRS households rose from 3.4 to 4.8 million Projected growth of 1.03 million PRS households by 2018 Estimated 48 billion paid in rent in 2011 Expected to rise to 70 billion in 5 years
Supply challenge Households rent for longer New home supply significantly below demand Increased supply critical to offering choice 200 billion investment to meet demand 50 billion expected to come from Buy to Let investment Private and institutional investment necessary
Business drivers Funding for traditional affordable housing development declining Seeking other sources of funding to maximise affordable housing output Strong, sustainable demand for market rent An ethical corporate landlord A provider of choice
Business benefits Utilise core expertise Access more development opportunities Reliable income streams and potential capital growth Meets a growing housing need Can open doors to additional affordable opportunities
Business benefits Government keen to support Institutional investment growing in the sector Market rent not constrained Predicted rises in house prices leading to capital appreciation Unlock larger opportunities Business kudos
Knowing your residents Who are renters of today? Aged between 25 to 24 (37.8%) In full time work (59.1%) Earning between 20,000 to 30,000 (20.1%) Single (31.9%) Living with one other person (35.8%) Fewer tenants plan to buy (27%) Committed to remaining in rented sector (39%) What do todays renters want? Open plan communal spaces for living kitchens Similar sized bedrooms On site assistance Security Contemporary design Tenant demand location specific Plug and play facilities Convenient locations On-site amenities
London Vs Regions London 100 + units with additional facilities Proximity to tube is absolutely key More operators More better funded developers More mature market Insatiable tenant demand Higher rents Bidding wars Regions Few schemes over 50+ units Proximity to town centre / employment Few corporate operators market dominated by individual landlords Development funding outside of London is difficult Immature market Tenant demand location specific Increasing rents but from historically low base Marketing strategies critical
Sovereign Journey Strategy to deliver 1,000 homes 185 developed organically 191 additional dwellings acquired in 2012-13 financial year Further 55 dwellings under construction / awaiting acquisitions. Further 306 dwellings / under offer in negotiation
Journey Continued Started MR programme: Winter 2011 Dedicated team established and recruited Consultant team / advisors established and retained Low Hanging Fruit acquired receivership purchaser / house builder year end pressure/ developer under threat of foreclosure Strategically important locations identified and markets assessed across our broad operating area. Business plan parameters established and approved to create mixed and balanced portfolio to adequately manage risk Development opportunities sought and processed via Sovereign sausage machine
The Robinsons building Distressed vendor From bags to homes 46 apartments in Bedminster, Bristol Very high quality development No affordable housing Acquired off inadvertent landlord All dwellings already tenanted
The Robinsons building Distressed sale due to bank pressure Purchased at substantial discount to open market value Strong yield Existing potential for rent inflation Desirable area, with exceptional mature market rent market
Belmont & Stanshawe Court - receivership The mainline to regeneration 24 apartments in central Reading Receivership purchase 20% plus discount from OMV Receiver acting as landlord Strong yield Very high potential of capital appreciation
The Zone Housebuilder Year End 21 Apartments acquired from Barratt Homes Acquisition Christmas 2012 Developer willing vendor due to challenging market Introduction of Help to Buy now limits this type of opportunity Good rental demand Mix of dwelling types and sizes Customer feedback influenced future specifications
Wapping Wharf Facilitating Development 55 x 1 and 2 bed apartments acquired on land and Build Ag s from Umberslade / Muse JV Fundamental to securing HCA Get Britain Building Fund 100% capacity Golden Brick stage reached Completions anticipated late 2014 Designed to Sovereign specification Indicative rents increased 100 month already on budget estimate
Kings Court Hanham Road Investor Sale 21 dwellings. Mix of houses and apartments Long term landlord seeking to release equity from scheme Tenants in situ with strong historic rental performances Low voids and bad debt Performance of Asset has influenced decision to acquire in this location What other suburban areas are appropriate for market rent?
In Summary Continued strong rental market in the region + limited number of operators at scale Success is location and scheme specific Market dynamics evolving as house prices recover and demand increases Increasing numbers of competitors considering entering regions as London hots up Consequently Competing viability for Development Its not as easy as it once was