The Young Property Developer Growing Fast With A Social Purpose

The link between developers and the social housing sector has become stronger and stronger in recent decades as builders have sought to help local authorities provide more units as successive governments have prevented councils from building their own.

Despite the tensions this has created it’s created an opportunity for developers if they are prepared to work with local authorities and housing associations.

Many of the big builders have risen to the challenge and particularly in London many famous-name builders now have extremely active ‘public partnership’ divisions.

This includes, as Dealmakerz revealed earlier this year when we talked to Redrow, the extraordinary extent to which some of them rely on housing associations to keep their construction pipeline going.

But there is also a new breed of young entrepreneurs which has gone even further, growing their property development companies entirely on provision to the social housing sector.

And one of the most unusual examples of this is Manchester-based HS Property Group. We spoke to its Managing Director, Guy Horne to find how he’s taken his company from zero to 410 units in just five years through this route.

Why did you choose the social housing sector?

“When we started the business, we were looking at social housing as an offering to investors who wanted low capital, high yield secure investments and there was very little that I could see in the market that was any good. I knew who the existing suppliers were, and I felt they were just bleeding the sector dry.

“We looked at different ways of getting decent returns and tried to do it on a low-capital investment basis. So as recent graduates, we thought why can’t we turn other types of property into HMOs rather than just student houses?

“Therefore, we thought why not do this in low capital areas, and we looked at properties on the outskirts of Manchester and did some digging around on various different ways of achieving it and that’s how we got involved initially in social housing contracts in a shared accommodation properties in the city.

HS Property Group at a glance…

  • Total amount invested: £56 million
  • Net income: £5. 1 million
  • Claimed average net yield: 9.1%
  • Number of staff: 14
  • Main areas of operation: HMOs, Consultancy, Asset management, Long-lease shared accommodation.

“We then began acquiring properties in low capital areas that needed renovation, starting with them again and converting them into whatever the housing association wanted. We’re very much demand led.

“They liked the quality of what we developed and in return we got long contracts to provide it, and in return our buyers get security of income. Everyone’s a winner.

“Remember, the value in these sites, unlike in traditional property development,  is based on quality of tenant and income, not location.

“And because not enough social housing is being built, at the end of the term whether it’s five, ten or twenty years, you’ll find it’s probably going to be renewed again.”!

Did you have a social purpose from the outset?“

At first we were investor led, looking at how we could attract buyers to the product we were developing and we knew that long-term leases from established social housing organisations had many benefits for them.

“It was only later that we realised the needs of social housing and those of investors could be merged together and that we could do something really good for the sector. The two set of needs go hand in hand.”

Would you describe your company as a niche operator?“

Yes and no. We do specialise in social housing, but we work in almost all areas of it which isn’t typical – most developers tend to focus on one particular type or size.”

Does working with councils make planning easier?

“Some developers we know use the Permitted Development route to ‘play the planning game’ but we’re lucky that we don’t have to do that.

“HS Property Group works in collaboration with the council on our developments to ensure they fit the needs of the end user and that means the council understand what we’re doing, and planning is easier.

“Most recently that’s included turning a former pub into eight one-bed flats with communal and office space and 27 apartments to be created within a former office block in Oldham that come with facilities for carers.”

It’s been reported that you embraced blockchain recently – why?

“I think it’s good to bring technology into the sector and in particular we wanted to speed up processes which are often slow.

“For example, we noticed we were being slowed down by lawyers and estate agents when it came to both acquiring and selling properties.

“The idea is that if you can remove actors you can reduce leads times and speed up process.

“HS Property Group piloted the clicktopurchase platform, got it to work and over the past 18 months we’ve sold 10 units.

“I think blockchain will be used more and more frequently in property sales, but whether clicktopurchase is the one to achieve the breakthrough, who knows?”

Who are your buyers?

“It’s a broad range but includes institutions, family offices and those looking to achieve wealth preservation. 

“We begin selling on a site once the property is leased so we are looking for the right people to own this kit once it’s developed – i.e. those who want access to completely hands-off property investment secured via a long lease to an established social housing organisation.

“Investors are attracted to us because the sector is insulated from exterior economic market conditions – unlike the retail sector, for example.”

Why Manchester?

“I think people got disillusioned with London and  the South East especially a couple of years ago with returns of 2-4%.

“And then they realised there were better returns outside London, and Manchester became the natural place for people to go because of the amount of infrastructure being built.

“Walk outside of our offices and there are a lot of large cranes everywhere and big companies are moving to Manchester including Amazon, who recently announced they are taking 90,000 sq ft.

“There is also a huge social housing need here and a large homeless population.”

Where would you like to be in five to ten years?

“We want to carry on going with the granular stuff and growing it at a steady rate but we’re now getting involved in larger sites – big blocks of apartments – so we’re looking to increase both deal size as well as deal flow. Social housing is not about to go away.”

You might also like