PlaceFirst targets 1,000 resi units
MANCHESTER developer PlaceFirst is aiming to build a portfolio of 1,000 residential units before selling to an institutional investor, or refinancing.
So far the company has completed 250 properties and has a further 250 in the pipeline, putting it in a strong position in the emerging private rented sector (PRS) market.
Big investors have turned their attention to the residential market and many are looking at the US model, usually based around large upmarket apartment blocks with a hotel-style concierge.
But PlaceFirst, founded in 2010 by former KPMG man David Smith-Milne, has identified a different opportunity – revitalising unloved housing and targeting working tenants who can’t afford to buy. It is carrying out the wholesale redevelopment of streets in areas which have been neglected, often picking up the properties cheaply from local authorities.
In Accrington, Colne and Morecambe, it is working on 287 houses that were left derelict after the coalition government pulled the plug on Labour’s Patherfinder scheme which involved buying up and demolishing homes in areas where the housing market was said to have failed.
“We knew the opportunity was there for us to step in with a different model which wasn’t reliant on grant funding,” said Mr Smith-Milne. “We wanted a housing led regeneration product and realised the best way would be to look at the most distressed areas. We went against the grain of what everyone else was trying.”
The plan was to attract customers, “in the growing gap between affordable housing and ownership… it’s affordable, but it’s not affordable housing,” said Smith-Milne. “Anybody given the choice would own their own home. We’ve thought long and hard about which bit of the private rental market will be the source of the strongest demand. The economically mobile will gravitate to home ownership. We focus on those who can’t ever access home ownership due to the level of variability of their income.
“They would have traditionally used social housing but it’s being awarded on a strict needs-based criteria and hardly anything is being built, while the affordable housing demographic is getting bigger all the time.”
The PlaceFirst model allows for an investment of between £87,000 and £132,000 in each property to generate a 6% yield. The idea is to target tenants whose gross household income can support rents of between £482-£879. The properties are completely overhauled to high energy efficiency standards and in some cases remodelled, with some knocked through to create houses with more bedrooms. In Accrington, PlaceFirst has even bought an empty pub and is now looking for an operator, and demolished a 1980s bedsit building to create more open space.
PlaceFirst was established in 2009 as a management buyout of the property consultancy division of outsourcing group Tribal. Its first major project was a 1,400-property solar panel scheme in Blackburn through a special purpose vehicle called Roof Energy which it later sold. Then the company turned its attention to the former Pathfinder areas.
The first 150-house site in Accrington was a joint venture with housing association Twin Valley homes and has taken an investment of some £15m.
PlaceFirst has secured funding from various sources – it’s own cash has been leveraged agsinst borrowings from the Homes & Communities Agency and the banks. It has also taken investment for the green technology installed in the homes from 350 IP, which spun out of the Carbon Trust, through the North West Fund.
The business has identified a further 257 units in Merseyside, Cheshire and Hartlepool but recognises it will run out of redevelopment sites and is plotting new-build schemes.
