I was recently interviewed by Adam Branson of Property Week with whom I talked about the future of Urban Splash and the work we’re doing. Have a read of the article below or online on the PW website…
Tom Bloxham does things just a little bit differently. That’s something that applies not just to his company Urban Splash’s projects, but also to his own sense of style.
On the day of our interview, he is dressed in a well-cut suit and a stylish shirt. So far, so property. But a glance towards the floor reveals he is wearing a pair of open-toed white leather sandals. Different enough in itself, but given that it is pouring down with rain outside it counts as mildly eccentric.
Such individuality has stood Bloxham in good stead. It was his company that pioneered city centre living in places such as Manchester and Liverpool, doing as much as anybody to contribute to the urban renaissance in our northern cities. It was also that iconoclastic world view that made Urban Splash a huge success - and Bloxham a very rich man. By 2007, the company was turning over around £100m a year and had advance sales on its residential developments of twice that amount.
“Then the world changed,” says Bloxham. “The people who had committed to sales couldn’t raise the money to complete, so those exchanged contracts were next to worthless.”
At the nadir, Urban Splash had a debt pile of more than £200m. Now, however, Urban Splash is back in the black. In an exclusive interview with Property Week to coincide with the RESI Conference, Bloxham reveals how he dragged Urban Splash back from the brink and why his new modular housing concept, ‘hoUSe’, gives him the same butterflies inner-city lofts did two decades ago. He also comments on those rumours he considering running for mayor of Manchester.
To say things got bad for Urban Splash during the downturn would be an understatement. When the residential market first started to feel the chill winds of the crisis, the business had enjoyed 15 years of year-on-year growth.
The sharp contraction in mortgage finance had not figured in its calculation. Worse, the value of Urban Splash’s developments started to go through the floor. People who had bought flats at, for instance, £100,000 were getting valuations for £60,000-£70,000, at which price only forced sellers were coming to market.
What is more, cash buyers were the only game in town, and they were offering just £30,000-£40,000 on the same properties - which in turn fed into valuations and the vicious circle just continued. “You saw the cycle of banks panicking and most companies in our sector - speculative, northern developers - sadly went to the wall,” says Bloxham. “Nobody saw the crash coming and I think we did well to survive it. We’re still here - many people in our position just fell away.”
Such a situation was unprecedented and it did not help that in 2010 the government abolished the regional development agencies and a series of grant agreements Bloxham had assumed were in the bag simply disappeared.
“It was an interesting thing I never thought I’d see,” says Bloxham drolly. “But whatever happens, my experience is that it’s not what life sends you; it’s how you deal with it. It was a bit of a challenge, but people were very supportive. They saw in Urban Splash a company that had done some great regeneration schemes nobody wanted to lose.”
That support saw Urban Splash able to raise enough money from HSBC and the Homes and Communities Agency (HCA) to build out the schemes it had started, and Bloxham says that all its contractors got paid in the end. Homes that could not be sold - read most - were simply added to the company’s burgeoning private rented sector (PRS) portfolio, which Bloxham describes as “a good business”.
“Fundamentally, housing for rent is a good business model,” he says. “If you look at most building types today - student accommodation, supermarkets, office parks - in 30 years’ time they will be useless. Most of the houses we live in are more than 100 years old and as long as you maintain them well, they will last forever.”
That may be so, but what the crash killed dead was Urban Splash’s ability to take on new developments. The last two years, however, have seen Urban Splash shrug off its debt burden, return to growth and to begin, tentatively, to look for new opportunities.
In its latest set of results, covering the year to the end of September 2014, the company posted a turnover of £44.4m and a pre-tax profit of £7.6m. It also concluded the refinancing of £195.9m of debt and £93.6m of property transactions and repaid £134.9m of debt.
Two deals were critical to the turnaround. The first, agreed in July 2013, saw Urban Splash sell off a £77m residential portfolio to housing association Places for People. Urban Splash was retained to manage the properties and a joint venture (JV) formed to enable the two organisations to undertake new developments together. The ongoing redevelopment of the brutalist Park Hill estate in Sheffield is a key example.
Then in April last year, Urban Splash agreed a refinancing deal with the Pears Group, the notoriously private London-based property firm, to replace £135m of facilities held by the Co-operative Bank, Blackstone, HSBC and RBS. Again, the deal led to a JV being formed to take forward future acquisitions. Bloxham says the result of both deals is that Urban Splash has “no significant bank debt”.
So now the developer is back to doing what he loves best - turning ignored or neglected spaces into thriving and profitable places. The second phase of homes on the Park Hill redevelopment went on sale earlier this year and a cluster of creative companies have moved in to join taxi app Uber and graphic design firm Human. Now Urban Splash is considering future phases of development. “It’s very early days, but we’re thinking about putting in an arts centre,” says Bloxham. “We’ve used artists all the way through the process.”
Then there is the Smith’s Dock project in North Shields, where Urban Splash and Places for People have secured planning for the first phase of a project that will see 815 homes, work spaces, cafés and bars constructed on the banks of the Tyne. The JV will also continue to develop out the Lakeshore scheme in Bristol and is down to the last two in a bid to develop the British Waterways, Birmingham City Council and HCA-owned Icknield Port Loop site in Birmingham.
While Urban Splash will continue to build the individualistic developments that made it famous, both on its own and with its partners, it is also moving into modular housing. The company has been working up its hoUSe concept for five years and the first project to utilise it is now under construction in New Islington, Manchester.
“Inevitably, you get more cautious as you get older,” says Bloxham. “I think we are more cautious about financing and our rate of growth. We do want to find things that are scalable, and one of the things about hoUSe is that it is a lot less capital intensive. You can build a house, sell it and move onto the next one - you can speed up and slow down.”
The idea for hoUSe was borne in part of a desire to minimise exposure to rising labour costs - units are largely prefabricated in factory conditions and then assembled on site, requiring a minimal workforce. However, Bloxham also wanted to bring a new product to the market - one that involves selling homes by space rather than the number of rooms.
“Housebuilders get the maximum number of rooms in the smallest amount of space,” he says. “They don’t even tell you how much space you’re buying. It’s incredible. You buy a can of beans and they have to tell you how much space is in the can, but you buy a new house and they don’t have to tell you how many square feet it is. They’re selling rooms rather than space.”
Purchasers of hoUSe homes are able to choose between a 1,000 sq ft two-storey home or a 1,500 sq ft house with three storeys. They are then able to configure the internal space to their liking, including the number of bedrooms they need. The design is by architects shedkm, which designed Urban Splash’s multi-award-winning Chimney Pot Park development in Salford, and incorporates a modern take on the Victorian bay window in order to maximise natural light.
Bloxham hopes that, while still very much in its infancy, the hoUSe concept will grow to become a substantial part of the business, although he knows he is in untested territory.
“We’ve got a pipeline and we want a bigger pipeline,” he says. “We think this could be really quite important. When we first did inner-city lofts 20 years ago, we didn’t know if it was going to work, but we had butterflies in our stomachs and we feel the same way now.”
If the day job isn’t sufficient to keep him busy, Bloxham has other roles that put him at the front and centre of civic life in Manchester and further afield.
He has just stepped down as chancellor of the University of Manchester after seven years (“you do less than that for murder these days”), but is still a trustee of the Tate group of art galleries, sits on the board of the Manchester United FC Foundation, the football club’s charitable arm, and chairs Manchester International Festival.
But could it be that he is about to take his extracurricular activities a stage further? In order to secure additional powers, Greater Manchester agreed to chancellor George Osborne’s demand for an elected mayor to provide strategic leadership for the area. Inevitably, Bloxham’s name is being mooted, with Ladbrokes currently offering odds of 12/1 - not as good as Manchester City Council’s leader Richard Leese at 3/1, but considerably better than Happy Mondays’ Bez at 33/1.
Bloxham is having none of it. “My son says he will take any bet he can get,” he says. “So no, Manchester is very well run and I have no aspirations. I wouldn’t be able to do it as well as the current incumbents. I’ve got the best job in the world doing what I’m doing and I’ve got no desire to leave it.”
Unless he changes his mind, Manchester politics will have to do without the Bloxham brand. But now that Urban Splash is back in the black; you can bet your house - or even hoUSe - that we will see much more of the quirky regeneration schemes that made Bloxham’s name.