The Lucent Investment Partnership

The pressing need for housing has only increased since the 2008 financial crisis. People are working and need homes, and private investors can build them.

Local Authorities in the UK are currently facing huge challenges. The global economic downturn has reduced central funding whilst the country’s population increased by 7% in the decade to 2011. Government figures suggest that 232,000 new homes will need to be built every year to meet projected household growth in England alone over the 25-year period from 2008 to 2033. So how do local authorities build more homes with less money whilst central government is putting them under increasing pressure to do so?

Traditionally the answer would be found in selling off land to a developer and hoping that the developer would build what was needed, where it was needed, when it was needed. In today’s environment, that is not much of an answer!

The Lucent Local Investment Partnership (LIP) is a sophisticated solution to this problem. Lucent provides the commercial know how, market relationships and investment funding (via strategic land partnerships) required to give local authorities a holistic plan across their development portfolio, to assist them in gaining the best returns for their land assets and to ensure that the developments are entirely appropriate and in keeping with the local community.

The key partners in this arrangement are the Local Authority and the Lucent Strategic Land Fund (LSLF). Other private or public sector partners in the land investment opportunity can be included from the outset or later on. Adding them into the partnership is both simple and cheap to do.

The partnership is structured as a 50:50 Limited Liability Partnership. Both partners share the enhanced value on an equal footing, (a “paripassu relationship” with each partner receiving the same rate of return per pound of investment). The Council provides land and strong strategic and political links throughout its region. It can also provide or source grant funding to assist with land infrastructure requirements which, in turn, will support/maintain the IRR and also support project viability. Lucent Advisors, on behalf of the LSLF, provides requisite investment and resources to secure planning consent on each site, in accordance with the use set out in each Project Plan and agreed to by the Partnership.

So what will the Partnership do? Lucent Advisors will arrange and manage appropriate exits to operators to deliver housing, food or other retail, commercial or employment opportunities. The partnership will have the capability to acquire identified sites within towns (or even across a wider region), enhance sites and meet specific strategic community objectives. It will also support the Council Plan delivery (and other Council priorities) through the delivery of land investment plans. In addition, over the life of the Partnership, further sites and opportunities will be identified and benefits realised.

• The LIP model addresses many of the shortcomings of the Local Asset Backed model (LABV), currently popular with some local authorities and which has several disadvantages including that of the “asymmetric partnership” in which each partner is focused on different commercial and delivery objectives. This can lead to a lower or nil cash return to the authority partner.

• The LIP model provides the Council with a cash return, capital or revenue plus the economic, employment and regeneration benefits.

• It also has the ability to acquire sites anywhere. As a private entity, the LIP does not have geographical boundaries.

• LSLF is a capital growth fund. Its model is predicated on investing and growing capital investment. It is not interested in delivering construction/developer returns, ensuring both Partners have the same lined-up and equal interest in outcomes – a true joint (and equal) venture partnership.

• Moreover LSLF’s return can be invested back into other projects as determined by the Council and Partnership.

• Additional land, for example HCA land, can be “directly injected” into the LIP.

• Lastly, the model allows the LIP to work with other local authorities to meet the needs of the wider region.

Following the success of both the Allerdale Investment Partnership, formed in Spring 2014, and the Peterborough Investment Partnership, formed in December 2014, several other councils have approached Lucent to discuss the possibility of entering similar arrangements.

New Houses on Green Belt Land: A Trend for 2016?

Distinctions between green spaces that have aesthetic and environmental benefits from those that don’t should be part of the discussion.

Giving a new twist to an old controversy, Chancellor George Osborne is striving to build 400,000 homes in the UK by 2020. And it appears likely that some green belts may well be the land on which those homes - including the so-called starter homes, priced at £250,000 or less (outside London) and sold to people under age 40 – will be built.

The need is great and the homebuilding industry has said for quite some time it’s green belt land that needs to be freed up for development. As Britain strives to catch up on a million homes’ deficit to serve its growing population, UK land investment groups search for places where disused hectares might be developed into housing. But resistance to developing on the official green belts that encircle dozens of cities and towns has been fierce for decades.

The Campaign to Protect Rural England is perhaps the loudest voice in the resistance. Paul Minder, the CPRE’s planning campaign manager spoke with a reporter from the Daily Telegraph about these opposing needs, more houses versus environmental considerations: “The current policy isn’t working,” he acknowledges. “But these proposals will make things worse. It could see a lot more planning battles in the countryside over coming years.”

Indeed, the argument for rethinking the sanctity of green belts is about more than what the homebuilders want. Shelter.org, the housing charity, argues for a reasonable swap of greenbelt lands, particularly those near transport stations, for parkland swaps inside cities. This would enable lower-cost home building that would ultimately trickle-down to greater affordability for all social classes. At the same time, those swaps can bring vegetated spaces inside cities where perhaps more citizens would have visual and physical exposure to green spaces and the quality of life benefits they provide.

There are 14 green belts in England, covering approximately 13% of the country’s total land. Since the Localism Act 2011 was implemented, more local planning authorities have opted to use green belt areas for development. The National Planning Policy Framework requires each council to have formal five-year plans for development.

Other voices include the Adam Smith Institute’s Tom Papworth. His paper, “The Green Noose,” takes a more critical view (as the name implies) of the green belts, explaining there is a “welfare cost” in terms of smaller houses, house price volatility and a higher cost of living due to this “noose.” This argument roughly parallels what Shelter says. Papworth says that intensive agricultural use of green belts fail to meet their claimed purpose and environmental value, a point on which many environmentalists would agree (an organisation, the Campaign for the Farmed Environment, argues for more species-friendly methods that would also allow fewer chemical runoffs to streams and rivers, sharing this critical view that industrialised farming is undesirable).

A professor from the London School of Economics, Paul Cheshire, urges broader thinking on the green vs. growth equation. He told the BBC “You only need a tiny amount of the least environmentally-attractive green belt to solve the housing land shortage for generations to come.” Instead of treating green belts as untouchable, he favours the preservation of lands that are designated as Areas of Outstanding Natural Beauty and National Parks.

When alternative investment funds search for ways to turn land into homes, farmland and other green space– not necessarily green belts – are routinely considered. Building on green belts is already happening: the BBC reported in 2015 that planning permissions were granted in 2014-2015 for the construction of almost 12,000 homes, up from just 2,258 homes in 2009-2010.

Choosing to put any kind of money into housing development is on the minds of individual and institutional investors alike. But clearly there are variables and controversies that need to be negotiated. For individuals in particular, the advice of an independent financial advisor is highly recommended.

Build Houses Faster: Innovations in the UK that Speed Construction

From bricklaying robots to factory-built houses, the country is looking for ways to build more homes quickly. This matters to homebuyers and investors.

Will the recent invention of a bricklaying robot - which reportedly can build the exterior walls of an average-size UK home in two days - transform the house building industry? And if so, might it help alleviate the shortage of homes in the country?

Perth, Australia-based engineers recently demonstrated a fully built prototype of this house-building machine, which has the working name Hadrian (Get it? After our wall.). It lays 1,000 bricks per hour, using information fed from a three-dimensional CAD (computer assisted design) programme. A single boom head of the crane-like apparatus applies bricks and mortar to the building foundation.

Typically, traditional building methods require about four months to construct a home from the ground up, and that’s after land is acquired and planning authority approvals are put in place. That can take years, however skilled specialists in joint ventures related to property funds strive to keep those bureaucratic measures to a minimum. The faster the turnaround, the quicker the return on assets.

It remains to be seen if the company succeeds with Hadrian. Building in England is stymied by a shortage of skilled house-building labour, but building materials (including bricks) are harder to source as well. The approximately 150,000 homes built in 2015 fell short by about 100,000 of the number required to help the country catch up with the need created by a fast-growing population. Other ideas are welcome.

Volumetric building is one of those ideas. These are the offsite factory-built homes and building components (such as fully-assembled walls) that have made a dent into the housing shortage over the past decade.

Building research firm BRE unveiled two such modular homes in 2015 - the designs of which originate from Tigh Grain Ltd., a Scottish prefabricator, and Userhaus AG, a Swiss technology non-profit - that promise low costs, an eight-week build time and sustainability features such as tight insulation and rooftop photovoltaic systems. A 50-unit housing development in Scotland will be the first application of the system in the UK, which will be built in a Welsh factory. The homes will cost less than £1,000 per square metre to build.

Volumetric building is not new, however interest seems to be increasing because of the favourable economics. A publication dated 2005 from the National Audit Office, “Using modern methods of construction to build homes more quickly and efficiently,” strongly recommended offsite building. As compared to brick-and-block, open panel and hybrid methods of home construction, the volumetric method wins over the others in terms of on-site construction duration (much shorter) and the time it takes to provide weather tight conditions (reducing damage from rain and snow to the interior). It also significantly requires less on-site labour, which has an important cost savings and mitigates the UK’s current skilled construction worker shortage.

To investors in housing these are critical concerns. Time is money, after all. When real assets such as land funds can achieve a sale more quickly those funds can be reinvested in additional building elsewhere a lot faster.

Building.co.uk, an important industry trade publication, cites several factors that could and likely will encourage off-site building manufacturing. Those include a steady flow of orders to achieve economies of scale; lowest-cost manufacturing (perhaps locating manufacturing in cheaper labour markets outside the UK); and CAD/CAM advances that enable more customised construction (vs. building within a limited number of designs, the proverbial “cookie cutter” approach).

Land is one of the most expensive inputs into the home building enterprise. To make a wise move in any phase of the process – land acquisition, land use approvals, building and estate agent work - the counsel of an independent financial adviser is recommended.

Modern Mansions: How and Where the UK's Largest Homes Are Being Built

In contrast to a shortage of homes in the UK, the modern moneyed-classes are building big again. But perhaps investors find middle class homes more interesting.

England has always been a huge international tourist draw with its country estates and castles. And while the television show “Downton Abbey” has educated millions at home and abroad as to the process by which those 19th century edifices very often became unaffordable to the families who built them - turning into hotels and museums, if not abandoned and demolished - there is a new class of the well-off who are building 21st century mansions to rival their architectural forebears.

Currently in development is one classically styled stone-and-stucco country house in Warwickshire, complete with newly planted woodland and hedgerows, ponds, ditches, an orchard and native wildflower meadows. It contrasts architecturally with the futuristic “Serenity” manse being built near Nottingham, variously described by critics as “an amoeba-like monstrosity” and “curvaceous” and “exuberant.”

Any discussion of these new estates naturally begs the embarrassment of riches matter relative to the homes shortage in the UK. An estimated one million new residences are needed to house the country’s growing population, while only about 150,000 houses and flats were built in 2015. Working to catch up are UK land investment funds targeting areas that need people, workers in particular, who help growing companies compete in a global marketplace. When average-sized houses are near workplaces, the company and its employers are more likely to succeed.

But just as there will always be a need for affordable housing, so too will there be demand for 14+ bedroom estates with every imaginable feature and convenience. Following are some features of size and price that are affecting the UK homebuilding landscape, particularly around London and the surrounding commuter-distance areas:

The biggest homes are in the Home Counties - Savills, the property group, analysed data from the Department of Communities and Local Government to fined that the largest new homes in England and Wales are outside of London in the commuter belt. Leading this group are Surrey Heath (with 200+ square metres of interior space), Elmbridge (190 m2), South Bucks (190 m2), Maldon (165 m2) and Guildford (145 m2).

The smallest homes are in urban areas - Savills’ data analysis also shows the smaller-builds are in areas with the greatest demand outweighing supply, and where most new building is that of flats and few detached homes. From smaller to larger this includes Oxford (58 m2 of interior space), Bournemouth (61m2), Reading (62 m2), Newham (63 m2), and Islington (63 m2).

Rents in Home Counties are rising quickly - As of July 2015 the rental prices in places such as Berkshire, Buckinghamshire, Hertfordshire, Kent, Surrey and Sussex jumped 27% over the same period a year earlier, according to data compiled by Knight Frank. This is attributed to corporate renters (relocated employees and their families who wish to be in the London commuter belt) who make up 47% of tenancies in these areas. The industries fuelling these rises with well-compensated employees include gas, technology and pharmaceuticals.

Some Home County residents are London émigrés - Homesandproperty.co.uk reported in mid-2014 that the rising London real estate prices are providing owners there a chance to move up the property ladder by moving out. Over a year’s period (mid-2013 through mid-2014), 44,000 Londoners traded in their flats to buy larger homes with gardens within commuting distance. For their money (they spent an average of £330,000) the best values were in West Sussex and Medway (in Kent, including the towns Strood, Rochester, Chatham, Gillingham and Rainham).

Strategic land investments by homebuilders and investors are made in the South East as well as elsewhere in the UK. If an area is already at peak valuation the wise investor will try to get an advance on where values will rise next and where homes will be in the greatest demand. That could be in a down-market London neighbourhood, or further out to Home Counties, or even further to places such as Peterborough, or the North West in Cumbria, to Wales and to Scotland. The point is to achieve planning approval where houses are needed.

The strong demand for housing attracts individuals and institutions to invest in building the homes that are sorely needed (the larger estates are presumably funded by their eventual occupants). For an objective understanding of all market opportunities, speak with an independent financial advisor.

Bryson's Fundamentalism: Famed Author Battles Home Building on Green Belts - and the Backlash

Everyone loves the English countryside. But does green belt preservation trump the pressing need for homes in the UK? Two writers spar over the question.

In discussing problems as significant as housing and green belt preservation, it stands to reason that passions would run deep. Writers Bill Bryson (Notes From a Small Island, In a Sunburned Country) and Colin Wiles (housing writer for The Guardian) have disappointed no one in taking a strong stand in opposite corners of the verbal boxing ring.

The much beloved American writer who adopted the UK as a home decades ago, Bryson surprised many with his new swipes against portions of British pop culture such as reality TV stars and retail commerce. In the just-released The Road to Little Dribbling, Bryson reveals a not-so-surprising opinion, given his position as president of the Campaign to Protect Rural England, that the green belts be saved from the creeping development overtaking much of the rest of the country. He argues that American city sprawl is evidence of an unrelenting human drive for those with money to overtake the verdant areas; he says the UK’s green belts make that available to all.

Developers in the UK, those who identify land investment opportunities for capital growth where homes can and need to be built, run up against this debate frequently. And it’s not just green belt land that many want to preserve - it’s the proverbial backyards of NIMBYism found everywhere, where new development is perceived as a threat to the status quo. Every community is right to question the effects of development – but when they do, they owe those land investors and homebuilders the opportunity to demonstrate what new residences can create. Very often that includes new infrastructure that not only includes roads, utilities and schools, but oftentimes they build public green space where none exists currently.

Wiles’ position is less “fundamentalist,” as he describes Bryson’s writings on the topic. “Suggest that just a small fraction of green belt land could meet our long-term housing needs and they accuse you of want to concrete over the whole of it,” he says. “In London, building on just 19,000 hectares of unattractive green belt land that is within a 10-minute walk of a station would provide almost a million high-density homes. Yet there are 100,000 hectares of green belt within the M25 alone.”

Given the high rents and unaffordable prices of homes to average workers in London - and the building of “iceberg homes” (expanding basements below grade to maximize use of land) in recent years - it seems the time has come to question the use of some of the green belt hectares.

Wiles has been writing in The Guardian regarding the rationale for rethinking green belts for some time. He makes a six-point argument as follows: (1) It’s not all green nor pleasant (much of it is poor quality scrubland); (2) It doesn’t actually stop cities [from] growing (commuter belts outside the rings develop eventually); (3) The countryside isn’t being concreted over (only 6.8% of the UK is built-upon); (4) It encourages inequality (he cites a London School of Economics professor who claims only the rich and absent investors can live in London’s home counties, while others must live further out); (5) It worsens the housing crisis (constrictions on land while the population grows is unsustainable); and (6) It’s partly why house prices are out of reach for so many (a simple constriction of supply in London, Oxford and Cambridge “denies decent homes to people on low-and middle-incomes and forces people into long commutes).

Those willing to make alternative investments into UK land for development are at the ready. They want to put their capital where homes will serve a need and can yield a good return on assets. Wiles’ argument for a middle ground position seems to agree with both the builders and the buyers.

It’s a gentlemen’s disagreement, and perhaps one that will never be fully settled. As the British economy continues to grow, and along with it the country’s population, it’s hard to see if Bryson’s absolutist argument (‘build exclusively on brownfields’) can endure.

One thing investors should not argue about is where to rationally put their money. It should be a reasoned decision made under the guidance of an independent financial advisor.

England’s Second-Tier Cities: Building Homes Will Help

The entire UK economy can benefit from stronger cities north and west of London. Part of that strength draws from improving home building and infrastructure.

Strong arguments are made by many interests for strengthening the economies of Britain’s so-called second tier cities, the next-largest metro areas to London. This would not only ensure a certain regional fairness, but also could improve the overall economic health of the UK when industries, jobs, population and infrastructure are more evenly distributed to places that include Liverpool, Bristol, Birmingham, Manchester, Sheffield, West Yorkshire and the North East.

Housing factors into this as well. Not simply that greater affluence in each of these areas would drive more home building. But also that more housing and the infrastructure that comes with it can be part of what makes the second-tier cities successful.

It should be noted that some discussions and recommendations include social housing as part of the equation. But private investment too - such as that generated and overseen by real asset managers - plays a big role. This discussion primarily considers the role and effects of market-rate homes.

One of the strongest interest groups arguing for devolution of authority is the Centre for Cities, which produces research that helps British cities to improve their performance. A central argument they’ve proposed (in a document titled, “Economic growth through devolution,” November 2014) is for the creation of combined authorities that would empower regions to act with greater autonomy on strategic planning, particularly on economic issues.

For example, a combined authority centred on Bristol would encompass Bath and Northeast Somerset, Bristol, North Somerset and Gloucestershire. Together, they could set binding statutory city-region plans incorporating housing along with transport and other land use within the region. This would also incorporate the powers to conduct green belt reviews and to rezone land as they collectively see fit.

Ideally, that would mean the economic interests of the region could be viewed in terms of where houses go, where transport goes, and where other infrastructure can be developed to lift up the region. At the same time, distant Whitehall bureaucrats would be involved.

A revamped housing authority could be an economic boost to each of these regional groups, and perhaps even make housing more affordable. The cost of housing in the UK over the past several decades, a function of the chronic and critical shortage of homes, is unlike that of other western European nations.

Another research organisation, the Centre for Economic Performance (CEP) from the London School of Economics, offered additional thinking on this topic in 2013. Henry Overman, who directs the Spatial Economics Research Centre within the CEP, wrote, “Britain’s story is fundamentally different because most of the increase in [housing] prices was a result of building too few houses in areas where people want to live. This, in turn, is down to the fact that our planning system strongly constrains the supply of UK land.” Overman goes on to state that the existing planning regime that affects housing also affects the cost of office space (he cites the 2008 study by Cheshire and Hilber, “Office Space Supply Restrictions in Britain: The Political Economy of Market Revenge,” Economic Journal).

These restrictions are what strategic land developers representing private investors encounter on a daily basis. They may be skilled at achieving land use changes from local planning authorities. But the challenge everywhere is what slows the process of homebuilding. Perhaps the Centre for Cities argument to devolve power to community authorities that approach development on a broad - but not national - basis can expedite and expand development.

The 2015 election and the election of the Conservative Government has brought about much discussion and promise to liberalise planning policies and to provide resources for home building. It remains to be seen if devolution of authority of any kind will harness regional interests.

Investors have a great deal of variables to examine when considering housing development, even in the face of almost unlimited demand and rapidly rising home prices. An independent financial advisor can help those investors to sort through the myriad factors to identify a smart property investment strategy.

England's Hot Tech Towns: Where Growth Means More Houses are Needed

If salaries are an indication, cities with the highest tech salaries are also the growth areas. Is this a shift in the winds for London and the South East?

The global growth of information and communications technologies - ICTs - is breath taking and disruptive. From a dark perspective it can mean jobs and industries go to markets outside the UK. But without question ICTs benefit all industries here in the British Isles and create new jobs along with new companies.

The reason this may matter to those investing in UK land, and in strategic land in particular, is simple: the highest demand for new housing, and the likelihood of selling those new homes, is where job growth is most robust. You can’t ignore tech industries, and established businesses being transformed by tech (the “internet of things”), if you are interested in maximising your return on assets.

Drill down to where ICTs are job generators in England, Wales, Scotland and Northern Ireland and a surprising picture emerges. As might be expected, the bulk of “tech jobs” are in London: the recruitment firm Experis found in 2015 that seven in ten such positions are there. But in a report titled “Tech Cities Job Watch Report” it appears as if the rate of growth in tech is a bit higher elsewhere. Cities that offer relatively high average salaries for technology work are Cambridge, Glasgow, Edinburgh, Manchester, Bristol, Birmingham, Sheffield, Brighton and Newcastle upon Tyne.

Looking at non-salaried independent contractors and their compensation averages, London actually ranks below or at a near par with other cities in absolute compensation (pound for pound) for certain specialised skills. For example, cloud technologies reward the Bristol and Brighton workers with £520 and £500 per day, respectively; in London it’s £436. Security specialists in Edinburgh, Glasgow and Brighton also do better than their London counterparts. Factor in the cost of living for these freelancers and it’s easy to see how better money is often made outside the Capital.

This might be due to the high cost of doing business and living in London. An industry where many of the jobs need not have a physical address seems perfect for placing workers where the commutes are shorter and where they can spend their money on something other than stratospheric house prices or rent.

Those engaged in joint ventures that seek land to buy and convert to housing already are investing outside of London. The devolution is on - a younger generation of educated workers are finding the economics in places such as Manchester, Birmingham, Southampton, Peterborough and elsewhere to provide a better quality of life because their money stretches farther.

And for enterprises in the property and estate agent fields, City A.M. reports that property sector-specific ICTs are rising in the UK. The newspaper cites the 2015 £1 billion listing of Zoopla, a property portal, among several companies that wed digital technology with real estate transactions and industries. Others are GetAgent, Splitable, Trussle, Purplebricks, eMoov, Homeshift, Buzzmove, Fixflo, Property Partner, Uniplaces and Rentify.

As technology and the economy grow overall, so too does interest in land assets. But to make a rational investment relative to your individual portfolio, speak first with an independent financial advisor.