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GROWTH STRATEGY

GROWTH STRATEGY. Fiona Coventry Head of Growth and Partnership's. Responsible growth aligned to ‘heartland’ approach Routes to growth Delivery models Risks/ restrictions Approach to Growth. Agenda.

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GROWTH STRATEGY

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  1. GROWTH STRATEGY Fiona Coventry Head of Growth and Partnership's

  2. Responsible growth aligned to ‘heartland’ approach • Routes to growth • Delivery models • Risks/ restrictions • Approach to Growth Agenda

  3. Development of asset holding appraised on realistic long term assumptions (management/ maintenance). • Identified growth areas. Not solely opportunistic. Responsible Growth

  4. Targeted Growth Areas

  5. Merger – 10% of HA’s < 2,500 units • Develop – HCA affordable homes programme 2015-18 • Acquisition – ‘Distressed stock’ and RP disposals • New markets – PRS & Sales Routes to Growth

  6. Advantages: • Brings assets and financial capacity to the group. • Quick way to grow • Efficiencies of scale • Disadvantages: • Needs to be a good geographical and cultural fit. • Upheaval within organisation, including risk of redundancies. Merger

  7. Advantages: • Bespoke product - location and fit with target market • Predictable running costs • Attractive to customers, giving high customer satisfaction • Vibrancy associated with being a developing RP • Disadvantages: • Capital hungry – In terms of cash, borrowing and security • No programme, no delivery team! Develop

  8. 1a. Corporate loan finance no grant Delivery Model Construction £ £100K £50K £50K £50K EUV-SH £ £0 £50 £100 £150 100K Loan Security 105-110%

  9. 1b. Corporate loan finance with grant Delivery Model Construction £ £100K £50K £50K EUV-SH £ £0 £50 £100 £150 20K Grant/80K Loan Security 105-110% Grant Security 105-115% loan?

  10. 2. JVCo Developer 50% Cash 50% Cash £100K 50% Return 50% Return ‘Dev Co’ Delivery Model Sales Return @ 20% ‘Agreed Purchase Price’ Design, Build and Sales Contract 80% ORS 20% AR

  11. HCA Affordable Homes Programme 2015-18: • 3 year programme being procured next spring • Opportunity to get grant which should not be missed • Will require sufficient capital or borrowing capacity to bid (For a programme of 150 units per annum will require circa £12m per annum @£80K per unit). • NB: Opportunity to review framework partnership prior to spring to ensure maximum value for money. Opportunities

  12. Advantages: • Cheaper than development, unit for unit - less burdensome in terms of cash, borrowing and security • There are bargains to be had! • Disadvantages: • Inherited product - location and fit with target market may not be great • Not new, and specified by us, so running costs uncertain Acquisition

  13. 1. Corporate loan Finance Delivery Model Acquisition £ £61K £50K £50K EUV-SH £ £0 £50 £100 £150 Security 105-115% loan? 61K Loan Security 105-110%

  14. Purchase from selling RP’s: • Target stock which is a poor geographical fit for transferring RP, as sometimes good quality stock is tendered. • Purchase of ‘distressed stock’: • Although cheap, this is often less attractive for rental stock and more suited to PRS due to the inability to specify compliance with a given standard. Opportunities

  15. Advantages: • Higher rents, so more easily self supporting • Funding streams available – Build to rent/ PRS guarantee • Meets the needs of new markets • tradable • Disadvantages: • Vires and company structure implications • Competitive market • Little known about long term demand. Private Rented Sector

  16. 1. Corporate Loan Finance Delivery Model Construction £ £100K £125K OMV £ £0 £50 £100 £150 Security 105-115% loan? £100K loan Security 110% NB: Government backed PRS guarantee also available

  17. 2. Lease/ Sale and Leaseback Delivery Model

  18. Build to Rent: • Round 2 tender due in at the end of October. Likely to be developer bidders keen to find an RP partner to own/ manage on completion. • PRS Guarantee: • Reliant on securing corporate finance but good provisions in respect to security of loan. Relies on a portfolio of 100 units. • Lease deals: • Lots around with Pension companies, Financial institutions etc. Some tenders due out imminently in Mcr. Opportunities

  19. Advantages: • Income generating • Meets the needs of new markets • Disadvantages: • Vires and company structure implications • Competitive market • Risk of unsold assets on the books Sales

  20. Risks: • Income uncertainty (PRS) • Demand uncertainty (PRS and Sales) Restrictions: • Regulatory • Lender consent • Gearing • Unencumbered assets Risks and Restrictions

  21. A mixed bag: • Grant fund traditional development • JVCo’s with developers, sales to cross subsidise • Lease/ sale and leaseback • Be opportunistic and acquire, but be selective • Mergers, if the right one comes along Above all, it must be the right scheme and the right product, in the right place Approach to Growth

  22. Mcr, PRS, AR Barnsley, AR & SO Growth Areas and Products Tameside, AR Trafford, All High Peek, AR, SO, Sales Rotherham, AR Sheffield, AR, PRS Stockport, All Cheshire East, All Chester and Cheshire West, All

  23. Barnsley, AR & SO Questions Tameside, AR ? High Peek, AR, SO, Sales Rotherham, AR Sheffield, AR, PRS Stockport, All Cheshire East, All Chester and Cheshire West, All

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