Urban Splash was left drowning in debt after the property crash, but founder ?Tom Bloxham believes he can now plot a profitable course in the growing private rented sector outside London. Simon Donohue reports
“In hindsight, what I should have done is thrown in the towel, gone and lived in my lovely house in the south of France, let everything settle down and then come back fighting,” admits Urban Splash founder Tom Bloxham. “But that’s not really our style.”
That he owns a “lovely house in the south of France” says something about the success that Urban Splash enjoyed selling trendy apartments before the collapse of Lehman Brothers brought the roof down on a £100m property portfolio.
The battle to stay afloat cost Urban Splash dearly. Half of the 200-strong workforce lost their jobs, mortgage offers for apartments were withdrawn, projects were abandoned and the group breached banking covenants. The latest available accounts covering the year to the end of March 2012 showed that Manchester-based Urban Splash had net debts of £242m and Bloxham won’t say whether or not that figure has crept even higher.
Instead, he refers to five years of dark days, with many other developers like Urban Splash – focused predominantly on apartments and based outside London – now having disappeared. But he’s far from beaten.
The chutzpah which enabled him to progress to property from a poster stall, funded with a £200 student grant cheque, means he is now confident about a booming private rented sector outside London. He believes it can mirror the growth of the student accommodation market. Even if the banks won’t lend, Bloxham has found prominent support for his vision.
The Preston-based social housing landlord Places For People threw Urban Splash a £77m lifeline in July this year, buying 654 Urban Splash apartments and then handing Bloxham’s company the contract to manage them. The money was used to placate Urban Splash’s bank lenders.
Property assets with mortgage charges remaining against them have been ring-fenced in a division of a restructured group. Urban Splash plans to start developing again through management companies that are free of debt. Places For People is now considering joint venture opportunities with Urban Splash and Bloxham says he is actively seeking further investment partners.
The first People for Places joint venture is likely to be at Park Hill, Sheffield, where the social landlord will work with Urban Splash to fit out unfinished apartments. And there is a growing appetite for private rented sector property which Urban Splash and its development partners can satisfy.
He says: “For the first time, there’s a real interest in private rented property and we are going to try to expand our portfolio of residential properties, working in partnership with private investors to develop. There will be some new buildings, some conversions, some stuff on our sites, some stuff on partner sites. Apart from Park Hill, there’s nothing I can tell you about. But we are active.”
Blocks of 50 and 100 units at a time are the target, adds Bloxham, who suggests that institutional investment in PRS is low in the UK compared to other countries while demand is increasing due to a mobile workforce, immigration, population growth and prohibitive prices to buy.
“If residential property is well cared for, it can appreciate in value. I have never seen a bigger discrepancy between London and the rest of the market in values and yields. Whereas London prices have increased, outside London has been relatively static. I can’t believe that this discrepancy can grow wider and wider. There’s growth there.”
Research by Savills suggests that Tom Bloxham might be right. The number of private rented households is expected to grow by a further million properties to 5.7m homes in the next five years. Savills say that £1.3bn has been invested in PRS property in the year to date, although 61% of that is in London. The North West lies in second place, with 10% of total investment. “We absolutely think the private rented sector is a growing market,” says Susan Emmett, Savills’ director of residential research.
“The main driver will be people unable to access home ownership, people who can’t access a mortgage because they can’t put together a deposit,” Emmett adds. “This is a trend which started before the recession in 2003, pre-dating the credit crunch, and we don’t see it reversing any time soon.”
If what Savills says pans out, Bloxham will have been right not to flee to the south of France. Keeping Urban Splash afloat since 2008 has been tough but Bloxham insists there was never any question of the company becoming insolvent. It raised £50m in 2009 to complete developments where work had begun, a combination of further bank debt and kick-start funding from the Homes & Communities Agency.
Development work continued (see box) albeit at a slower pace. More recently, the Homes and Communities Agency freed Urban Splash of obligations as lead developer on some regeneration schemes.
Had he exiled himself, Bloxham would no doubt have missed the view from the cinematic window of his office at Urban Splash’s HQ at Timber Wharf in Manchester, which looks out on to a lawn adorned with life-size painted cows. It’s not the nerve centre of a typical start-up company, but Bloxham says that’s how the company feels right now.
“I have the best of both worlds,” he says. “I have the freedom to start like a new start and the critical mass and scale of business and a team of people which leaves us very well placed.”
Current Urban Splash ?developments
• Urban Splash Royal William Yard, Plymouth: Seven residential buildings now fully developed and let. Of the three final buildings, one residential building is about to start and two are in the pipeline, with a hotel and arts studios both in for planning shortly.
• Urban Splash Park Hill, Sheffield: Phase one complete, phase two ongoing
• New Hall Fazackerley, Liverpool: 26 listed buildings recently purchased, refurbishment plans under way
• New Islington, Manchester: Six phases have been completed and further phases including family housing and a free school due to start on site in 2014
• Bewsey Old Hall, Warrington: Phase one complete, phase two has planning
• Springfield Lane, Salford: Planning permission just achieved (September 2013) with Si-Si Investments for a 40,000 sq ft food store and family housing
• Lakeshore, Bristol: Phase one complete, phase two has planning
• Tribeca, Liverpool: planning secured, live project under design review
• In addition Urban Splash owns and/or manages more than 800 residential private rented apartments across the country and nearly 2m sq ft of commercial space including Fort Dunlop, Birmingham; the Matchworks and Ropewalks estates, Liverpool; Smithfield Building, Ducie House, Waulk Mill and Schoolhouse, Manchester, and numerous properties in Castlefield.
Shelved Urban Splash ?developments
The projects which Urban Splash hasn’t taken forward include developments on Morecambe Promenade, Littlewoods in Liverpool and a development in Stoke.
Properties sold by the group include Sunbeam in Wolverhampton, Woodfield House in Altrincham and Bridewell Island in Bristol.
CV: Tom Bloxham
Name: Tom Bloxham MBE, chairman and founder of Urban Splash
Family: Married with two sons
Age: 49 (50 in December)
Born: London but a Manchester resident since ?his teens
Sport: Manchester United
