Housing supply in the new world: developing for profit Working in - - PowerPoint PPT Presentation

HOUSING & REGENERATION I COMMERCIAL REAL ESTATE I CONVEYANCING

#CroftonsDevSem

Housing supply in the new world: developing for profit

Working in partnership with

Housing & Regeneration I Commercial Real Estate I Conveyancing I Charities

Today’s speakers

Julie Loggenberg

Partner, Head of Property

Jo Savage

Head of Governance and Regulatory

Developing for profit: costs and opportunities

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Profit for purpose

• Non-primary purpose activity
• Not developing for affordable rent
• Outright sale and PRS
• Mixed use and commercial
• Competing with ‘spec builders’
• Change and challenge the mindset
• Developing the skills
• Costs

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More profit to fund your core activities

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Costs

• Land ownership
• S106 liability
• Abnormals
• Funding
• Procurement
• SDLT
• Consultants
• Marketing

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Opportunities

• De-regulation & the freedom to do more?
• A level playing field
• Government initiatives
• Better use of land holdings
• Increase profile
• Growth
• Pooling resources and services
• Sector pulling together

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Diversification: viability and feasibility

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Housing and profit

What is the most profitable development/house type you or your

• rganisation have delivered?

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Development viability & feasibility

Market research & segmentation Site identification Financial feasibility

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Site identification

Land banking capacity Risk strategy Partnering

• pportunities

Competitors Option agreements Land Buying Strategy

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Market research & development

Consumer behaviour

• 1. Research and development strategy
• Target audience profile – know your market
• Market segmentation
• ACORN
• MOSAIC
• Life stage assessment
• 2. Product design procedure
• Tailored specification
• Market testing
• Marketing strategy

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Financial feasibility

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Financial feasibility

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Commercial units - viability

• Is there a market for your commercial

units?

• Valuation/appraisal
• Key objective

If answer is yes…

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Commercial units – Heads of Terms and leases

• Addressing covenant strength issues
• Structuring incentives
• User provisions
• Break options
• Time well spent!

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Commercial units – planning and strategy

• Where is the investment market at?
• Any pre-sale ‘tweaks’ to bolster investment

value

• Re-gears
• Buying out tenant break options
• Method of disposal

Get your house in order: structure, regulation & funding

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Structure

• The right structure: trading company, joint

venture, partnering?

• RP links and protecting social housing assets
• Merger
• Parental controls
• Profit for purpose
• Non-primary purpose trading
• Sector pulling together

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Governance & regulation

• Consents regime – HCA
• Risk-based approach
• Groups and other vehicles
• Intragroup arrangements
• Decision-making processes
• Deregulation
• White Paper

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Funding and funders

• Loans (new and existing)
• Consents and covenants
• On-lending
• Investment
• Institutional investment

Tax implications of commercial development

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Tax implications

• Stamp Duty Land Tax
• VAT
• Corporation Tax

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Tax implications

• SDLT applies to any acquisition of a

chargeable interest in land

• Who is liable to pay it?
• What is the charge based on?
• Are there any reliefs or exemptions

available?

• RP relief
• Charities relief
• Group relief

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Tax implications

• Is the price of the site subject to VAT?
• Maximise the VAT recovery
• Group structures and VAT groups

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Tax implications

• Profit for purpose – not charitable
• Group structure – use of a trading

subsidiary

• Gift aid – possibly subject to restriction

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Last, but not least…

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Exit strategy

• What happens if it all goes wrong?
• Do you have a plan B?
• Anticipate risk
• Future proofing

– Tenure switch – In-built flexibility for market fluctuations – Cost recovery – Funder requirements – Protect social housing assets

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Top tips

• 1. Know your market
• 2. Look before you leap
• 3. Don’t waste money
• 4. Use your consultants effectively
• 5. Think flexibly
• 6. Have an exit strategy

What? Why? How?

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Any questions…?

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And finally, a shameless plug…

Free legal seminar:

Joint ventures in the housing sector

Focus on JVs for property development. Wednesday 17 May, 9.30am Friends’ Meeting House, Manchester www.croftons.co.uk/events

#CroftonsDevSem

Get in touch

Julie Loggenberg

0161 214 4823 / julie.loggenberg@croftons.co.uk

Jo Savage

0161 214 6188 / jo.savage@croftons.co.uk www.croftons.co.uk / @CroftonsLegal