In Conversation With… Nick Stonley
September 11, 2013
There’s a plethora of leading figures in the property, investment, finance and charity sectors who we’re regularly in conversation with, many of whom are guest authors for PRSupdate – and here we share more about them, their roles, priorities and backgrounds. If you would like to feature in this series, or to suggest someone who might, please get in touch through our contact us page or let us know on twitter.
Why not take a lucky dip into our In Conversation archives and discover:
- Stuart Corbyn, Chairman of Qatari Diar Delancey, East Village Operations
- Lesley-Anne Avis, National Chairman of the Association of Women in Property
- Mark Weedon, Head of Residential and UK Alternative Real Estate at IPD (Investment Property Databank)
Today we speak with Nick Stonley, Managing Director of United House Developments.
Can you tell us a little about your background?
I have 33 years experience within the construction industry, with 18 years at Director level. Most of my career has been focused on house building and residential development.
My knowledge of the industry and hands on experience ranges from site engineering,site management, land acquisition, planning, and sales and marketing through to running substantial businesses.
United House Developments Ltd (UHD)
I have been at United House for over five years. My role at United House Developments is Managing Director with overall responsibility for their financial performance in accordance with the Group’s expansion objectives. I am also a Director of the main United House Board, contributing to the Group’s overall strategies and business objectives.
Before United House, I spent 13 years at Berkeley Homes at Senior Director level. I was Managing Director of a number of regions including City and East London, South East London and Kent.
For those who may not know, can you briefly explain what United House does?
United House is a leading housing specialist offering innovative solutions across London and the south as a developer, contractor and investor.
The company, founded in 1964, has achieved impressive, consistent growth, with a turnover of £197 million for 2012, reflecting its outstanding track record for delivering an unrivalled combination of social housing new build, refurbishment, regeneration, mixed use, Public Private Partnerships and private residential schemes, investing in the communities where it works. The company is a pioneer of low-carbon retrofit to reduce fuel poverty.
United House Developments won Housebuilder of the Year at the What House? Awards 2011 and Homebuilder of the Year at The Sunday Times British Homes Awards 2012, for its exemplary and design-led approach to high-end development in prime locations.
What is the biggest hurdle when it comes to developing specifically for the PRS?
The major difficulty is in achieving the quantum to produce the required economies of scale which affects the overall investment returns. Thus land availability, and opportunities for sites in the right locations, attractive to renters, in competition with housebuilders and developers are ongoing challenges.
Another consideration is the viability of a site – which will be hampered by the planning requirement to deliver an affordable housing element.
Acquisition values tend to be typically lower than open market values because of rental levels and targeted returns.
What is an acceptable return rate for investing in PRS developments in the current market?
This is driven by the institutional funds. To establish adequate returns from PRS you need to invest for a minimum term of seven to eight years. A large percentage of the equity funds in the market are more five to seven years focused.
The yield depends on scale and location but a good yield is between 6-6.5%. However, longer-term investments on a large portfolio will yield a better rate of return.
How does developing homes for the PRS differ from traditional ‘build to sell’ product?
PRS requires quantum, to drive economies of scale. Design of common parts and services are more focused on reduction of service charge than aesthetics. The mix and layout of units are designed to maximise rents. There is also a focus for the landlord to generate additional income from sundries.
What are currently the greatest challenges facing the PRS?
The current planning requirements for affordable housing can make developing for PRS unviable. The competition for sites with private developers is another factor affecting the volume required for PRS. Achieving acceptable returns on sites and capital growth outstripping rental growth, particularly in London are tangible threats.The volume of property being acquired over the last few years from foreign investors, the majority of which will come on to the rental market simultaneously with some of the first large PRS schemes is a major challenge.
Typically, they will have been bought from developers and housebuilders but are likely to have higher service charges as the schemes have been designed to attract purchasers not renters. If PRS wins the rental battle it will be interesting to see what happens to the sales values of the privately owned properties if they remain unlet. Although if the predicted demand for PRS is correct there will be room for both, as I do not believe that until there is a major shift in planning policy towards PRS, that the sector will be able to generate the required volumes.
Finally, do you have a favourite London landmark?
Central Saint Giles. I am slightly biased as we developed the private residential element there. But the colourful Renzo Piano designed scheme brings vibrancy to a formerly grey area of London.
I went to the top of The Shard the other day and Central St Giles immediately stood out. A number of people have remarked on how well it stands out from the air when flying in to London.