Rationalisation, - South East Consortium · Rationalisation • Non-core housing products to be...

Rationalisation, Optimisation & Intensification

SEC Conference – Strategic Asset Management Zone

Speakers

Colin Farrell, Senior Partner

Stuart May, Head of Housing Consultancy

© copyright Faithorn Farrell Timms LLP

Introductions and Overview


• Strategic Asset Management in context

• To outline the principles, purpose and objective of undertaking options appraisals of social housing assets,

• To explore Rationalisation, Optimisation and Intensification as three means of improving the potential return from assets

Business Plan Basic Principles


Income

Rent from Property Assets

Service Charges

Paid-for services

External funding sources and grants

Expenditure

Property Maintenance and Investment

Central operating costs and overheads

Staff salaries, training and benefits etc

Finance / Debt servicing


Getting the balance right?

Comparative Performance


Comparative Performance


£0

£5,000

£10,000

£15,000

£20,000

£25,000

£30,000

£35,000

Yrs 1-5 Yrs 6-10 Yrs 11-15 Yrs 16-20 Yrs 21-25 Yrs 26-30

Comparison of Forecast Income and Expenditure Two House Types

SCS and D2D Costs - Edwardian 3BH SCS and D2D Costs - 1995 3BH Gross Rent

£0

£20,000

£40,000

£60,000

£80,000

£100,000

£120,000

£140,000

Yrs 1-5 Yrs 6-10 Yrs 11-15 Yrs 16-20 Yrs 21-25 Yrs 26-30

Comparison of Forecast Cumulative Cash FlowsEdwardian vs 1995 House

Cumulative Gross Cash Flow - Edwardian Cumulative Gross Cash Flow - 1995 House

Financial vs Strategic Performance


Strategic Objectives

Location

Housing NeedAffordable

Homes Provision

Growth aspirations

Placemaking

Yield / NPVRental Income

Planned Maintenance Repairs

Improvement Costs

Management Costs

Statutory Compliance

Management Cost

Cyclical Maintenance

Strategic Asset Management


Data Gathering

Data Validation and Analysis

Asset Performance Appraisal

Options Appraisal

Rationalise Optimise

IntensifyBAU - Retain and Manage


A Case Study


Ambitious strategic asset

management commission from

a large traditional RP client

Open brief - Pilot approach a

holistic evaluation of their

‘estate’ aligned to LA priorities

Defined geography comprising

several thousand homes

and related property assets.

Multi phase project - Tight

timeframe with phase 1 of

approximately 3 months

The challenge


To align the client’s objectives of optimising its asset

performance and delivering new supply with the

Local Authority’s vision for meeting housing needs

and aspirations between now and 2030.

Our mission


GOALSLocal

planning

authority

RP client

Strategic

housing

authority

Defining the geography


MARKET PLANNING NEEDS

Current state v target state


• Whole portfolio interrogated

and described - Archetypes,

locations, densities, tenures,

demographics and

performance.

• Identified where the estate

could contribute more to the

strategic goals of the client

and key stakeholders, by

intervening to optimise these

characteristics.

• Developed a table of key

metrics comparing the

current state and target state

to set out clearly

theanticipated evolution of

the portfolio.

Stock groupings


• Schemes further

divided into:

• Restricted

• Street properties

• Estates

• Clusters

Interventions

• A set of potential interventions devised

• Range from retain and maintain, to market

interventions, tenure flexing, tenanted transfer, site

intensification, redevelopment to large scale

regeneration.

• Intervention matrix devised - mapping against stock

groupings



Rationalisation

• Non-core housing products to be

considered for tenanted transfer

to local/specialist providers, eg

rural, supported.

• Regularise leases and exit

commercial property

• Disposal of freehold reversions

• Acquisitions from other local RPs

Intensification

• Conversion of large family homes to

smaller dwellings.

• Remodelling sheltered schemes.

• Regeneration: master planning and

phased demolition and rebuild at higher

densities and mixed tenure

• Targeted interventions to maximise

value of properties with vacant

possession prior to disposal.

• Possible windfall infill where appropriate

Optimisation

• Maintain and invest, cap ex vs routine

• Tenure conversion to shared ownership.

• Tenure conversion to market and

sub-market rents on ASTs to

preserve/maximise later opportunities for

intervention.

• Garage site portfolio – revisit and optimise

Target state - 12 years’ time


QUANTUM 25% increase in homes under management

ARCHETYPES Shift away from houses and bungalows towards flats, and particularly ‘high’ rise

TENURE Increase in intermediate and sale tenures whilst maintaining significant majority affordable

AGE PROFILE More than 10% increase in working age residents

DEMOGRAPHICS Maintain majority of households in ACORN groups M-Q, but increase in groups I-L

DEMAND Reduce void loss by 30%

SOCIAL SUBSIDY Reduce to release latent value to increase housing supply with the estate, including affordable

STOCK AGE Reduce proportion of older properties by 30%

LOCATION 25% increase in proportion of stock in priority areas for strategic partners

NOI 10+% increase

Stock classification


Geographical ‘pull’ factors:• Market / planning opportunity areas

• Specific adjoining site opportunities

Lowest asset utilisation:

• weak demand

• extreme poor financial performance NPV

Highest opportunity cost of retaining current use or

Social Subsidy

• Logic test applied

• Combinations of these factors led to schemes being put in ‘baskets’ to definitely, or possibly, assess against potential interventions

Outcomes


Intervention matrix devised and mapped to stock

grouping for whole estate

Roadmap to 2030 devised for the whole ‘estate’

•Partnership solution for the client and the LA

High priority - 35 schemes comprising 1,125 assets selected for phase 1 options

appraisal and possible intervention

Medium priority - 26 schemes comprising 1,096 assets selected for phase 2 options

appraisal and possible intervention

282 Street Properties in 31 schemes to be assessed against a range of potential

interventions at the next void event

26 key recommendations made and set out in an action plan

The next stage


• Every scheme identified for definite or possible assessment will have option appraisals carried out.

• Each option appraisal will include every possible intervention for that stock grouping.

• Each intervention will be evaluated for its potential to contribute towards moving the estate from the current to the target state.

Stuart May MSc MRICS CIHCMHead of Housing [email protected] 2018

Rationalisation, - South East Consortium · Rationalisation • Non-core housing products to be...

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