Qandor Property Magazine | Issue No. 14 | June 2021

Qandor.. ®

PR OPERTY MAGA ZINE

NAMAN PATHAK

A grounded entrepreneur with sky high ambitions

SUSTAINABLE DEVELOPMENT

Jonathan Fashanu explains why it's more than just 'going green'

TROPOLIS. Issue No. 14 – Qandor – 1

Issue No. 14 | June 2021

TM

IN THIS ISSUE

THE FORMALITIES

04

FOREWORD A letter from our Founder, Matt Siddell

PRIME

06 CONVERTING AN UGLY DUCKLING IN 3.5 MONTHS

By Josiane Wileman

HERITAGE

08 HISTORY IN WEST SUSSEX

By Emma Morby

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INTERIORS

16 MISTAKES SELLERS MAKE - AND WHAT

ISSUE NO. 14

Cover featuring Naman Pathak of Mountbatten Homes, a rising star in the property world with business savvy and good instincts. (p.26).

NOT TO DO WHEN SELLING YOUR HOME

By Christopher Hammond

INSIGHT

20 5 THINGS I LEARNT WORKING FOR THE BERKELEY GROUP

By Ben Richards

COVER STORY

26 DEVELOPING AN EMPIRE In Conversation With Naman Pathak

SUSTAINABILITY

32 HOW SUSTAINABILITY IS BECOMING

INSURANCE

72 5 REASONS WHY YOU SHOULD TAKE

MORE IMPORTANT IN THE PROPERTY

OUT CONTRACT WORKS INSURANCE

WORLD

YOURSELF RATHER THAN RELY ON

By Gary Hersham

YOUR BUILDER’S POLICY

38 DEVELOPING THE CASE FOR

By Tommy Hodgson

SUSTAINABLE BUILDINGS

By Jonathan Fashanu

PENSIONS

74 CLUB TOGETHER TO BUY

PLANNING

44 MANAGING PLANNING RISK IN MAJOR DEVELOPMENTS

COMMERCIAL PROPERTY WITH YOUR PENSIONS

By Gorge Ttouli

By David Kemp

50 SHARING RISK CAN DRIVE GROWTH IN THE GOVERNMENT’S BRAVE NEW

FINANCE

78 WHAT DUE DILIGENCE WILL DEVELOPMENT FINANCE LENDERS

WORLD OF PLANNING

UNDERTAKE ON A PROJECT?

By Sam Cherry

By Gary Walsh

DEVELOPMENT

52 HOW TO COMPLETE AN INITIAL ASSESSMENT FOR YOUR PROPERTY DEVELOPMENT OPPORTUNITIES

By Dorian Payne

58 UNINTENDED CONSEQUENCES (AND

82 THE FUTURE IS FINTECH

By Mike Bristow

86 2020’s ‘LOCKDOWN ON LENDING’ SAW THE CONSOLIDATION OF SOME ALTERNATIVE LENDERS

By Paul Watson

HOW TO AVOID THEM!)

By Martin Brooks

62 REFURBISH OR BUILD FROM SCRATCH?

By Robert Ciuraru

BUSINESS & TAX

90 PAY YOUR DUES

By Michelle Lowe

94 THE ADVANTAGES OF GRANT FUNDING

SURVEYING

By Georgina Keys

68 THE IMPORTANCE OF A PARTY WALL SURVEYOR

By Steven Vaughan Issue No. 14 – Qandor – 003

Qandor Founder Matthew Siddell Managing Director Kevin Taylor Managing Editor Gabrielle Winandy QANDOR TEAM Membership Manager Rekha Patel rekha@qandor.org Videographer James Evans james@qandor.org For editorial and advertising enquiries, please email: magazine@qandor.org Visit our website: www.qandor.org Contributors Ben Richards Chris Hammond David Kemp Dorian Payne Emma Morby Gary Hersham Gary Walsh George Ttouli Jonathan Fashanu Josiane Wileman Martin Brooks Matt Siddell Michelle Lowe Mike Bristow Naman Pathak Paul Watson Robert Ciuraru Sam Cherry Georgina Keys Steven Vaughan Tommy Hodgson Legal Qandor Ltd does not endorse any of the members or contributors to this publication. Always seek your own independent advice prior to investing or agreeing terms of business.

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EXPERT ADVICE When I first met Naman Pathak, I was impressed to learn about the types of projects he chooses to develop.

At the time, he was a man in his late 20s and had a fantastic vision for the direction in which he saw his business heading. Naman presented to a live audience at our very first instalment of Q.TV, where he spoke about delivering over £40 million worth of projects across London and the Home Counties, including an impressive 14-story residential tower in Brixton. Fast forward three years and Naman continues to make waves in the sector, grow his business, Mountbatten Homes, and deliver some very interesting projects. Read his interview on p.26.

This issue is packed with some great advice columns and opinion pieces, all written by Qandor members. Sustainability in construction is explored from two thought-provoking perspectives by Gary Hersham (p.32) and Jonathan Fashanu (p.38). Interestingly, Gary and Jonathan both highlight that the importance of sustainability goes far beyond ‘the need to go green’. It is about future-proofing the property sector to ensure it remains environmentally and commercially fit for purpose.

SSAS pensions exist in an unregulated corner of the property sector and we’re witnessing another rise in unsecured debt. It’s so important that people work with trusted professionals if they choose to go down the SSAS pension route. Fortunately, George Ttouli is a regulated IFA, and shares his advice on how to use your pensions to buy commercial property the right way (p.74).

Also in this issue, Christopher Hammond looks at the mistakes people make when people sell property (p.16), and David Kemp shares some tips on how to manage planning risk when working on major developments (p.44).

Matt Siddell Founder

E-BOOKS PROPERTY DEVELOPMENT ESSENTIALS Expert advice to get it right!

What are the biggest challenges developers face?

Four rising stars in property working on successful deals share their knowledge on what to do and what NOT to do when it comes to property development.

Dorian Payne Castell Group

William Stokes Co-Space

Denis Gleeson Gleeson Build & Develop

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Naman Pathak Mountbatten Homes

Issue No. 14 – Qandor – 005

PRIME

FROM AN UGLY DUCKLING (WITH POTENTIAL) TO A WHITE STONE SWAN IN 3.5 MONTHS JOSIANE WILEMAN Co-founding Director Elegant Property Investment www.elegantpropertyinvestment.com

Or the transformation of a 500 m2 French 18th century Manoir into a 5-star holiday rental residence in record time.

We all know that refurbishment and transformation of old character buildings can be full of surprises that can cause delays, so what are the essential ingredients to meet a tight completion deadline whilst aiming for high standards? The transformation of Manoir Les Gaillardoux in South West France gives us a few clues.

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This is the story of one of our French projects that achieved a happy outcome – a 500,000-euro transformation project started on 5 January and completed just before 21 April of the same year.

When we first saw the Manoir with a local estate agent, it took some imagination to visualise its potential, as the property had been standing in “its juice”, as we say in France, for over 50 years.

Originally built in 1765, it had randomly developed over time into 8 bedrooms, 2 basic washrooms, 2 randomly located toilets and

a 50s kitchen. It also had a spacious living room and a south-facing dining room with a view over the hilly countryside, and some handsome features: big oak beams, lovely high windows and ceilings in many rooms, venerable terracotta tiled floors which had seen history and a majestic central stone staircase. It also had an attractive stone pillared coach house, a traditional stone barn and a rare example of a round Quercy pigeon tower standing by what looked more like a frog pool than a swimming pool. All surrounded by a nature park.

Having decided to buy the Manoir, we used the two and a half months between

the Compromis de Vente and the Acte Authentique completing the purchase to recruit an inspirational local Project Manager, decide on a new internal configuration of the house and have plans drawn for the works to come. The Project Manager meanwhile carefully recruited and selected her team of local artisans who would carry out the refurbishment and transformation work.

Part of the plan was to rewire the whole property, install a modern drainage system, redesign the pool, remodel and reroof the North wing, create 6 comfortable bedrooms, each with en-suite shower room, double washbasins and toilets (1 with a spa bath), ➳

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1 extra shower room for the swimming pool, a further 2 toilets and washbasins (8 in total), fully equipped kitchen and separate laundry, 4 spacious reception rooms and a glass veranda, 14 new windows, new concertina patio doors, and full redecoration.

The project required 15 different trades and specialists and their teams. The target date for completion was set at April and the commencing date on 5 January. To maintain productivity, the artisans were asked to work as one team under the leadership of the Project Manager, and contracts were allocated subject to committing to our timing and

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requirements, a tall order for independentminded artisans who had never worked that way before.

But we had two major assets: • A highly motivated and experienced Project Manager, fully conscious of the need for inspirational leadership and a hand of steel in a velvet glove. We all wanted these men and women to succeed. They felt it and everyone gave their best. Her daily emailed reports and any requests for clarification kept us tuned in from the UK. ➳

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• Towards the end of January, when the team spirit was developing, we announced that we planned to celebrate project completion on 21 April, with champagne and dinner to honour everyone who had

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contributed to the success of the project, with their spouses or companions, and all the dignitaries of the area – the best personal recognition and publicity the artisans could receive. Everyone would have a chance to shine… or hide in shame.

They all shone and took great pride guiding visitors through the Manor and showing their work. We were 85 at dinner and made local history.

The result was the birth of a 5-star holiday rental residence, fit for an international market, and which subsequently won the top 5 star-rating from the French Tourism Ministry. The beginning of another adventure. Q.

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HERITAGE

COUNTRY LIVING IN HISTORIC WEST SUSSEX. EMMA MORBY Director of Land Acquisition Heritage England www.heritageengland.co.uk

Amberley Barn is an exceptional Grade II listed barn conversion with the addition of two separate one-bedroom cottages.

This property in total offers just under 9,000 sq. ft. of accommodation located within the beautiful South Downs National Park and has the benefit of some very impressive views over the Amberley Wildbrooks nature reserve.

The barn, which is believed to date back to the 17th century and was used for 012 – Qandor – Issue No. 14

storage and livestock as part of the Amberley Castle estate and was lovingly converted to a very high standard by the current owner approximately 17 years ago and is steeped in local history, has a 12th century castle as its neighbouring property! The barn appears aged from the outside, but inside it creates a modern living area with exposed oak beams, solid oak floors and large windows that flood the property with natural light.

The generous accommodation comprises six bedrooms, six bathrooms and four reception rooms. There is a beautiful ➳

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dining hall with galleried landing and full-height dual aspect windows giving a wonderful feeling of space and light. There’s a game room, study and large sitting room with open fireplace which showcases the stunning views over the Amberley Wildbrooks nature reserve, and the kitchen/breakfast room has a vaulted ceiling.

Outside there is an extensive gravelled parking area, large timber-framed double car barn, garage and storeroom, so you’ll have plenty of room for storage!

Adjacent to the castle, there are two converted one-bedroom cart cottages each with a sitting room, bathroom and double bedroom.

The gardens are landscaped with large lawns, patio areas and a feature walled garden for all those keen gardeners.

Amberley Barn is perfect for country living and enjoys panoramic views over the South Downs National Park, Amberley

Castle and neighbouring Wildbrooks nature reserve.

If peace and tranquillity are what you are looking for, then look no further! This offers plenty and has a price tag of around £2,400,000. Q.

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INTERIORS

MISTAKES SELLERS MAKE – AND WHAT NOT TO DO WHEN SELLING YOUR HOME CHRISTOPHER HAMMOND Director Beau Property www.beauproperty.com

Home staging and interior design can make or break a property sale. Property developer Chris Hammond, who also runs a home staging company, reveals his tips and tricks to sell your home quickly – and for the best price.

Here are some of the mistakes sellers make – and what NOT to do when selling your home: Personalising the space – It’s vital your home doesn’t feel unloved, but by 016 – Qandor – Issue No. 14

personalising the rooms too much, you can put buyers off, and they won’t be able to visualise themselves living in the property.

Just because you love a certain genre of art doesn’t mean everyone will (even if you spent a fortune on it!).

Bold colours – To appeal to the mass market, keep paint colours neutral. There are lots of warm, characterful neutrals available with paint suppliers now, so if you have a bright feature wall that your friends have told you is a bit OTT, get the paint brush out and tone things down. Calming, ➳

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relaxing spaces sell houses. And it goes without saying that if your rooms are all looking a bit tired, give them all a coat of paint to keep things looking fresh.

Clutter – Clear it out! Decluttering is key. Firstly, to maximise the space and secondly, to depersonalise. Buyers struggle to see past ‘stuff ’. If might be stuff you’ve treasured for years or collected affectionately on your travels. But viewers will see it as a mess and often can’t see the potential of a property that simply isn’t tidy. A vase and a couple of home decor sculptures or ornaments can show off shelving or sideboards perfectly – you don’t need your collection of tea pots on display to do that.

On trend interiors – Sometimes trying too hard and following trends can actually put people off. You don’t want to make your property niche – classic interiors are your

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safest bet when selling your home.

Eclectic interiors – These can be beautiful when executed correctly. But if you’re unsure, or your family or colleagues often question your tastes, keep things simple. Clashing patterns and mixing several different textures and colours can create interesting, often inspiring interiors, but if in doubt, don’t be too ambitious with your style. Save your ideas for your new home.

Statement kitchens or bathrooms – If you must, make your cloakroom or spare bedroom the statement, with darker colours, patterned tiles, or striking wallpaper – keep things neutral in key spaces like kitchens and bathrooms (adding stylish accessories is enough to achieve a ‘designed’ look). If buyers don’t like these rooms, they’ll be worried about how much they have to spend to replace them, and the

saying ‘kitchens sell houses’ isn’t a myth.

Neglecting that all important first impression – Buyers often decide on whether they want to buy a house before they’ve even seen the entire property, so don’t forget about the exterior. And the hallway – Store coats away, and add a large mirror in a narrow hallway to make the space feel bigger. This is not a space to fill with a picture wall you’ve copied from Pinterest. Buyers don’t need to see dozens of family snaps or photos from your travels.

A mirror and a house plant are enough, and maybe one or two photographs to dress a console table if you have the space!

Mood or statement lighting – Mood lighting can be perfect when you’re relaxing at home on a Friday evening, but natural light sells houses. If you have shutters, make sure you have them open to let the light flood in, and if you’re adding new window treatments to appeal to buyers, frame the window with curtains or hang blinds cleverly to avoid blocking any light out. In doing so, you achieve a feeling of grandeur, even in small, dark spaces. Similarly, ‘cool’ statement lighting can again over personalise the space – statement chandeliers or bright colourful LED under cabinet lighting in the kitchen might be something you’ve dreamt about, but remember, your taste might not be everyone’s cup of tea.

Multi-functional rooms and spaces – Home staging and interior design are all about a clever use of space. But what works for you and how you need to use the space might actually deter buyers. If you have a desk in a bedroom, for example, even a cool one that hangs from the wall

and was designed meticulously, it might just be odd to someone who just wants to sleep in this room. Stick to conventional styles and uses of spaces. Something quite obvious but not always a rule sellers follow is dressing bedrooms as bedrooms. Not music rooms, or art studios or home offices – just bedrooms (Although, it is always useful to show there’s space for a desk in a spare bedroom or a living space nook... particularly in the current climate when working from home is the norm for more than ever before).

Don’t confuse design and homeliness – Buyers want to see fresh, welcoming and warm interiors in new homes; they won’t necessarily appreciate the gadgets and gizmos that you might love. They just want to visualise themselves living there.

So, of course, sell a lifestyle, but the main rules are: keep things simple with style and colour, tidy up and clean, clean, clean.

Adding a scented diffuser or baking a cake on the open day is sometimes advised by home stagers... And if that helps you sell faster and for the highest price, why not? Q.

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INSIGHT

5 THINGS I LEARNT WORKING FOR THE BERKELEY GROUP – AND HOW THEY’LL MAKE YOU A BETTER DEVELOPER. BEN RICHARDS Director Aura Homes & EXP Property www.aurahomes.co.uk

I was fortunate to spend three years working on some incredible Berkeley Group schemes in Battersea/Nine Elms via their subsidiary companies, St James and St William. In this article I will share some of the key takeaways that I learnt whilst working as a Technical Manager with such an established and successful property development company.

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‘Riverlight’ was the first project in which I got to see the later stages and occupation of a development and how customer care was at the forefront of the company ethos.

‘Prince of Wales Drive’ was only just being built out of the ground after years of preparation when I left to start my own business ventures. At this early stage, I was able to see just how much value can be added during the design and planning process – to the tune of almost £100m in our case.

Read on to hear how!

For those of you that don’t know much about the Berkeley Group, it’s quite cutthroat, a high-performance and a highpressure company to work for. They demand a lot from their employees, contractors and external consultants and that’s why they’ve been at the top of the development game for 40 years.

My role focused heavily on the design of our schemes so most of the tips below follow this and should be something you as the developer should be driving from your consultant team of architects, engineers and third-party consultants.

First of all, I’d like to explain how the company was structured into different work functions. I know this has helped my development business with how we build our internal teams, so I’ll elaborate in the hope that it helps with yours.

There were six key functions/ teams: • Land and Planning – Front-end land buying and obtaining planning permissions before being moved on to the delivery/operations teams.

• Technical – Would typically take on the projects with planning permission in place, tasked with optimising the scheme for added value and coordinating the subconsultants (architects, engineers, interior designers, energy consultants, etc…) to provide the design packages.

• Commercial – Essentially the Quantity Surveying element and the team that would feed into the Land/Planning and Technical teams to ensure the overall budget is closely monitored.

• Build – The team of project managers on the ground overseeing the various contractors, health and safety on site, and reporting issues to the ➳ Issue No. 14 – Qandor – 021

Technical/Commercial team to resolve.

• Sales and Marketing – Involved much sooner than you would imagine (even before breaking ground and three years before any apartments were completed in our case). Close liaison with the Technical team to create CGIs, marketing brochures, floor layouts and interior design specifications ready for sale offplan (in the UK and overseas). On-site presence when possible via marketing suites.

• Customer Care – After-sales customer service and maintenance. The Berkeley Group are well known worldwide for the quality of product they produce, and the level of attention they give their buyers.

It’s no wonder they find investment buyers asking for the marketing brochures on their next site ready to buy and buy again.

1. Focus on the customer journey outside It’s not just what’s in the house/flat or what it looks like that will sell it. It’s how the landscaping and context invites you in. Access should be effortless with good wayfinding from the communal spaces.

On the large eight-year phased schemes I worked on, it was fundamental to think about the construction stages so that prospective buyers could access the completed blocks of apartments without being put off by dusty walkways, noisy plants and messy workers.

Tidy the bins up, offer to repoint the neighbour’s boundary wall if it improves the site entrance, pressure wash the driveways.

It all adds up to that all important first impression.

Think about these different functions in your property development business and if you aspire to grow, how you could mould your teams in a similar way.

You can see from above how the Technical team may feed in to almost every other function of the business at some point throughout the development lifecycle.

It’s why I believe that good design should be such a large focus of your time as the developer.

You need to be the driving force behind your architect and consultants and not just rely on them to carry out the design for you.

Challenge everything and ask ‘why’ they are designing it that way.

So these are my top tips to use in your own developments:

2. It’s all about the customer experience and functionality when inside Everything should have its place, i.e. space for a console table in the hallway with a shoe rack, his and hers hooks on bathroom doors, a utility cupboard to store your ironing board and drying rack. Your greatest success will come from someone that instantly imagines themselves living in your properties.

If you have a marketing suite or are staging the properties, you should focus on all the different senses. Not everyone’s main focus will be on what your apartment looks like.

Some may well remember the smell of the candles in the bathroom, the textured wallpaper they touched in the hallway, the

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way the underfloor heating felt on their feet, the calming background music. Try to appeal to all these senses.

And my favourite tip of all time: Your shower valves do not belong under your shower head! Nobody wants a cold arm when turning the shower on.

3. Improve your floor plate efficiency This along with other design optimisation allowed us to take an 836-unit scheme to 955-units – within the same building envelope! These extra 119 units were worth close to £100,000,000 in development value (that’s a lot of 0s) for a paperwork exercise.

To do this, the goal is to get your NIA:GIA ratio up as high as possible.

Above 85% is good but you should really target close to 90%, meaning there is very little wasted space in communal corridors, stairs, lift cores, etc., leaving more space for the good stuff: ‘NSA’ – Net Saleable Area.

Question whether you can have thinner walls, narrower stairs, a smaller lift shaft – whilst complying with building regulations obviously.

Bonus tip: you can also improve your efficiency by reducing the communal hallways and dead-legs within your apartments/houses.

4. Regularisation, regularisation, regularisation This will save you hundreds of pounds, especially when you grow as a developer ➳

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and start creating 10, 20, 100+ unit schemes.

By this, I mean creating repeating forms. This could be similar apartment layouts across multiple floors, the same 5-house types replicated across your land development (maybe with 5 different cladding choices), the same kitchen design (left and right-handed), or identical bathroom sizing and layouts in every flat.

On the two large schemes I worked on modular, bathroom pods were used to improve efficiency, reduce wet trades on site, improve the quality of product, and speed up installation times. These were shipped in completely finished, pushed in to position, and connected up to the waste pipes. Worth considering for larger schemes.

When you are doing small developments sub-10 units, you don’t notice the effect of this regularisation as much, but when the £1000 saving made on your kitchen design (due to replication) is factored across 100 units, you do the maths: that’s £100,000 saved. Fewer drawings, less mistakes, quicker installation – what’s not to like?!

5. Review the development mix What I mean by this is understanding the number of 1, 2, 3, 4-bedroom flats in a development against the market demand, and also the location of the unit within the development.

Rearranging the location of certain units generated a huge uplift in value for us. Putting a 2-bedroom unit on the landscaped courtyard side of a

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development as opposed to a road facing side added £50,000 to the end value. So it made sense to move the 1-bed flat (which was courtyard side) to the road elevation where we only dropped £20,000 in end value by doing so. That simple switch created a £30,000 uplift in value.

Work with your marketing/sales team or agents here to get their input early in the design stage.

Bonus tip no. 6: Don’t overlook storage! It’s part of the National Space Standards to include a minimum area size of storage. I’d implore you to go beyond this considerably as it’s a huge factor for buyers.

Whether you’re an SME developer turning one development at a time, or a large house builder churning out 100s of units a year, these tips should help you sell faster, build cheaper, and ultimately provide a better user experience that your buyers will tell their friends about.

Go get ‘em! Q.

If you’d like to discuss your next property development with me, do get in touch at info@aurahomes.co.uk or ring 0203 189 1619. I own an award-winning architecture firm in SW London (www.aurahomes.co.uk ), but also carry out my own property developments (www.XPproperty.co.uk) so I understand great design and the commercial aspects needed to generate healthy profits and saleable developments.

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COVER STORY

DEVELOPING AN EMPIRE. IN CONVERSATION WITH NAMAN PATHAK Managing Director Mountbatten Homes www.mountbattenhomes.com

He’s run an estate agency, a construction recruitment company and is possibly about to buy a builder’s yard. When serial developer Naman Pathak does property, it’s resolutely from the ground up.

The MD of Mountbatten Homes, Naman provides New Build homes in London and the Home Counties, his stock 026 – Qandor – Issue No. 14

in trade being small bespoke nine-unit developments. Almost a decade further on from when he first set foot in the property industry, this 32-year-old entrepreneur now has his sights set on 50-unit developments.

Then there is his company’s own future HQ in Ealing. Taking inspiration from the Everyman Cinema in Chelsea’s King’s Road, the new development will showcase what Naman and his team are capable of in terms of producing a landmark building. ➳

Issue No. 14 – Qandor – 027

“Luck, confidence and effectively throwing myself in at the deep end, whether or not I feel ready for it – that’s all helped with my journey so far.”

It all began with a site earmarked for six apartments belonging to his father, who was too busy elsewhere to work on it. Pathak junior managed to negotiate planning for another two units in the basement.

“From that one site, I grew to two, then three,” he said. “Today we have 12 sites on the go. Four are currently in construction.

We’re looking to start on another two in the next quarter and hopefully another two after that. We want to be able to develop a site within a two-year period then move on.”

The stint running his own estate agency was to learn what it takes to sell and rent stock. The construction recruitment agency, how much trade labour cost. Investors in

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his developments like the fact he ‘knows the ropes.’

“For me, my focus became development because it’s something I really enjoy doing and realised I had a knack for,” he said.

“I’m particularly proud of the planning go-ahead I received for a 14-storey tower in Brixton close to when I first started out. It was a pretty run-down pub and everyone I spoke to told me there was no way I’d get permission. Last year we actually succeeded in getting full planning permission on it.

“It was purely down to gut instinct.

Although, ironically, if I was offered the same deal now, I don’t think I’d go for it, as I’d deem it too risky.”

Despite his success to date, the LSE graduate isn’t exactly resting on his laurels.

“Part and parcel of any business is luck,” he said. “By that, I mean being in the right place at the right time. But luck is only half of it. You have to put yourself in those places in the first place.

“During my first Qandor talk years ago, for instance, I felt incredibly nervous. I was a young guy and still learning my trade.

I didn’t feel right about being on stage with people in the industry who were so much more experienced than me. But, as a result of putting myself out there in some way, shape or form, the right people reached out to me.

“Also, if I like a deal, I’ll go for it – whether I have the money or not. And often I don't, as my finances are usually tied up elsewhere.

“I have the confidence to back myself, knowing that somehow I will make it work.

If you truly believe in something because it’s the right project, you’re obviously

committed to it and have a good track record, then there’s no reason why you won’t be able to pull other people in as part of that journey.

“Luck, confidence and effectively throwing myself in at the deep end, whether or not I feel ready for it – that’s all helped with my journey so far.”

Naman believes the biggest challenge for property investors, especially in London, centres around being able to unlock value in a site. That’s if you can find that site in the first place. So labour-intensive is this part of the process – and Pathak keen to grow the business – that Mountbatten Homes has an employee whose job is to do just that.

“Otherwise, it can all get a bit tricky,” he said. “It’s not like my father's McDonald’s franchise business, where he opens up a restaurant and people continuously come in to eat. With property, you can complete the most wonderful development, earn a very healthy profit, but then be sitting, twiddling your thumbs for the next six months because you don't know what else to put your money and effort into.

“Right now, we have a pipeline for the next 24 to 36 months, but I’d like to expand that to the next 10 to 15 years.

And, obviously, finding sites is the most important part of that process.”

Naman’s strategy is to provide a turnkey offering. This, he says, is where he adds value for investors. He puts in equity but gets a slightly higher proportion of the shareholding due to the work he does behind the scenes. He’s about to disband the construction management side so he can procure “things that matter” instead.

“Timber and joists, etc., we’ll leave up to the sub-contractors, but flooring and kitchen finishes – the aspects of a build that make a difference to buyers – that’s where we will add our value as developers,” he explained. “So, it’s turnkey to a degree but effectively the reason we have that process in place is to give investors comfort and add value at each stage of the supply chain.”

Naman believes the government needs to entirely overhaul the planning system. ➳

Issue No. 14 – Qandor – 029

Right now, he insists, it neither encourages nor incentivises developers to build quickly enough.

“I really don’t think councils do enough to support developers,” he said.

“They are often torn between what’s right for the borough, politics and what the GLA wants. Somewhere in the middle of that there is a solution, but it gets crowded out because there’s too many stakeholders with an opinion.

“There should be some sort of metric system where councils recognise house

030 – Qandor – Issue No. 14

developers who are doing well. They can then work hand in glove with them to progress further development in the borough.”

It was working with one council in particular – Croydon – that taught Naman one of his biggest property lessons. And that is to always have a Plan B. The Council went bust after 18 months of close working, prompting a sudden need for cash on Naman’s part. He also recommends looking at the worst-case scenario and, for peace of mind, making sure you can still fund it.

One unexpected expense he recently faced during lockdown was in the supply of plaster. Instead of paying £5 a bag, he ended up paying £20 (the market price was £50). Waiting another two months would have resulted in a huge amount of interest added to the project.

“Now, we're already learning from that, and are trying to buy things in advance. I'd rather buy in advance and pay for storage, than chance it to getting it a month before I need it. It’s why I’m now looking at possibly investing in a builder’s yard.”

Naman, whose family are Indian, isn’t concerned with price falls in London over the past year.

“I've received at least 10 phone calls from India in the last three weeks from people who are looking at acquiring assets in the Capital,” he said. “It’s thanks to the infrastructure which led to a successful vaccination programme. London is just that one place in the world that you can't ever really lose money.”

Well, it seems Naman Pathak can’t, anyway. Q.

SUSTAINABILITY

HOW SUSTAINABILITY IS BECOMING MORE IMPORTANT IN THE PROPERTY WORLD. GARY HERSHAM Founder Beauchamp Estates www.beauchamp.com

Sustainability is a word that has been used for decades and applied readily to almost everything in Maslow’s hierarchy of needs at some point, as a remark for transparency and excellence. In the course of the last two decades, the validity and understanding of sustainability have changed for both organisations/businesses and consumers: the notion has moved on in people’s minds and solidified to become a need in itself.

032 – Qandor – Issue No. 14

Sustainability is about the future and the need to create a sustainable system, balanced between productivity and environmental respect: the United Nations talked about sustainability as ‘economic development that meets the needs of the present generation without compromising the ability of future generations to meet their own needs’.

As the impact of ignoring sustainability becomes all too clear and real, in regard to the planet and human existence, the value of being guided by principles of sustainability is finding favour with an ever-expanding group of people and governments.

This is particularly true for wealthy individuals for whom engaging with and supporting issues of sustainability and the environment speaks to their fundamental principles and philanthropic and humanistic ideals – this is not just about aware men and women planting physical and metaphorical trees, the shade of which they will never sit under, but about these ideals informing and shaping an individual’s decisions and patterns of behaviour: from the food they eat and the clothes they wear to the investments they

make and the homes they buy.

While legislation for issues of sustainability may have started as a ‘bottom up’ movement, there exists in the majority of developed countries an increasing swath of fundamental legislation and taxation policies forcing organisations to meet minimum standards of sustainability and encouraging and rewarding them for meeting the best possible: this is driving energy conservation, water harvesting, recycling, and the reduction of pollution from transportation of materials. ➳ Issue No. 14 – Qandor – 033

034 – Qandor – Issue No. 14

Issue No. 14 – Qandor – 035

With real estate anticipated to consume around 40% of global energy annually, accounting for over 20% of international carbon emissions, sustainability in the property world is a poignant issue.

Increasingly stringent measures and targets, in addition to the race to become carbon neutral, have required all parts of the sector, from planners and architects to developers and funders, to provide increasing transparency to demonstrate their commitment. Capturing and successfully harnessing this value has been challenging for the real estate sector, particularly so in some areas, though less in others.

The link between sustainability initiatives and the creation of value is becoming more apparent in all four main sustainability value drivers: financial savings, worker attraction and retention, brand and reputation and, of course, customer attraction and retention.

036 – Qandor – Issue No. 14

Proactive approaches to increasing a building’s sustainability credentials are now becoming the norm for future-proofing, creating better long-term returns and satisfying occupier demands and needs.

By taking steps to develop greener buildings, the property sector can reduce its negative environmental impact. However, sustainability no longer simply covers the traditional issues of energy–water–waste.

It now also encompasses issues such as biodiversity, health and wellbeing, customer and community engagement and behaviour change – things that ever aware consumers want to see in place, be a part of and actively support.

The ‘green credentials’ of homes are increasingly important to consumers who want their decisions and financial patronage to minimise harm to the environment and want to know that their homes and the systems

that ensure their comfort are not delivered at a maximum cost to the very environment in which they, and future generations, will live.

This change, for both developers and customers, is bringing to the market and has built environment homes and buildings for which green credentials are at the very heart of their specification: from the materials used in the build, to the systems and appliances fitted.

These are no longer statements of fashion or intent, but fundamentals to secure planning, funding and sales.

One St Johns Wood is an excellent example of how principles of sustainability, when fully embedded, can deliver homes that are not only best in class from a technical perspective, but also hugely appealing to buyers both from a standpoint of aesthetics and the environment. Located in the leafy central London suburb of St John’s Wood, these new build homes deploy the very best

in ambient environment systems, heating and cooling, in addition to water usage and biodiversity issues with gardens and living roof.

When being an early adopter of cuttingedge or new technology, there is generally a premium to be paid. However, we are increasingly finding more and more clients who are happy to meet that cost, not only for the more immediate and financial benefits that may accrue, or for future-proofing and creation of something that will sustain its value more effectively, but for those less tangible or easily quantifiable environmental benefits, too.

It’s an investment in everyone’s future. Q.

For further information contact Beauchamp Estates on Tel: +44 (0)20 7499 7722 or visit www.beauchamp.com.

Issue No. 14 – Qandor – 037

SUSTAINABILITY

DEVELOPING THE CASE FOR SUSTAINABLE BUILDINGS. JONATHAN FASHANU Co-founder & CEO Dash www.homesbydash.com

We all know the stats. Roughly 30% of the UK’s carbon emissions come from our existing residential buildings. We need around 300,000 new homes a year; most of these will have to comply with the Future Homes Standard which will come into effect in 2025, all this playing a role to slash our emissions by 78% by 2035 in line with a netzero target by 2050. Regardless of whether we hit those targets or not, the direction of policy is clear.

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Sustainable developments are no longer a fringe movement; they are the new normal, and they are here to stay. While climate change helped strengthen the environmental argument for sustainability, COVID brought many of the social issues around health and wellbeing to our doorstep. Personally, it has been great to see many of the developers we work with engage in the dialogue, but we should be past that discussion, and every development should already have sustainability metrics implemented.

The main reason for the slow adoption of sustainable developments was that there was no demand for them. This ‘vicious circle of blame’ was highlighted 20 years ago, but you will be surprised to hear still the same arguments today. In 2008, RICS published a report1 where they presented a ‘virtuous circle’ where the market adjusts its requirements. The five takeaway points were as follows: 1. Sustainable buildings are not any more expensive to build f rom the onset than conventional ones.

Many developers still share the view that a sustainable build is much more expensive than a traditional one. The BRE and the Cyril Sweett building consultancy carried out research to quantify how much it would cost to build to BREEAM sustainability standards. The report2 found out that the additional costs to achieve ‘Oustanding’ or ‘Excellent’ standards were

typically less than 2% while incurring little or no additional costs below those standards. These costs could be paid back from the operational savings within two to five years.

The “Passivhaus” methodology was developed in the early 1990s and is one of the leading standards in energyefficient design and construction. A study

by Etude and Levitt Bernstein endorsed

by The Passivhaus Trust3 debunked the myth that Passivhaus certified homes cost 25% more than conventional ones. The actual figure is around 3-8%. This can be achieved when sustainability is considered at the very early stages of the project and integrated into the design.

2. There is an immense savings potential embedded in the existing building stock.

Besides the savings in demolition and construction, the potential for refurbishment in the UK is significant ➳ Issue No. 14 – Qandor – 039

Owners / End Users ‘We would like to have sustainable buildings but there are very few available.’

Investors

Designers & Constructors

‘We would invest in sustainable buildings, but

‘We can build or retrofit buildings in a

there is no demand doe them.’

sustainable way, but developers don’t ask for it.’

Developers ‘We would ask for sustainable buildings, but the investors won’t pay for them.’

Owners / End Users ‘We demand and occupy sustainable buildings because they are cheaper to run, increase our wellbeing and improve our image.’

Investors

Designers & Constructors

‘We invest in sustainable buildings because that’s

‘We design and construct sustainable buildings and

what occupiers want and because they give better

environments because that’s what our clients want

returns and have higher value growth potential.’

and society expects.’

Developers ‘We develop sustainable buildings because they are easier to sell, achieve higher prices and are much more resistant to obsolescence.’

040 – Qandor – Issue No. 14

due to the mix in the composition of building stock and our preference towards the older stock. The majority of the building stock, especially in London, will be around for years to come.

For example, homes existing in 2006 will make up 70% of the total housing stock in the UK in 20504. Refurbished buildings present an excellent opportunity to add value and improve their efficiency.

There, however, needs to be better policy to incentivise developers to explore these options.

3. Unsustainable development, construction and investment lead to obsolete buildings and a loss in asset value in the long run.

There are changes being made to the current building regulations (Part L and Part F)5, which will impact the requirements for energy efficiency from 2021. These have been driven by the need for regulations to align with lowcarbon government commitments. The new Future Homes Standard will deliver homes that produce 75-80% less carbon emissions compared with current levels.

They will also need to be fitted with low-carbon forms of heating. This means there will be a huge requirement for homes that will have to be retrofitted in order to meet an increased standard of regulations in the future as we move towards a decarbonised grid without gas for heating.

4. A shift in focus to user satisfaction and comfort enhances the value of the building.

Consumers are now more informed than ever as to how their investments impact the wider environment and are willing to spend more on their homes. There is more demand for higher-quality building materials, robust building structures, lower-energy appliances and better indoor air quality. A CBRE Green Homes Sustainability Report6 in 2017 found 63% of home buyers want a green home, 82% would pay more for such a home, and 25% were willing to spend at least a 6% premium for a home with sustainable features.

Businesses are more prepared to accept environmental responsibility and encourage their workforce to be more productive through thoughtfully designed spaces as they improve their environmental, social and governance (ESG) credentials in their portfolios. JLL’s report7 unveiled that sustainable office buildings had a higher rental premium, had less financial risk and higher tenancy rates. Buildings with an ‘A’ or ‘B’ energy performance achieved a rental premium of 10% and had vacancy rates of 7%.

5. A truly sustainable property market needs to look beyond being green and economic considerations and embrace social aspects of sustainability.

When we consider the ‘virtuous circle’ again, it is clear to see that there is an emphasis towards the end user of a ➳

Issue No. 14 – Qandor – 041

DEVELOPER

TENANT

Why would I want to build this green building?

Why would I want to lease this green building?

Health and wellbeing

Lower design and construction costs Lower refurbishment costs

Increased productivity

Higher sales Corporaste image price Ability to and prestige value secure Reduced finance Compliance with downtime Quicker legislation and CSR Rapid sales Lower requirements return on operating investment Lower costs Increased transaction Lower market value fees maintenance Reduced costs vacancies Increased occupancy rates Slower depreciation Lower exit yield

OWNER

Why would I want to own this green building?

Source: World Green Building Council, 2013

042 – Qandor – Issue No. 14

development. People are invested in their communities, and property developers play a role in creating these communities.

Stakeholder engagement is critical between funders, developers, regulators and the end users for the successful delivery of sustainable development. More investors are committed to ensuring that sustainability credentials are assessed as part of their real estate portfolios. These credentials must be monitored throughout the life cycle of the asset to ensure that the investments provide long-term, robust returns with minimal environmental liability.

While some argue that in a time of economic uncertainty, there should be a focus on the bottom line, that the trends show that most investors no longer share the emphasis on growth at any cost, and, thankfully, even fewer condone the disregard for the environment or the wellbeing of future generations, a focus instead on the leadership in environmental protection, social equity and sustainability will set apart property investors and developers, and attract more investment.

In summary, it is no longer a debate around whether a sustainable development has a viable economic case. However, it is how it can be used as a driver for the acquisition, design and delivery of the development scheme. In commercial, mixed-use and owner-occupier schemes, the research stacks up as a no-brainer for a business case. With residential schemes where the units are sold, and the developers want to cash out earlier,

attaining certain sustainability credentials that home buyers are happy to pay a premium for will create a win-win-win scenario for the investor/developer, customer, and the environment. Q. Breaking the Vicious Circle of Blame – Making the Business Case for Sustainable Buildings https://www.researchgate.net/ publication/263782010_Breaking_the_Vicious_ Circle_of_Blame_-_Making_the_Business_Case_ for_Sustainable_Buildings 2 Delivering sustainable buildings: Savings and payback https://www.brebookshop.com/details.jsp?id=327411 3 Easi Guide Passivhaus Design: Medium density housing projects https://www.levittbernstein.co.uk/site/assets/ files/3553/passivhaus-easi-guide_screen_portrait.pdf 4 Sustainability potential of housing refurbishments https://www.researchgate.net/ publication/306205255_Sustainability_Potentials_of_ Housing_Refurbishment 5 The Future Homes Standard: changes to Part L and Part F of the Building Regulations for new dwellings https://www.gov.uk/government/consultations/thefuture-homes-standard-changes-to-part-l-and-partf-of-the-building-regulations-for-new-dwellings 6 Sustainability: Simple steps to better homes https://www.cbreresidential.com/uk/sites/ukresidential/files/CBRE%20Green%20Homes%20 Sustainability%20Report%20July%202017.pdf 7 The impact of sustainability on value: Developing the business case for net zero carbon buildings in central London https://www.jll.co.uk/en/trends-and-insights/ research/the-impact-of-sustainability-on-value 1

Issue No. 14 – Qandor – 043

PLANNING

MANAGING PLANNING RISK IN MAJOR DEVELOPMENTS. DAVID KEMP Director DRK Plannning Ltd www.drkplanning.co.uk

‘Good fortune is what happens when opportunity meets with planning.’ Thomas Edison The complexity and risks of the planning process often mean that we have to manage cost exposure in proportion to planning risk as we go, especially on larger projects.

044 – Qandor – Issue No. 14

Our strategy is usually based around a three-step process normally involving: 1. Initial review and advice.

2. PD applications &/or Pre-application.

3. Full/Outline application This was the case involving a development that we recently obtained

planning permission on in Christchurch, near Bournemouth, on the South Coast for 46 new flats.

The Overall Strategy The aim of the project was to obtain permission for 48 dwelling units in total within this 10,000-sq ft building. This would have required extensions to the building through an extra floor on the roof, bay extensions to the side and a small ground floor extension.

This needed a full application for planning permission at some stage. However, the change of use of the building to residential use meant that, tactically, it would be best to secure PD for change of use first, even though this would not yield the greatest number of flats.

Obtaining PD as a ‘Fallback’ As the building had a lawful B1 office use, that would have meant proving that it had been marketed for an extended period of time before applying for full planning to change the use (most Councils ask for evidence of at least 12 months of open marketing). ➳

Issue No. 14 – Qandor – 045

Most Councils will not be so strict on the need to ‘prove’ a period of marketing if Prior Approval for the change of use has already been obtained; this is called a ‘fallback’ position. The reasoning here is basically because if the Council know that Prior Approval has already been granted for the change of use, then they will not do much to stand in the way of something that is almost inevitable.

Usually when starting a project such as this, a Marketing or Valuation Report will have been produced by the bank’s valuers or surveyors, and this can be a useful starting point for the marketing evidence on local office demand and history of marketing of the building sought by the planners.

Therefore, we started off in May 2019 by obtaining Prior Approval for a change of use to 27 flats, which was granted 56 days later in July 2019.

The Effect of New PD Rights on Strategy These PD rights for change of use will be carried over from the 1st August 2021 from Class O of the General Permitted Development Order 2015 to the new Class MA permitted development right. It should be noted that there are different conditions that apply to Class MA that do not apply to the current Class O (e.g. initial three-month period of vacancy before PD can be sought, floor limit of 1,500 sqm), so advice should be sought from an expert before assuming that your own building would also benefit in this way.

046 – Qandor – Issue No. 14

It should also be noted that the potential for a ‘fallback’ position did not just relate to the change of use. As a detached commercial building outside a conservation area, two other potential PD rights applied to the prospect of additional floors to the building, under Schedule 2 Part 20 of the General Permitted Development Order 2015 (amended in 2020). The first was to put up to two floors on an existing commercial building up to 30 metres (Class AA rights), and the other was to demolish the existing building and re-erect it with additional floors up to 18 metres (Class ZA rights).

After obtaining the PD for a change of use from the Council, we started to prepare our case for the additional floors and additional flats.

Dwelling Mix It is often the case that the applicant’s perception of what size of dwellings or dwelling mix is justified in a proposal will not be shared with Council Housing or Policy Officers.

Each Council prepares its own Strategic Housing Market Assessment (SHMA). When preparing any planning proposal, you should look for this on the Council’s website; there might be an annual update on it known as the ‘Annual Monitoring Report’. It is usually tucked away in the ‘evidence-based documents’ section of the Council’s Local Plan pages.

The SHMA sets out what the Council perceives as its ‘priority dwelling mixes’.

Unsurprisingly, this tends to be tilted toward larger units, often 2-bedroom and

3-bedroom units; this will not make for the optimum density scheme and will affect the end value. Therefore, it is always worth trying to push back against this by obtaining a Housing Market report from a very reputable firm of local residential agents (or you could go with a national firm with a local presence, e.g. Savills, Knight Frank, CBRE).

The Council was prepared to be flexible about this after seeing our Housing Market report. Initially, we had 90% of the scheme as 1-bedroom units. We offered a couple of extra 2-bedroom units, bringing the scheme down to 46 units from 48 units, with 80% of the scheme comprising 1-bedroom flats.

Flood Risk The biggest sticking point in the scheme had to do with Flood Risk. It is here where we seemed to have trouble in making our case understood by officers.

Flood risk is assessed in applications for Prior Approval, but not as strictly as in applications for new build extensions in applications for planning permission.

When applying for planning permission, as opposed to Prior Approval, the Council asks for a ‘sequential test’ assessment. Paragraph 158 of the National Planning Policy Framework (NPPF) states that: ‘The aim of the sequential test is to steer new development to areas with the lowest risk of flooding. Development should not be allocated or permitted if there are reasonably available sites appropriate for the proposed development in areas at lower risk of flooding.’

On the Council’s Strategic Flood Map, a small corner of the building and some of the site falls within anticipated future Flood Zone 3a and Flood Zone 2.

The Council therefore required us to go through all of the sites allocated in the local plan for Christchurch for residential development and consider whether they would be a better alternative to our own site for residential development, especially where they were located in Flood Zone 1 instead. This is called ‘Sequential Testing’.

Problems with Sequential Testing There are a number of problems with sequential testing, which make it very difficult to use to support a case for developing on land in Flood Zone 2 or 3, and these issues have been highlighted in planning appeal decisions that have gone against developers: • Inconsistency: As the initial focus and sequential preference is on allocated sites, some of these will be in Flood Zone 2 or 3 anyway!

• Practicality: In reality, although many sites might appear as ‘allocated’ in a Local Plan, this does not mean they are ‘likely to be developed’ in the near future – e.g. sites may be encumbered by poor access, ownership problems or lack of funding.

• 5-Year Housing Targets: Oddly enough, the Council can disregard the fact that it may be woefully short of its 5-year housing land targets, ➳

Issue No. 14 – Qandor – 047

It is clear to see from the above problems that there is a danger of plenty of ‘grey areas’ in how this is applied, and we did find for several weeks we were going around in circles with officers.

Simplicity is Key Looking at the list of problems thrown up by Sequential Testing, along with the communication challenges that we faced with officers working remotely, we needed to take a fresh approach urgently.

The solution was in the levels of the site. so even if the proposal site is desperately needed in order to meet these targets, it is irrelevant to passing the sequential test.

• Fragmentation: The Council can look to several sites to cumulatively provide the required number of houses that the proposal site would have provided on its own, so even if one or two of the allocated sites fail, an unspecified number of alternative cumulative sites might all together be sufficient to prevent the proposal from going ahead. What is not clear from the appeal decisions is to what degree it would be ‘reasonable’ for the Council to fragment the alternative distribution of sites – could you have this proposal for 46 dwellings fragmented over 46 separate Flood Zone 1 small sites for instance? It would seem unreasonable.

048 – Qandor – Issue No. 14

LiDAR Mapping and Modelling Flood Risk Rather than getting bogged down in the numerical exercise around sequential testing, we went back to the sole, single question that was at the heart of this issue: What is the likelihood of flooding to the proposed area of development?

In getting to the answer to this question, it is important to remember that flood maps produced by the local authority or by the Environment Agency only provide a 2-D analysis.

In order to get a full picture, one needs to look at changes in levels across a site and its topography and then one can also model likely patterns of flooding or water dispersion following a possible flooding event, hence the need to also look at LiDAR mapping of the site to build up a 3-D picture.

Put simply, a 2-D map might show the site as being within a Flood Zone 2 or 3, but if part of the site rises above the land around it (even only slightly), then in 3-D terms that part of the land might be relatively ‘dry’ and not so susceptible to flooding – i.e. practically speaking, equivalent to Flood Zone 1.

Opportunities for Development Understanding that it may be possible to get around concerns over development of extensions or new buildings in Flood Zone 2 or 3 land, where it may be possible to make use of changes in topography and site levels, is key to unlocking opportunity on sites that others may have walked away from.

Therefore, in this case, where the proposed ground floor extensions to the building were in vulnerable areas of the site, we modelled the likely flow of flood waters using this 3-D approach and managed to persuade the Council that there would be no flood risk. Simply and succinctly put to the Council, this then became the main plank of our flood risk case and we decided not to push the sequential test case anymore due to its ambiguity and inconsistency.

Appreciating the key risks in a project of additional height, change of use and flooding starts at the very beginning with an initial appraisal by the planning consultant, of course helped with input from a flood risk specialist to test these issues early. The other two key issues of height and change of use can be mitigated through obtaining PD and establishing a ‘fallback’. Q.

Issue No. 14 – Qandor – 049

PLANNING

SHARING RISK CAN DRIVE GROWTH IN THE GOVERNMENT’S BRAVE NEW WORLD OF PLANNING SAM CHERRY Sales Director Legal & Contingency www.legal-contingency.co.uk

As the Government processes responses to its proposed changes to planning policy, we have a chance to take stock. Given our business (insurance), I’m inclined to examine the proposals in Planning for the Future from a risk management perspective.

050 – Qandor – Issue No. 14

The implication from the Government’s proposals is that scheme viability pressures created by section 106 agreements and the community infrastructure levy are an obstacle in the way of consented schemes.

The removal or delaying of these will therefore increase the flow of housing, a long-term Government aim. However, the unintended consequences of this – at least in the shorter term – may end up being

the opposite, what economists refer to as stagflation: why build now when it seems likely to be more profitable to do so later?

It remains to be seen if the Government’s proposals will actually see the light of day. In the push to meet the ‘mythical’ 300,000 homes target, the potential contribution of regional developers and private individuals looking to bring forward smaller sites yielding 50 units or less has been somewhat overlooked.

Scheme viability is a key issue here, including the exposure to planning costs.

Quality planning applications are costly, and viability for those sites may not be solely around margin but may also include planning costs, which can be prohibitive.

Few owners of land with development potential can claim to have the requisite financial or personnel resources available when it comes to viability and risk analysis in conjunction with portfolio management processes.

Uncertainty in planning decisions will continue to be the enemy of both the developer and the local authority, as many viable sites are not brought forward. How should site viability from a planning perspective be approached when there are so many factors to consider, such as environment, transport, infrastructure and health and wellbeing?

Often, defining a risk management strategy early on in the site acquisition process can also open up opportunities to develop sites that would otherwise be sanitised by legal risks. For example, using option agreements to achieve planning gain or fully develop a site can leave developers open to risk before they have realised the value that a grant of planning will bring. The use of a pre-planning insurance as part of a risk management

strategy would provide financial comfort in the event that planning was not achieved.

Development of our living spaces is the fundamental building block of our future and support needs to be available to help developers, planners and local authorities achieve viable, sustainable solutions – not just to meet Government targets but to maintain a viable future for developers.

In insurance, we often talk of a balanced book of business – the notion of a portfolio of risks with a varied range of exposure but which ultimately produces a tolerable return after claims have been paid.

The interaction of insurance and planning costs exposure remains in its infancy and is not a panacea for new housing targets; but by introducing a novel element of risksharing into the planning process, this may contribute to growth in planning consents on smaller sites. It also prompts a wider question of how risk-sharing could be used as an engine for growth in the planning process.

UK real estate development is at the heart of L&C’s business and has been for over 25 years. Planning is the thread that runs through our entire commercial book of business in which we insure against a comprehensive range of title matters that would otherwise hinder development, on both a pre- and post-planning basis, including restrictive covenants, rights of light and access. Q.

For more information on Abortive Planning Costs insurance or any of our other legal indemnity products, contact Sam Cherry at Legal & Contingency on 020 7397 4343 or sam.cherry@legal-contingency.co.uk.

Issue No. 14 – Qandor – 051

DEVELOPMENT

HOW TO COMPLETE AN INITIAL ASSESSMENT FOR YOUR PROPERTY DEVELOPMENT OPPORTUNITIES. DORIAN PAYNE Co-Founder Castell Group www.castellgroup.co.uk

When you begin to look for new developments, you will quickly realise there are a lot of available ‘opportunities’ out there at any one time. How do you know if they can be progressed into a viable deal?

052 – Qandor – Issue No. 14

There are various ways developers go about appraising opportunities, and so I am going to share how we conduct our initial assessment within our full development appraisal. In my opinion, it is important to gain a holistic understanding of the development process

and create your own appraisal system that correctly reflects your location, target market and deal criteria.

Full Development Appraisal I am unable to share the full appraisal methodology that we work through in this article, but you will broadly see how it looks from the point at which an opportunity enters our pipeline: • Initial Assessment (We also call it Key Constraints Check) • Planning Assessment • High-Level Numbers • Demand • Sensitivity Analysis The process is not necessarily linear as sometimes we will jump straight to demand before moving forward. The key is to become familiar with the process so that over time you acquire an understanding of what renders a

deal viable/unviable, and you can then quickly sift through ‘opportunities’ to ‘potential deals’.

Initial Assessment / Key Constraints Check The objective for this step is purely to consider the main constraints and/or information that you need to know. This could render a site unviable without even looking at the numbers or demand; it is also important to understand the work involved for a site to potentially be developable.

This step is fundamentally a checklist of basic information gathering which does not have to be complicated. In fact, I believe a simple system is more effective and will greatly mitigate the risk of omissions and errors in your appraisal, which in development could save many months of time, effort and significant sums of money.

The typical checks we look for are as follows: Issue No. 14 – Qandor – 053

1. Basic information This is about gathering useful information on the site which we will need at a later date, such as: • Address • Size • Vendor and agent details • Type of land (greenfield, brownfield) • Previous uses • Vendor’s expectations • Vendor’s reason for selling • Have any previous offers or sales fallen through? If so, why?

• Anything else deemed relevant This section is typically completed from memory when dealing with the vendor or the agent, and then notes added. You can acquire a great amount of information from just asking questions, especially about expectations. After a period of doing appraisals and deals in your area and to your criteria, you’ll quickly understand if an 054 – Qandor – Issue No. 14

opportunity is overpriced without even going through the rest of the appraisal.

2. Basic planning check In this section, we are looking briefly into the planning side of things. Most of the opportunities we look at have no current planning permissions, so we want to quickly understand where the site sits in terms of the local authority’s local development plan.

We are looking to see if the site is within the specified development boundary, if there are any restrictions in the area or if the area has been designated for anything other than residential development. The local authorities provide this information and some of them have interactive proposal maps which make it easy to identify constraints. This is very important as we look at potential sites that have specifically been designated as open space, and others that have been designated as commercial.

We are also looking to see if the site is situated within a conservation area, or if there is an existing building and whether it is listed and in what category.

We also check neighbouring properties in terms of their design and scale in order to work out the overlooking distances. This will ensure that our initial sketch is within areas that are developable.

3. Flooding A quick but vital and free check we carry out is to establish the site’s flood potential.

In Wales, we do this by viewing the Natural Resources Wales (NRW) developer’s advice map and checking what rating the site lands in. England also has a flood map that you can access via Googling ‘flood map for planning’.

If the site lands in a flood zone, then initially I would advise you to reach out to a flood consultant because a flood consequence (or risk) assessment may be needed. Local authorities take differing views on acceptable flood levels for differing types of users (residential or commercial). This is a typical example of something that can render the site unviable or too risky to start with. If the vendor wants an unconditional offer and the site is in a risky flood zone, with no planning permission, you could be running a high risk

in progressing with the site.

4. Ecology & Arboriculture When assessing the site, you should be looking at the potential impact the development will have on ecology and trees. It may not be high on your agenda, but it’s a material planning consideration, and it is unlikely you will be granted permission if it would result in a detrimental impact on wildlife, plants and trees (which could be protected). From our experience, this is getting even tougher to satisfy at the planning stage and so it is now something we consider at the beginning.

You may not know exactly what to look for so it’s wise to have good consultants on board to quickly sift through opportunities.

However, it is not viable to pay for a consultant’s advice or assessments on every site, or at least until it progresses to a clear potential deal.

Until you have built up a better understanding of ecology and arboriculture requirements in your area, you can assess the site from satellite maps and walk through the site. You can take note of existing buildings that bats and/or owls may inhabit, and you can see larger/older looking trees and hedges that may be protected, and existing biodiversity on the site where protected species may also be in situ.

Typical protected species can include the following: • Bats • Owls • Breeding birds • Badgers • Great crested newts, toads, otters, invertebrates • Protected plants

Issue No. 14 – Qandor – 055

5. Access Access alone is very important and can render a prime site undevelopable, hence is one of the first things we look at. We are typically looking to see if the site can achieve safe access and egress. Without getting into the heavy technical side of things, ensure you spend some time trying to build your knowledge of access and highway-related problems. You can read the requirements set out in the local authority’s supplementary planning guidance and any highway technical design guide they may have published.

Don’t worry too much about fully understanding the technical side of highway requirements at this moment, as this stage is about identifying obvious problems. Our highway engineer always reviews the scheme before we commit to the deal.

The things we look for are as follows: 1. Is there, or can there be, wide enough access? a. Specified widths vary between local authorities and with size of development.

The size we typically look for is 5.5 m and we may also need extra space for a pavement.

2. Visibility splay a. There needs to be sufficient, unobstructed space around your site entrance junction, allowing drivers to see potential traffic in the road. b. This is typically where you may cross third-party land which may have obstructions such as hedges or boundary walls.

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c. Working out the visibility splay depends on the speed of the main road you are exiting onto. Your local authority highways department will stipulate the required ‘Y’ length in meters for different road speeds.

The ‘X’ is typically 2.4 m but can be reduced, if deemed acceptable by highways.

3. Does any part of the access road or visibility splay cross over neighbouring or thirdparty land? a. Potential ransom problem.

4. Connectivity around the site a. We have had sites that are situated within the development boundary with sufficient parking and acceptable access/egress, but the roads didn’t have pavements in the village due to the age. Thus, our application was declined due to poor connectivity.

5. Parking standards and ability to provide enough spaces a. Also remember, just because you have sufficient parking doesn’t mean the planning authority will like and approve its design.

6. If seeking reduced parking, is the area ‘sustainable’? a. Is it within walking distance to transport links, shops etc? b. Note – some local authorities don’t use sustainability assessments to justify

reduction in parking so it may not be clear, and a pre-app with highways should be sought.

7. Potential build constraints (city centre, no parking, no site storage etc) a. The licenses and agreements needed to be obtained may be a key consideration in terms of the timing of the development and costs.

6. Basic legal check If the above checks haven’t rendered the deal unviable or too risky yet, we then purchase and look at the registered legal title plan and register for the opportunity. They cost £3 each from Land Registry. If you’re using a system to find opportunities, they will normally have a feature to allow you to buy the plans through the software, which saves time.

The title plan tells us the extent of the site and if there are any abnormalities, such as unregistered land and general boundaries.

It is useful to walk the land with the vendor to confirm the boundaries are indeed as they are registered at the Land Registry.

We’ve been involved in two deals with boundary abnormalities, and it can be a huge inconvenience.

The title register tells us the key information about the land, such as the registration number, vendor details and address, potentially how much they paid for it, any mortgages and rights, restrictions and obligations attached to the land. If you cannot understand what the register says, it’s wise to get it checked out by your commercial/land solicitor. If you have a good relationship, they probably won’t charge you.

7. Deal Criteria I have mentioned the importance of having deal criteria for your business in previous publications. This will keep you focused and effective because, as highlighted above, there are many ‘opportunities’ and it is paramount to sift through them as efficiently as possible.

This will enable you to capitalise on the real potential deals out there.

A good set of criteria will include requirements for the deal to be a certain size, within a defined location, within a budget, and include other requirements which may not be a planning consideration.

It is beneficial to have some collaborations or partnerships with land sourcers or other developers so you can pass onto them potential opportunities that are outside of your criteria.

This will not only ensure you do not waste valuable resources on deals not suited to your business but will also ensure you do not feel like you’re leaving ‘money on the table’, so to speak.

Once we have completed the above assessment, we will be in a much better position to make a decision on whether to progress the scheme or not. Q.

Issue No. 14 – Qandor – 057

DEVELOPMENT

UNINTENDED CONSEQUENCES (AND HOW TO AVOID THEM!) MARTIN BROOKS Director MBA Projects www.mba-projects.co.uk

From systems that can learn our preferences to those that make life more convenient and comfortable, today’s prime residential trends are more integrated, more intelligent and more stylish and expensive than ever.

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Connected entertainment? Tick.

Complex and personalised security? Tick.

Climate systems, smart lighting, a virtual reality home fitness centre? Oh, yes please, and those are just a few of the benchmarks that high-specification residences require.

“Smart” has become synonymous with

luxury, and those looking to buy in the prime residential market expect it. This, in turn, raises questions around budget and expectation for many of us who work in project management and juggle budgets and expectations. But here’s the thing. In the past ten years or so the percentage of overall cost has changed, but have we taken the reality of this into account for budgets? As a rule of thumb back in the day, construction made up 65% of a budget and mechanical and electrical 35% (give or take), but now the cost has shifted to an equal ratio of 50% each. Managing client expectations and budgets for residential high-end projects has the potential to get complicated when there is a lack of understanding and reality around cost and, in some instances, designers ploughing ahead with schemes to meet client expectation, with no real idea of the cost implications. All of this risks delays, disappointment and unaccounted

costs.

Let’s examine why the change to cost centres have emerged through an example: Then: For IT and AV – Cat five cabling and a simple lighting system was normally allowed for.

Now: The requirement is for: • Audio visual racks • Home monitoring systems • Lutron lighting systems • CCTV and alarm systems All of which have become far more complicated and expensive.

Air-conditioning or comfort cooling particularly raises the possibility for problems, as discerning and well-travelled clients who have experienced superior air ➳ Issue No. 14 – Qandor – 059

conditioning in other countries come home to find that here, in the UK, we can’t obtain and install the same systems and maintain it.

Ten years ago, A/C was only allowed for in the very high-end super prime residential projects, but now it is expected in the principal rooms of most residential developments at the very least, and so costs must be properly calculated and expectations met before costs are submitted and installation begins.

Staying on top of emerging smart home and prime residential trends and

060 – Qandor – Issue No. 14

costs, sidestepping budget pitfalls and embracing proactive communication can determine a project’s ultimate success. As skilled project managers, our role is to properly assess budget against expectation, and then when the two don’t meet, our most vital role is to be experts at delivering bad news!

Our job is to focus on planning and controlling and managing cost and risk by defining the fundamentals from the outset.

I hate to say this, but clients can be a part of the problem where unrealistic budgets are concerned! The project scope must be defined correctly from the first draft so that expectations can be managed not only from the client side but from the PM, the designer, and the construction team, too.

Then, everyone’s happy. Q.

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DEVELOPMENT

REFURBISH OR BUILD FROM SCRATCH? ROBERT CIURARU Managing Director Robert’s 21st Century Design www.roberts21stcenturydesign.com

During our lifetime, we are often faced with situations where we must make important decisions.

One of the most important is probably regarding our house.

Living in a proper built house with the much-loved family around is for sure everyone’s goal in terms of homes, but being the owner of a house can be very tricky and definitely brings some responsibilities and challenges. One of the biggest questions is whether or not refurbishing a house is better than building a new house from 062 – Qandor – Issue No. 14

scratch.

How large is your family?

First and foremost, a house is not just for you, but also for your family. Having that in mind, it is very important to understand how much space you need on a day-to-day basis. Is it just you and your partner? Do you have any kids, or do you plan to have them? If so, how many?

You have probably already figured out where this is headed, haven’t you? It is of utmost importance to have enough rooms for every member of your family or even an additional room for guests. If you already ➳

Issue No. 14 – Qandor – 063

064 – Qandor – Issue No. 14

own a house with not enough space, you can definitely think about extensions or maybe conversions, but this introduces a crucial second point that we will discuss next – how old is the construction?

House condition and age You should probably know by now what you want for you and your family, how much space you need and how your dream house should look like. If you already have a house built just over a decade or a couple decades ago, a refurbishment could be your choice.

What kind of problems can houses built before 2000 pose? You may already know: asbestos, asbestos, asbestos. There is a whole process to take care of if you intend to refurbish old houses, and this involves some extra costs. Thus, you have to seriously think about it and decide if refurbishing is the smartest choice for your family. Another thing to consider is that ➳ Issue No. 14 – Qandor – 065

used materials can be seriously damaged by harsh UK weather, with high precipitations, humidity, and mould being very serious concerns.

Let’s dig a bit deeper and mention something that could possibly generate lots of problems: plumbing and electrical installations. Being something that you are going to use every single day, even if they are properly looked after and serviced regularly, they may become very expensive to maintain or repair with the passing of the years.

In all honesty, we consider these installations the framework of every house, thus our focus is to make it a priority and always come with the best solutions.

Technology features and materials used Last but not least, we live in a very different age today compared to a few decades ago, with many differences, especially in the construction sector. Technology evolved exponentially, with more engineering studies showing exactly what kind of

066 – Qandor – Issue No. 14

materials are more efficient in terms of sustainability, environmentally friendly processes and energy. What all this means is that choosing to build a new house nowadays can offer you more quality than ever.

Over the years, we have been involved in all kinds of projects. Some of our clients wanted to convert their space, others to extend their houses or simply to refurbish what they have. We managed to stay on top of every situation with huge attention to details, so that the final result would meet our clients’ expectations, offering a welldeserved upgrade to their homes.

What is more, most of our projects are now focused on building new houses. Most of the time, it can be much easier for you, as a future house owner, to build everything from scratch, exactly how you have always envisaged it, with the best materials.

From our experience, the financial difference between refurbishing a house and building a new one is usually around 20%, so there is no surprise that we have a winner: building a new house. Q.

SURVEYING

THE IMPORTANCE OF A PARTY WALL SURVEYOR. STEVEN VAUGHAN Director Steven Vaughan Associates www.stevenvaughan.co.uk

A party wall is defined as a wall that forms part of a building and stands on lands of different owners to a greater extent than the projection of any artificially formed support on which the wall rests. In layman’s terms, the best way to think about this is when viewing terraces of houses, the wall that separates each property is a party wall. When undertaking building work that affects a party wall in England and Wales, it is a legal requirement to comply with the Party Wall etc. Act 1996.

068 – Qandor – Issue No. 14

The Act provides a framework for preventing or resolving disputes in relation to party walls, party structures (the floor/ceiling structure that separates flats), boundary walls and excavations near neighbouring buildings. If you are undertaking any ‘notifiable work’ to your property, it is compulsory to meet the requirements of the Act to ensure your legal obligations have been fulfilled. If your neighbour is undertaking notifiable work which affects your property, you should be served a party wall notice to ensure your interest is properly safeguarded in the event of damage.

Notifiable work is defined within the Act as work which constitutes a party wall notice. The owners undertaking the works are legally known as the ‘building owners’ and any other person who is liable to receive a party wall notice containing the notifiable work is known as an ‘adjoining owner’; this includes all freehold and leasehold interests within neighbouring properties that share a party wall or are within 3 or 6 metres of excavation that is to a lower level than existing foundations of an adjoining owner’s building.

Ideally, the building owners would have already involved an architect who would have produced a preliminary design which would satisfy a planning department’s requirement for the granting of planning permission (recommended but not essential), an engineer who would have considered the scheme in terms of the structure and would prepare a structural design that shows the locations of any steel members being cut into any party walls and the locations of any new foundations and their depths. Armed with this information, the building owner would usually be recommended a party wall surveyor by the architect or engineer to prepare party wall notices for service to adjoining owners to ensure their obligations under the Act are fulfilled.

Unfortunately, the process does not stop there. Once a notice is prepared and served referencing the relevant sections of the Act in connection with the work and appends the necessary drawings to ensure the notice is valid, an adjoining owner has four options. They can ‘consent’ to the

notice, meaning they are content with the proposals. They can ‘dissent’ to the notice, meaning a dispute under the act has arisen, and either appoint the building owners’ surveyor as an impartial ‘agreed surveyor’ or they can ‘dissent’ and appoint their own surveyor, the reasonable costs of which are picked up by the building owners.

If a notice is served and the adjoining owners fail to respond within the 14-day statutory expiry period, then the party wall act provides for a scenario that allows the matter to continue to be resolved by creating a deemed dispute and eventually a party wall surveyor would be appointed to act for the interest of the owner that has not responded. If a ‘consent’ is received, the ➳ Issue No. 14 – Qandor – 069

building owner can start work immediately (it is recommended that the condition of the adjoining owner’s building is recorded); however, if a ‘dissent’ is received, then the agreed surveyor or two surveyors must agree and serve a party wall award that sets out the rights and obligations of the owners should the building owners commence the work.

Work cannot legally commence until a notice is served and that notice is acknowledged with a consent, or in the event of a dissent, a party wall award is served.

There is nothing preventing a building owner preparing DIY notices themselves should they wish to verse themselves in the legislation, which is available on the Government website; however, whilst this approach may offer some cost savings, a building owner should be made very well aware that the road ahead could be quite the opposite and be costly, time consuming and involve litigation.

The Party Wall etc. Act 1996 clearly states the requirements of a notice in its relevant sections, and these sections must be scrupulously complied with for the legal notice to be valid. Two owners who have lived next door to one another for many years often prepare a DIY notice and ask their neighbour to sign it, which they are typically happy to consent to; however, if the notice is not legally valid, then the Act

070 – Qandor – Issue No. 14

has not been invoked and therefore cannot provide a framework for resolving any disputes that arise. Whilst in most cases this could be minor cracking to walls and ceilings, it should not be forgotten that when major structural work is undertaken, there is a small chance that a worst-case scenario could occur and that is the adjoining owner’s building could collapse.

If notices were served in this scenario, the party wall act would provide the pathway to resolving the damage; however, if not, then litigators would be involved and at a cost much higher than that of a party wall surveyor. Additionally, once a party notice has been served, in the event the adjoining owner dissents, the building owner who has prepared it themselves must appoint a surveyor who should then undertake diligence and recheck the notices served to ensure they are valid or reserve them.

Essentially if the initial notice is invalid, then everything that succeeds it is also invalid.

The party wall process can be complex to navigate but with good communication, sound advice and suitable planning, much of it can be streamlined. We are experts in all party wall-related matters, from drafting valid party wall notices to starting the process through to serving party wall awards and assessing damage upon completion of the works. We liaise with your architects, structural engineers and contractors to facilitate ground floor, first floor and roof extensions and we have extensive experience where basement excavation is undertaken.

Additionally, we offer 30 minutes of free advice to anybody on any party wall-related matter. Get in contact today! Q.

booking projects “we’re into February 2021 and beyond, get in touch and start Living!

We use science to design your perfect space!

We’ve won yet another award for our cinema rooms!

We’re not blowing our own trumpet here (well, we are) but we’ve beaten all of the compeition again! Why not experience one of our cinemas for yourself at our Essex or Dorset showrooms? Our Dolby Atmos 4K rooms will blow you away. We’ve started our waiting list for 2021 projects, so now is the time get your name down!

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INSURANCE

5 REASONS WHY YOU SHOULD TAKE OUT CONTRACT WORKS INSURANCE YOURSELF RATHER THAN RELY ON YOUR BUILDER’S POLICY. TOMMY HODGSON Director Eggar Forrester Insurance

www.eggarforresterinsurance.com

A contract works insurance policy is most simply def ined as an insurance policy covering the works in progress on a construction site.

The contract between developer and builder will dictate who is 072 – Qandor – Issue No. 14

responsible for arranging this cover, but here are some compelling reasons why we would recommend that you as the developer should strongly consider arranging the cover yourself:

1. If your builder arranges the insurance and goes bust partway through a job or walks away from a project, your project will be uninsured. Placing new insurance on a job in progress can be difficult and expensive.

2. If you leave your builder to insure the contract works, they may fail to insure correctly (meaning future claims are only part paid or not paid at all), fail to pay the premium (invalidating the insurance) or fail to insure at all. This will leave legal action as your only option and, even if successful, will leave you with an unfinished project for some time while you recover funds.

3. Taking out the policy yourself puts you in control. You can make sure the cover is appropriate, limits are accurate, and the insurer is reputable with a strong financial rating.

4. If you take out insurance yourself, there is often the option of insuring any

existing structure and contract works together under a single policy. This can be financially beneficial and, by having one insurer involved rather than two, will simplify the claims process in the event damage is caused to both the existing structure and the works.

5. If a builder places the contract works cover, the JCT contract (or other developer/ builder contract) will state that the policy should be in joint names (builder and developer). We know from experience that quite often this doesn’t actually happen, leaving developers exposed without the right to claim under the policy.

At Eggar Forrester Insurance, we regularly advise on and arrange contract works insurance policies, so please get in touch if you’d like to discuss any of the above or would like to receive a quotation. Q.

Issue No. 14 – Qandor – 073

PENSIONS

CLUB TOGETHER TO BUY COMMERCIAL PROPERTY WITH YOUR PENSIONS. GEORGE TOULI Regulated Financial Advisor Burlington Wealth Managemennt www.burlington.uk.net

Most people know you can use your pension fund to invest in commercial property. Of course, you need a self-invested pension: either a Self-Invested Personal Pension (SIPP) or a Small SelfAdministered Scheme (SSAS). The problem is you might not have enough pension fund to afford the commercial property.

074 – Qandor – Issue No. 14

A pension fund can be borrowed to raise money towards the purchase of a commercial property but the maximum loan is limited to 50% of the pension fund value.

If this is still not enough, what do you do next?

Why not have a chat with friends, family, business associates who have a similar interest in property investment? Likeminded people may also have pension funds which

they would like to invest in commercial property. So, in essence, you can form a syndicate of individual pension funds that can each purchase a share of a commercial property.

This works perfectly for personal pensions set up as SIPPs. This is different from a SSAS which is a single pension scheme with more than one member. In a syndicated arrangement such as this, each SIPP will have its own separate share in the property. So different individuals can bring different amounts to the syndicate. Each individual’s SIPP is a separate legal entity.

Financial advice is essential. An experienced financial adviser will manage the transaction across all the parties and help take out the complexity involved. There are excellent pension trustees who understand this arrangement whom your advisor will select and will deal with transactions on your behalf. ➳ Issue No. 14 – Qandor – 075

Please note this is the maximum permitted under the pension rules (£300,000 through Mr D’s pension and £150,000 through Mrs D’s pension).

I presented a really good example of a syndicated property purchase in the recent webinar “Pensions Fit for Property”. This was a super webinar hosted by Mike Bristow (you cand find a recording on Qandor. org/webinars if you’d like to listen to the presentation again).

This was a straightforward example, in fact, as the purchasers were legal spouses clubbing together to buy a commercial property. They were able to secure a mortgage against the property from within their pension schemes but still found themselves a little short on the purchase price. The final share was purchased through a special purpose vehicle where they were able to use some of their non-pension funds.

Mr and Mrs D purchased the freehold of a commercial property using their pension funds as follows: • • • •

Purchase price £1,800,000 Mr D SIPP value £600,000 Mrs D SIPP value £300,000 Mortgage arranged for total of £450,000.

076 – Qandor – Issue No. 14

• Total funds accumulated were therefore £1,350,000 with a shortfall of £450,000.

• Special purpose vehicle was formed to buy the remaining share.

• The result is Mr D’s SIPP owns a 50% share in the property, Mrs D’s SIPP owns a 25% share and the SPV owns a 25% share.

This is a simple example where I have rounded off the figures to illustrate how a syndicate can purchase a property. In reality, however, there are the usual legal fees, disbursements and advice fees that need to be considered.

So there you have it. If you have pension funds and you feel they are not performing, then why not use your property knowledge to invest in commercial property? If you don’t have enough money in the pot, why not have a chat with some friends who may club together with you for the right opportunity?

Think of this as some kind of “pension jointventure”. Q.

George Ttouli is a qualified financial adviser at Burlington Wealth Management and is available to discuss any financial matters. If you wish to arrange a private consultation, please send an email to george@burlington.uk.net

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FINANCE

WHAT DUE DILIGENCE WILL DEVELOPMENT FINANCE LENDERS UNDERTAKE ON A PROJECT? GARY WALSH Director Optima Property Funding www.optimafunding.co.uk

I recently ran a poll on LinkedIn asking property developers what mattered most to them when sourcing finance: amount, price or service?

The results were a tad surprising, or maybe not?

078 – Qandor – Issue No. 14

Service 44% Price 39% Amount 17% I dug a little deeper and established that ‘service’, whilst covering many aspects of the process, could be summarised as ‘the certainty to deliver the funding in a pain-free and timely manner’.

However (and having sat in the lender’s ➳

Issue No. 14 – Qandor – 079

chair in my earlier career), I have some sympathy for lenders; the quality of the information presented to them by borrowers ranges from the sublime to the ridiculous.

Lenders (and brokers) receive a spectrum of data ranging from a full business plan to numbers on the ‘back of a postage stamp’.

And their pet hate? A one-line email with a link to a Dropbox file and Planning Portal containing numerous random and unlabelled documents.

Lenders are busy and if presented with minimal, poorly submitted information, they are likely to put it at the bottom of the pile or decline.

Borrowers can significantly improve the chances of gaining traction from a lender by presenting a detailed pack of information.

Without wishing to teach grandma, here is the aide memoir I use; You will note that I lead with information about the borrower and then the project.

The lender and/or the appointed professional team (valuer/PMS/lawyers) will require to see some or all of the following (although not necessarily all at the beginning of the process). The level of due diligence will vary from lender to lender, and not all lenders require the full list. Items marked with an * are required to enable the lender to take the application through the credit process.

080 – Qandor – Issue No. 14

Executive Summary A brief bullet point overview (one page maximum) of the project to include borrower background and name, project address, description of asset ‘as is’ and ‘to be’, GDV, purchase price, build costs, net profit before finance, cash/equity investment, borrowing requirement. * About the Developer and the Team 1. CV/Portfolio of projects, both historical and current. To include name of borrowing entity, address, description, date commenced and completed, GDV, net profit, lender(s). * 2. Accounts/financial statement of affairs including details of other current schemes, if applicable. * 3. Asset and liability statements of directors/ major shareholders. * 4. Details of the intended borrowing vehicle including directors/shareholders. * 5. A credit reference agency report on directors/major shareholders and a search on any company borrower. * 6. Business and personal bank statements. * 7. Statutory money laundering requirements (ID/residency/evidence of and source of deposit etc.). * 8. Developers’ professional team including architects, QS, structural engineers, contractors, M&E, selling agents, lawyers for professional competence, PI cover, and financial creditworthiness (where applicable). * 9. Collateral warranties may be required from the professional team (architect, structural engineer etc.).

About the Project 1. A robust development appraisal where estimated GDV and construction costs/professional fees are realistic to conservative. Consider using bespoke industry software. * The scheme should be showing a minimum return on cost (ROC) or return on sale (ROS) before application of finance charges. The amount required will depend upon specific lender policy but typically will be a minimum of 20% ROC (16.7% ROS) for standard senior debt, 25% ROC (20% ROS) for stretched senior debt / mezzanine and potentially higher returns for equity investment. The project length will have an impact on post-finance profitability and thus prefinance target returns.

2. Marketing and sales plan with schedule of accommodation. * 3. Evidence of comparable GDV figures from both local selling agents and on-line data sources. * 4. Detailed breakdown of construction costs and professional fees and evidence that the borrower can deliver these numbers (data from previous projects/QS report etc.) * 5. Build and sales programme and cash flow detailing periods for pre-construction, construction and sales. * 6. Site plan and scheme drawings for design, access, construction matters. * 7. Planning Consent (or Permitted Development Rights) to ensure that the consent is valid, workable and not onerous. All pre-development conditions must be satisfied before a lender will advance any money on the construction

element of the loan (and some lenders will not advance the land loan element if the conditions are onerous). * 8. s. 106/CIIL/Statutory Liabilities details, if applicable. * 9. HM Land Registry Title Document copies. * 10. Construction Warranty. Most lenders, but not all, will require the scheme to be covered by a warranty such as NHBC, Premier, BLP etc. Warranties are available for conversions and heavy refurbishments as well as new build property. Most lenders will accept a warranty that is acceptable to the CML (Council of Mortgage Lenders) for residential mortgage purposes. It is worth noting that term lenders offering residential investment finance are increasingly requiring completed units to be covered by a warranty and are declining applications where there is not one or are offering a reduced LTV. 11. Building regulations, prior to commencement of construction.

12. Party wall agreements, if applicable.

13. Appropriate insurance policies (fire/ contractors all risks/public liability etc.).

14. Desktop (phase 1) and intrusive ground reports (phase 2) for contamination, soil composition/footing design etc.

15. Structural engineers report, if applicable.

16. JCT documents where Contractor appointed.

17. A valuation of GDV and RLV from a RICS Valuer (if one is available, submit with application).

18. An assessment of build costs/professional fees from a PMS. 19. Report on Title from lender’s lawyer. Q. Issue No. 14 – Qandor – 081

FINANCE

THE FUTURE IS FINTECH. MICHAEL BRISTOW CEO & Co-founder CrowdProperty www.crowdproperty.com

Three months on from the unveiling of the Kalifa Review, CrowdProperty CEO Michael Bristow considers the response and momentum around what Catherine McGuinness, Policy Chair at City of London Corporation, called “a crucial blueprint for the successful and sustainable growth of UK FinTech”.

This is both a UK competitive advantage and crucially relevant to you as it maps out the future of FinTech, and by definition financial services, which can help you grow your property business quicker and more profitably.

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The Kalifa Review of UK FinTech sought to highlight the opportunities and challenges facing the UK, with a view to reinforcing its position as a leader in the global FinTech space. The five-point plan put forward by the Review in late February – covering the key areas of Policy and Regulation, Skills, Investment, National Connectivity and International – was welcomed by many in the industry who are well aware of the benefits and opportunities that the sector presents.

As pointed out by Charlotte Crosswell (former CEO of Innovate Finance and 36H Group Chair, the FinTech platform lending group of sector leaders of which

CrowdProperty is a founder member), for over a decade FinTech has filled a gap that traditional banks were unable to service, a “niche for better cuastomer service, more online interaction and businesses that wanted better SME financing”. Indeed, the increasing popularity of non-bank lending caused JP Morgan Chase’s chief executive to note recently that “many of these new competitors have done a terrific job in easing customers’ pain points and making digital platforms extremely simple to use”, which was fascinating praise.

Previously considered part of “alternative finance”, Ron Kalifa OBE set out in the Review that “FinTech is the future of financial services… It’s permanent and changing the shape of finance. It’s about delivering better, cheaper and more inclusive financial services for customers, especially consumers and SMEs”. It seems we’ve come full circle – with the challenges presented by Brexit, COVID-19 and global competition all playing out, yet again “the sector has a central role to play in driving

economic growth and supporting a strong, sustainable recovery,” says Catherine McGuinness.

With the strategy and delivery model delivered and digested, the focus shifts to taking action in order to grow what Kalifa calls “a maturing and increasingly competitive industry”. The Government’s response to the recommendations came some seven weeks later, when Chancellor Rishi Sunak openly adopted the Kalifa Review in his UK FinTech Week keynote speech, announcing plans to “boost growing FinTechs, push the boundaries of digital finance, make our financial markets more efficient [and] capture the extraordinary potential of technology to cement the UK’s position as the world’s pre-eminent financial centre”.

Organised by Innovate Finance, I was privileged to share my own views on the power and future of marketplace lending as one of the founding members of the 36H Group – a unified voice for lending platforms – with perspectives about the ➳ Issue No. 14 – Qandor – 083

difference we are making to SME property developers as the UK’s leading specialist property project lending platform.

Amongst the measures announced by the Chancellor was the Financial Conduct Authority’s progression of a regulatory scale box – a package of measures to help grow UK FinTech firms, who are competitively advantaged and advanced on a global scale.

FCA chief executive Nikhil Rathi confirmed the launch of a regulatory “nursery” this Autumn, which will nurture the potential of high-growth FinTech clusters across the UK. The Midlands is one of the more established clusters, and CrowdProperty has experienced first-hand the further competitive advantage of being based in Birmingham – having access to a strong talent pool with less demand, alongside lower fixed costs, making for a better resourced, more sustainable business model.

It’s no wonder Goldman Sachs are heading here, but even they won’t be able to draw our brilliant software engineering talent away for the culture we’ve built and our shared mission of driving SME housebuilding and spend in the UK economy.

Rathi added: “We will support scaling firms’ entry and growth in other markets and further develop cross-border testing of innovative products and services” as part of Project Innovate. This supports Lord Grimstone’s declaration of the Government approach going forward being one of “visibility, collectivity and global connectivity” with a focus on inward investment and international expansion.

These sentiments couldn’t be more

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applicable to CrowdProperty, especially having just launched in Australia.

As a disruptive FinTech / PropTech business, we span and see the huge potential in both these sectors – EG recently reported on the billions of dollars being raised in the US through special purpose acquisition companies (SPAC), which are being “directed towards technology businesses, particularly in the real estate sphere”. If the US market is a measure of things to come, it’s interesting to see that Clelia Warburg Peters, Venture Partner at Bain Capital Ventures, is “extremely bullish on PropTech funding continuing to grow in 2021 and for the decade to come”.

The use of technology to innovate the built environment and real estate markets will be key to reducing the inefficiencies in the way we build, transact around and manage the built world – the evolution of PropTech is hot on FinTech’s heels and I see this first-hand sitting on the Investment Committee of Pi Labs, Europe’s most prolific PropTech specialist venture capital fund – there are some huge potential PropTechs in the Pi Labs portfolio.

The achievements of the FinTech sector to date are impressive, with the innovation shown by entrepreneurs enabling myriad solutions to everyday life.

Perhaps the more interesting development is customers adopting and demanding change – as Charlotte Crosswell notes: “data-led products and services, putting the customer at the centre of the proposition, is when you realise its full potential”.

We couldn’t agree more, which is why CrowdProperty is relentlessly customer-

focused and changing the game of property project finance. Leveraging proprietary technology for efficiency and deep property expertise for effectiveness, we’ve built the best property project lender in the market with the developer at its heart as property finance by property people, providing speed, ease, transparency and certainty of finance so that SME property professionals can spend less time arranging funding and more time growing profitable businesses.

The reliability of lending and knowledgeable support we have been able to offer SME property developers throughout the past 12 months is attracting more and more developers and more and more institutional capital. These institutions only look to work with the best platforms –

giving deep pockets, validating institutional grade investments, and only backing the highest quality players after months of due diligence. Whilst the diversity of our capital sources and deep expertise is partly responsible for our market leadership, our innovative and customer-centric FinTech / PropTech approach sets us clearly apart. Q.

Find out more about funding your projects better and growing your property business faster and more profitably at www. crowdproperty.com/apply.

Issue No. 14 – Qandor – 085

FINANCE

2020’S ‘LOCKDOWN ON LENDING’ SAW THE CONSOLIDATION OF SOME ALTERNATIVE LENDERS. PAUL WATSON Head of Origination Blend Network www.blendnetwork.com

2020 was the year when the ‘lockdown on lending’ meant many banks focused on serving their existing loan books, leaving many property developers with great deals out in the cold. Paul Watson, Head of Origination at development finance lender Blend Network, explains how 086 – Qandor – Issue No. 14

this allowed alternative lenders, especially syndicated property lending platforms, to step in and fill the funding gap left by traditional lenders while consolidating themselves as the go-to funders for many property developers looking to move fast and get funding quickly.

Prime Minister Boris Johnson’s address to the nation on Monday 23 March 2020 outlining strict measures to control the spread of COVID-19 was no doubt a monumental moment for all of us, but I can’t even begin to imagine how it might have felt for those thousands of property developers with deals in their hands going through funding for their projects, trying to purchase a site, agreeing funding to develop a site, refinancing their projects or even waiting for drawdowns from their pre-agreed facilities.

Yet that was only the beginning of what was to come over the following few weeks and months when lockdown on people also meant lockdown on lending. Through March and April many traditional lenders and high street banks reacted by re-evaluating their loan offerings, reducing their LTV offerings and their maximum loan size. Even for those developers with agreed funding facilities,

releasing drawdown funds became really complicated, mainly due to many surveyors not working, and delays getting building regulations signed off due to the added difficulty in arranging site inspections.

But against this backdrop of ‘lockdown on lending’ from the larger players in the market, some smaller lenders in the alternative lending space, especially syndicated lending platforms, decided to stay open for business and continue to actively lend. Furthermore, due to their nimble size and more flexible setup, these lenders were able to adapt much faster and adopt new technologies to overcome challenges such as site visits and inspections. This is when syndicated property lenders’ FinTech background came in handy as they were able to adapt much faster to ensure the minimum disruption to the borrower on things such as releasing drawdowns. ➳ Issue No. 14 – Qandor – 087

The role of technology Technology was the other great enabler during COVID-19. At a time when nonessential businesses had to close to the public, FinTech companies and syndicated lending platforms thrived by allowing users to do everything online. This is an area where traditional lenders’ heavy legacies and dependency on manual operations hindered them. Q. Maintaining liquidity There are many reasons that allowed alternative lenders to keep lending amid the pandemic, but perhaps the most important reason is liquidity. Indeed, alternative lenders and syndicated lending platforms get their funding from private sources and thus do not rely on the liquidity in the overnight markets.

For example, at Blend Network we get our funding from a mix of institutional investors, family offices, high net worth individuals and also retail investors. This well-balanced and diversified investor base enabled us to keep our liquidity during COVID-19 and in fact increase it. As explained in an article in Bloomberg, ‘ultra-rich families with cash on hand pile into private debt’ during the pandemic (link).

We also saw this at Blend Network: following the initial shock, liquidity increased due to what was feared as unsustainably high equity markets when global equities rebounded sharply since the end of March.

As a result, investors looked to diversify away from the equity market and their search for yield led them to private debt, where they could use syndicated property lending platforms as origination arms to deploy their cash into selected property deals.

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Blend Network is a peer-to-peer (P2P) property lending platform that provides development finance and bridging loans from £150,000 to £5,000,000 to experienced SME property developers and small construction companies.More information can be found at www.blendnetwork.com.

Blend Loan Network Limited is is authorised and regulated by the Financial Conduct Authority (Registration Number: 913456)

Hilltop Credit Partners

Funding and investment for the new normal

A JV with global real estate and asset management firm, Round Hill Capital

CLICK HERE TO READ MORE

BUSINESS

PAY YOUR DUES. MICHELLE LOWE Director Redshell Consulting www.redshell.org

Cashflow is king. And it’s king for everyone. No company, business, project, development, consultant or supplier can survive without the steady, reliable stream of incoming cash. It needs to flow freely, in all ways. In and out at the appropriate time to those, where and when it is due. It is an entirely more fluid entity than some might conceive.

This incredibly basic principle of business is still something that fails. Remains 090 – Qandor – Issue No. 14

to be something that continues to fall short.

Something that continues to cause so many unnecessary challenges to individuals, businesses and project deliveries alike.

This topic has reverberated around my mind for a little while now. An underlying annoyance that has indeed grown with intensity. The spark that lit the fuse came about last week. A lovely, kind and awardwinning architect I know had posted a status on LinkedIn. A simple status, yet it said everything.

“A client made my day today. When I

thanked them for paying our fees within 24 hours… They said: we prefer you focusing on the design and not wasting time chasing us.”

Such a surprise it was that payment was made so promptly that a post followed. Such an unusual occurrence that the hundreds of colleagues in the network commented.

“Where did you find this unicorn?” Surprise and admiration for the unusual client who paid and paid promptly.

As an independent consultant, we are also paid in fees, fees invoiced at the end of each month with normal 14-28 day payment terms. As a small business, this is critical. Yet, even we run at 20-25% of our yearly turnover paid consistently and continually late. We are operating with a continual lag. A lag that can and has stuttered our progress with our own business ideals.

You don’t walk out of a store carrying a new TV without paying for it, do you? Well, some might do, but that’s a different societal

issue. Or is it?

Regular and timely payments have been a serious issue within the construction industry for a long time. It was the very essence of the Egan and Latham reports from the 1990s and the Housing Grants and Regeneration Act 1996 that followed as a result.

Payment terms, valuation rules and a limit on elongated payment periods from the larger corporates were a move away from companies hoarding their cash, and the supply chain and contractors being squeezed as a result. A huge amount of companies within the industry have, over time, fallen simply because of stuttered cash flow.

As quite rightly pointed out by our unicorn client, the time, resource, and cost of chasing late payments is huge across all sectors within the industry. I am certain that whole account departments are created and exist for the sole purpose of chasing late and ➳ Issue No. 14 – Qandor – 091

outstanding payments. What a tangible waste of resource, time, and energy.

The risk of Employers overpaying Contractors is clearly managed and mitigated via the Contract and by the effectiveness of the Quantity Surveyor. So why the late, or even more annoying, the non-payments?

This really is a chronic issue.

Is it ego? Ultimately. To keep cash in reserves when it’s already due elsewhere?

Is it fear? A scarcity attitude that you will somehow fall short?

Is it overstretching? Robbing Peter to pay Paul? Doing something else with it other than allocating it to the project in hand?

A lack mentality when it comes to cash will see you holding on tightly to project funds that quite rightly belong elsewhere at some point.

It is a very old school attitude to withhold monies. To keep balances and deposits within

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your own accounts rather than passing them down. For what purpose exactly? Has anyone checked the interest rates these days?

Obviously in our role as Quantity Surveyors, we wade continuously knee-deep in the midst of all payments, drawdowns and transactions for the project. Not only does this ensure all drawdowns from the fund are accurate, complete and correct, but also that the project cashflow is distributed appropriately and timely. Correct and accurate payments to Contractors and onwards to Suppliers, Subcontractors and Consultants alike. Yes, it really should be that smooth.

There are of course sometimes understandable reasons why payments may be withheld or settled late. These should be the rare and unexpected events, though.

Open communication can usually always find a resolution that helps all parties, both in the short and long term, should funding stutter

or be an issue. We are all in this together, after all.

Construction News ran an article on this very subject back in December 2020. Instead of raising awareness and finding solutions, I’m afraid it just highlighted the widespread underlying attitudes that are causing this very problem. A contributor bleated when asked why they sometimes fail to make payments, “We only get 13 drawdowns a year… And if we miss a drawdown date, then our payment terms are stretched from 30 to 60 days”. I eyerolled myself into the next county. Manage it. Quite simply.

If the delay in payments is a result of the Employer just not having paperwork, drawdowns, finances in order, well, get your things in order. Many committed and professional resources are working for you and your project and are relying on the income. You are buying and committing to a service. You do, quite frankly, have a duty of care to all those who are involved in your project. They are pulling this off for you!

The real-time costs of delaying or withholding payment is tangible.

“Recent research by BACS Payment Services revealed that a staggering 75% of UK businesses are forced to wait a month beyond their agreed contract terms before getting paid. Firms have said that this represents the biggest threat to their survival.”

A voluntary government initiative PPC (prompt payment code) had been set up in recent years to start smoothing this whole situation over, yet it is quite surprising who is banned from it. You are no longer eligible to be accredited with PPC if your company takes longer than 60 days to pay 95% of your

invoices. Household names, no less.

The government are taking this seriously; new legislation set to be in place for September 2021 limits payment periods to 30 days, which will now be a pre-requisite of winning construction contracts with government and local authorities.

The ill feeling that delayed payments create has of course a negative effect on the commitment to and delivery of any role. I’d beg anyone to differ on this. The communications and project deliverables become a chore. There is a hesitation. It’s a grind; not a pleasure. I also know how awkward it can be to chase the entirely due funds. It shouldn’t be, of course. It’s not awkward for clients and employers to request tasks from you.

The delays in acquiring materials, the reluctant and erratic attendances of labour and workforces, the slow release of design information. All very real effects of late payment. None of this is going to help your project run smoothly.

The most effective catalyst for change in this modern world seems to arise from shame.

The shame now associated to poor payment performance and the underlying attitude of operating in this way is hopefully what will make this change. We at Redshell now take fully into account the payment performance of clients and employers, and this directly affects the choices of when, how and whom we will work with and what projects we choose to deliver.

Maybe you should do the same? Q.

P.S. If you owe Qandor a share of deals done…

Now is the time to pay up.

Issue No. 14 – Qandor – 093

TAX

THE ADVANTAGES OF GRANT FUNDING. GEORGINA KEYS Senior Specialist Tax Consultant Catax www.catax.com

If a business is planning a future innovative project, grant funding is an optimal solution for helping to subsidize this activity. Typically distributed by the government, corporations or foundations, these schemes reward companies with a share of a large sum of money that does not have to be paid back.

There are hundreds of schemes that run every year which deliver millions of pounds into the hands of industries.

These are specifically chosen because they 094 – Qandor – Issue No. 14

have a significant contribution to make to the environment and economy through innovation and technological advances.

Real estate and construction are some of these sectors.

The grants available for companies in such industries are changing, and are now focusing on the materials used, building efficiencies, innovative technology and greener supply chains. For example, these grants include the upcoming STFC Horizons Programme: investigating solutions for net zero. With a closing date of the 16th June, the funding has been created to support companies investing in research and development of technology

and solutions achieving new zero carbon dioxide emissions.

The techniques we use to build are changing, and policymakers use grants to encourage more rapid progress. Companies focusing on finding new materials that are more efficient to build with and more ecofriendly to use, and those that are working with existing structures – including soft targets to protect existing infrastructure and minimise waste – will be able to utilise these grants to fund their projects.

However, grant applications are often complex. It is essential that applicants not only explain how the money invested will be used and what difference it will make to the organisation concerned, but also how the advances it aims for will benefit the wider industry.

Chris Pa r k hu r s t , Regional Development Director (Grants) at Catax, said: “You face intense competition when

you make these grant applications.

“The selection process itself is even called a ‘competition’ in most cases, and you will be up against plenty of other determined leaders in the industry. If you can’t explain why you, above nearly all others, deserve the investment, then you won’t succeed.

“We come across plenty of businesses who missed out in the past because they weren’t able to put their best foot forward and fully explain the value they would add. It’s a crying shame when that happens because grants can have a terrific impact on the future trajectory of a business.” Q.

Catax is the UK’s leading expert in specialist tax relief and grants services. If you want to find out more about which grants you’re eligible for and how to apply, contact Shaun Marsden on 0781 750 8904 or shaun.marsden@catax.com.

Issue No. 14 – Qandor – 095

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