Extensive financial modelling work completed over the past year helped Urbanbubble secure its first large PRS management contract, the 380-unit Trinity Way for Betfred billionaire Fred Done’s development vehicle FICM.
Michael Howard, managing director of Urbanbubble, said the key to winning the work was being able to provide accurate and robust forecasts for the operating costs and net operating income for the scheme over the next 12 years.
Howard said: “This financial modelling was based on occupancy levels and our knowledge of the residential market in Manchester and Salford.
“The long-term forecasting we did, informally advised by Winckworth Sherwood, included market insight, funding and tax challenges and employment issues.”
Howard added that scale would be important to the emerging PRS sector; to achieve the 24-hour site staffing that customers expect at the top end of the market schemes would need 200-plus apartments to stack up for the asset owners.
The PRS market typically aims for 75-79%% net operating income, not including asset finance and interest.
Howard declined to go into details of the terms and NOI forecast for Trinity Way.
However, he said not all apartment designs would lend themselves to successful PRS blocks: “If a landlord is aiming to get between £1,100 and £1,500 a month for a two-bed apartment they need to follow the Manchester Design Code (which has adopted the London Code in the short term) which includes larger standard sizes of two-bed apartment at around 800 sq ft apartments. We think people will struggle to get those rents with smaller 650 sq ft apartments in 2017 / 18.”
FICM was established in January 2014 and is registered at Betfred’s headquarters in Warrington. The shareholders are Mark Stebbings, head of development at Betfred, Mark Comber, previously a director of Done Property Tradings, Peter Done junior, Lea Anne Done-Jackson, Nicola Done-Orrell, private equity specialist Simon Ismail and Steven Longden, head of legal at Betfred.
This is the first appointment for Urbanbubble on a development of this kind, where there is a single asset owner along with a single asset manager. With thousands of new PRS homes in the pipeline in Manchester, the company sees PRS as a major opportunity. The homes at Trinity will be ready for occupation by January 2018 and in the meantime, Urbanbubble will work closely with FICM to develop the management strategy for the development.
Howard added: “I am thrilled to be working with FICM on Trinity, it will be one of the first, true PRS schemes built and will be a huge benchmark for other developments to follow. At Urbanbubble we’ve been working very hard over the past few years to understand the specific challenges and requirements involved in managing PRS schemes, there’s essentially two customers – the asset owner and the residents, and it’s how we look after them, and their homes which will be the makings of a successful PRS development.”
Simon Ismail, director, FICM, said: “Urbanbubble’s approach really impressed us, they have a great reputation with the management of their existing portfolio. They understand the difference between tenants and customers. With our PRS schemes we offer much more than just an apartment.”
Designed by 5plus Architects, Trinity includes a range of one, two and three-bedroom apartments and seven townhouses. The grade II-listed Black Friars pub will form a distinctive entrance to the development and is integral to the design.