“Really for us it’s about the delivery of homes as opposed to sort of the towns under management and also just making sure obviously at the same time that we are diversifying and bringing in new investors really and making sure obviously that we’re giving them the right financial returns but those are our two goals; grown the number of homes really and do so in a way that’s providing that nice long, steady return profile.”
Susan Freeman
Hi, I’m Susan Freeman. Welcome back to our PropertyShe podcast series brought to you by Mishcon de Reya in association with the London Real Estate Forum, where I get to interview some of the key influencers in the world of real estate and the built environment. Today, I am delighted to welcome Cath Webster. Cath leads Thriving Investments formerly PFP Capital, a niche investment management company which is solely focussed on the UK living sector and seeks to generate strong returns for its investors by creating thriving communities. Cath’s focus is to increase funds under management alongside the delivery of social value augmenting the existing fund management platform across high quality affordable housing, private rented residential and urban regeneration strategies. She joined Thriving Investments in January 2023, prior to this she was an executive director for Strategy and Investment at Quintain, a specialist property development and investment firm. Cath has 30 years of real estate experience and has held several leadership roles in a wide array of companies including private equity, fund management and investment banking at Hudson Advisors Lone Star Funds, TIAA and Lehman Brothers Global Real Estate. She is a commercially minded individual with an unwavering focus on delivery of key projects and transactions. Alongside her lead strategic role in business investment and development, Cath seeks to drive sustainability and diversity initiatives and is co-chair of the Creative Land Trust, a charitable trust aiming to provide affordable creative studios in London. She holds a BSC in land management from Reading University, an MBA from INSEAD and is a member of the BPF’s affordable housing committee.
So now we are going to hear from Cath Webster about her varied career to date and how her role at Thriving Investments enables her to combine profit with purpose. Cath, good afternoon I, I’ve really been looking forward to this conversation because it’s been a few months in the making hasn’t it?
Cath Webster
It has, good afternoon Susan. I’m looking forward to this too.
Susan Freeman
So let’s start, I mean I know you’ve had a very interesting and varied career in real estate to date. So I think we probably need to start with why got you involved in, in real estate in the you know, in the first place you know, what first drew you to the idea of studying land management?
Cath Webster
It was a rather random serendipitous meeting actually, someone at my school came in to do a careers talk, he was a surveyor and basically said, ‘it’s a really interesting career that you can go into, it involves a market and transactions but it also involves people and being outside and it’s a physical asset’ and I thought, that sounds good. And bizarrely researched it after that and then that was that. I only applied to Land Management in the various different universities etc., that were doing it and sort of had a singular mind after that, I’ve got no family in the area, there was no other reason other than this one person who wholeheartedly thought it was an excellent career so I went for it.
Susan Freeman
It’s extraordinary isn’t it because it sort of validates all the initiatives that we’ve got going now you know, to outreach into the schools you know, to encourage people from different backgrounds to think about real estate as a career.
Cath Webster
Exactly and I suppose that’s sort of one of the funny parts about it is that just it was that spark and his enthusiasm and, and the sheer breadth of what you can do in this path that I just thought, okay there’s plenty of options there and rather than do something academic which probably wasn’t my forte in any case, this seemed to fit.
Susan Freeman
So you don’t regret having followed that path?
Cath Webster
Not at all, not at all. I went off to do an MBA and a lot of people when they went, go to do MBAs think about changing the sector that they’re in or the type of roles and actually I knew I wanted to get back to real estate even though at the time when I was doing it, it was sort of Dot Com boom before and Dot Com crash during, it was sort of you know, this really the bricks and mortar old school industry was something that still attracted me and I thought there was still lots of opportunities.
Susan Freeman
That’s so interesting because I had a similar experience and I was at London Business School and yes, the idea was to look at all the other exciting sectors you could be involved in and I realised that real estate is where I wanted to stay. So as I mentioned you have had a very interesting and sort of varied career to date and I think rather than me trying to precis it in anyway it might be you know, it might be good for our listeners if you could do a sort of very quick canter through the various career roles you’ve had, if you just sort of take us up to Quintain and then we’ll you know, we’ll talk about it from there?
Cath Webster
Yeah of course. So as I say, I did the degree in land management which typically at the time this was the early 90s, fed you into the go to a surveying firm which is what I did, that was pretty tough at the time. There were very few people being taken on but I was very lucky to get a role. I started with a company called Weatherall Green and Smith which changed its guise several times over the years and is now BNP Paribar in its different form but I went in and I did, I got my RICS, a member of the Royal Institute of Chartered Surveyors and I went round and did all my different postings within, ended up in the city office doing most of the work there which was a very interesting time in the early 90s seeing as most things were over-rented and difficult to market, a very difficult market but I actually worked out that whilst I was really enjoying all the different aspects of the chartered surveying world, I was a pretty useless property agent and I moved quite quickly over into doing fund management for a very small group, had literally just been set up but it had a fantastic client in the Teachers Pension Fund from the US and they wanted someone to come in and be the person who was doing the, I suppose, the leg work really for the team that was already there and that to me just seems like a really exciting opportunity to be on the client side and really understand the sort of how fund management worked. So I went from that and was really learning a lot about all the different types of property that you can buy across the UK having really been focussed primarily in the city office as I said before but what Teachers didn’t do was they bought everything with equity and really financing in property and especially at that time when we had sort of pretty interesting yields going on, a lot of things were over rented, lots of people were using finance. The role that I was in was not and just because of the profile really of a lot of the sort of long leases and the security that you can get just means that finance and property do seem to go very well hand in hand so I moved internally to corporate finance and was working with the team there which I really enjoyed but then decided that actually I didn’t have enough of the background in that and I didn’t feel confident enough. That’s why I did the MBA. I wanted to really think about how the finance and all the business side all sat together and that, the MBA and, and that process really helped me begin to see how the built environment fits into the world and the, people’s balance sheets and investments etc., and I came out from that and went into, I thought I was very European Susan when I came out having done my MBA in France. I wanted to go into a European role, try and use my newly, newly or re-acquired languages at that point and went into private equity and from them actually into investment banking and was really doing quite a lot of work across the board in Europe, across all the different sectors; residential, commercial and really understanding all the different markets in Europe which was fascinating, it was a real tour de force really. And then we had the GFC, I was at Lehman Brothers at the time so I most definitely worked my way out of a role even though I actually stayed on during its time in administration for a number of years. And moved back into doing some different bits in terms of lending and private equity again but actually ended up back at Lone Star which is where I’d been when I came out of my MBA and was helping them at the time, do you remember all of those non-performing loan portfolios that were going on? They’d been buying up loads of those and I was helping them on the other side once they’d acquired them, sort of sorted them out and put them into interesting portfolios, putting some leverage against them and finding other buyers but that role you quickly work your way out of a job which was the goal. Lone Star then was talking to Quintain and buying them and I moved into that role from Lone Star. I basically said to them, this is what you need me to do and told them effectively I was moving there. Luckily they were open to the idea as well and so I ended up landing there at the end of 2015, beginning of 2016.
Susan Freeman
So you have worked in so many different aspects of real estate so it gives you a complete sort of overview and just going back to that MBA, apart from learning the languages and feeling more European, how do you think it changed your outlook and direction or didn’t it?
Cath Webster
No it, it really did. I think it, I think it made me see things in more 3D if that’s not a silly way of describing it, very much before when I was in the property world it was very, we would think of property, we talked to property people, it would just be about your initial yield, who’s buying, who’s doing whatever and actually coming out and seeing it as an industry compared to a lot of other industries and how it fits in just generally, the whole built environment I just felt like I’d sort of seen now the sort of full 360 around that industry and wasn’t quite so myopic about it you know, it is a really investable asset class but it suits different types of investors for different types of risk adjusted returns etc., and really just thinking about that and seeing it was the MBA experience and just understanding it in that wider setting I think was really worthwhile.
Susan Freeman
And I think also it gives you a confidence doesn’t it because it makes you realise that you know, even if you don’t necessarily know the answer to something you know where to go for the answer.
Cath Webster
To find the answer, yeah exactly.
Susan Freeman
So you joined Quintain and it was again a very different role wasn’t it? I think you went in as director of strategy. Do you want to tell us a little bit about the role and why it appealed?
Cath Webster
So it really appealed from the fact that it was interesting I had talked to Quintain previously when I was working, again with Teachers on the lending side and I’d been trying to sort of persuade Teachers as an investment fund to think about maybe partnering with Quintain or whatever, they had also considered looking at the Olympic village that Delancey bought. It was something that didn’t work out but it sort of piqued my interest in the company which is why when Lone Star were looking at it I knew it was something of interest. It had this huge estate in Wembley you know, 80 acres or so. That in itself is unique you know, there are only a few estates in London like it where you’ve got them all under one ownership and the ability therefore to create something really to do the place making but also very much to learn at what was the sort of nascent part of the build to rent industry in the UK, the business plan effectively being Wembley to take what had been the mainly build to sell although they had already started to carve out some buildings as build to rent but mainly build to sell model and funding and converted into something that was a much quicker output because you had Lone Star’s funding behind it to create a huge number of homes around Wembley Stadium which of course they’ve gone on to do and so I came in, I think the strategy title was one of those that was a bit minister of what department not sure, but I was coming in with a lot of capital markets knowledge. The company was being taken private so it was losing its funding or its funding was being repaid and what was a company that had probably had a very secure and very stable and very consistent form of funding as a listed company was suddenly turning into something that needed to think about its funding in a very different way and that was my background. My background was about funding ventures and corporate not listed entities and we had to really think about how we funded an enormous amount of development and typically at that point there was not a lot of people in that funding market, it’s changed now but at that time there was quite a lot of scepticism about the rents and what could happen and absorption and the like and most of the schemes up until then if they hadn’t been forward funded by M&G etc., for their own ownership, most of those schemes had a certain amount of equity and then the debt would complete the project. If we had done the development that way the amount of equity that Lone Star would have used would have probably have been, well it would have been hundreds of millions to do it. And what we ended up doing was a revolving facility of 800 million and the revolving nature basically of it was that we just kept drawing down to do the development but when one scheme had completed we would re-finance through the investment markets which were much more established, not massively established but more established and then repay that facility and use it again and we were probably going to use that revolving facility twice but we only had to keep the same amount of equity in so we effectively halved the amount of equity and, or the flip side of doing it was were able to do double the amount in the same amount of time with the same amount of resource. So sort of coming at problems um, not saying I solved that entirely by myself of course we were, I was working with Simon Carter who is now obviously at British Land, he was our FD at the time and, and a team of people there but being able to solve that and really sort of find people who would come on the journey with us from the lending side was you know, really exciting for us but also one of the ways that I feel and felt that I could add to what that company is trying to do and also just generally what we are doing right now which is just think about how we can innovate to make that work and residential is tough, I am sure all markets are tough but residential is tough just because viability is really tight, the yields are very tight and that just involves quite a lot of value engineering to make sure that you can get it, get it to work.
Susan Freeman
You make it sound quite you know, simple and straight forward but was it difficult to get that facility because at the time it really was very much early days for build to rent. The East Village was about you know, it was just obviously after the Olympics so 2013, I mean my recollection was it was all quite difficult to get people to understand what the build to rent concept was because it just didn’t exist so was that a problem in getting the funding?
Cath Webster
I can’t say it’s easy, it wasn’t easy at all but we had three investors lenders so we had Wells Fargo, AIG and CPPIB, so three very different you know, a bank, an insurer and a sovereign wealth come together and have a meeting of minds and they all understood it, they all got what we were trying to do at Wembley and believed in it and you know, with the weight of Lone Star behind us and the team that was delivering just so well in terms of the construction etc., it came together. It wasn’t easy, it took a long time, it took months and months of effort but it was definitely worthwhile.
Susan Freeman
And it’s you know, some 20 years old, no it can’t be – anyway some years on you know build to rent now you know, has taken off and has got a lot of backing but the larger, larger build to rent schemes seem to have sort of stopped for the moment. What’s going on?
Cath Webster
Well so the build to rent market is if you take it at its absolute definition, it is those apartment blocks that provide amenity to the customers and a lot of those therefore are in major cities and probably therefore quite high rise. A number of them I think are probably suffering from gateways and building safety acts and delays etc. The demand is still there from customers, it’s massively still there. The demand is still there from investors but some of the changes that you’ve seen in terms of how the construction of the buildings and the regulations for the constructions are changing and we don’t yet know some of the things that are coming forward probably has muted the development appetite of some of those investors and as I said before, it’s a very low yielding asset class. There’s a reason for that, it’s a very stable asset class and it doesn’t react in the same way as, as other real estate investment, it’s the steady eddy really but if you’ve got factors of the unknown of not knowing whether it’s dual staircase you know, if we go back to some of the things that have been, that are out there right now or what might come in the future, lots of people will pause on that but the market is very alive in terms of single family housing, we’re doing a lot of that ourselves and have been for a number of years. And also what probably there’s a lot of terminology I have to say in the residential market but suburban build to rent is another way of saying it which is sort of more lower rise, maybe three storeys, walk up, don’t have you know excessive service charge costs etc. So those in and around different parts of the UK are still very active and the market, there’s quite a lot of secondary trading going on right now as well.
Susan Freeman
But if, if you look at London the sort of single family housing and the lower rise build to rent, does that give high enough density bearing in mind the land costs in central London?
Cath Webster
Not in central, you need to go out to one of the outer zones. We’ve got some town houses that we bought probably in the last 18 months that are up in Walthamstow where I did work but yes the viability is very challenging in London.
Susan Freeman
So let’s move on to, to your current role as CEO of Thriving Investments or PFP Capital as it was, so I think you took on, on that role in 2023 and you know, again it’s, it’s a real, a real change, a real shift. What was your thinking at the beginning of 2023?
Cath Webster
Well I think it you know, at the time and I took the role sort of in 2022 and did it before the Trust cutting budget which was an interesting change to the market but when I was thinking about moving on from Quintain you know my role in sort of helping the development and establishment etc., was set up and we had a great team that was doing stuff, I very much thrive on trying to grown and innovate things and there was less of that opportunity at Quintain, it was moving more into a steady state and an operational business which it’s a fabulous company, I really loved working there but I felt that I was adding or had the ability to add less and PFP Capital as it was then really had sort of a few things that I’d thought were really attractive. The first thing was its unique ownership. It’s owned by a social enterprise, Places for People which is 50% of its balance sheet is a registered provider and 50% are a group of commercial businesses of which this is one. But that’s got a huge purpose to it and all of the profits, it’s a mutual so all of the profits that are generated by different parts of the businesses go back into creating more housing and more affordable housing and that really appealed to me but in particular for PFP Capital it had a very residential focus and seeing as I had been focussed on that asset class for such a long time I wanted to stay in that. It has excellent investment partners and clients, all blue chip and was really well established but it was seeking to grow and that was the part that attracted me, that it was like, okay we’ve got a great base but now where do we go and what do we do and the solving of that was what, I mean that was, yeah that was the catalyst for me to think, I think I can come in and help. Now as I say, when I took the role in 2022 the market then changed massively with gilt 22.47 all moving out and different pensions deciding that maybe real estate wasn’t the right thing and lowering how much money they were putting into it but these things are sent to try us right. It’s a difficult market in what everything so, and we’re used to cycles.
Susan Freeman
And for somebody who likes to innovate it’s an opportunity to do things differently. I mean was, was there a sort of particular moment when it struck you that profit and purpose could coexist because people seemed to have the idea that you know, if you’re, you’re talking about social impact and discounted housing that you’re not making a profit. I mean was there anything that made you think well actually this can work?
Cath Webster
Yeah I think, I mean at Quintain we had, we were delivering about 35% of the estate as, on the new homes, as affordable and I really wanted to try and retain them within Quintain. The funding wasn’t there to do it, it was, selling it was part of the business plan to get the funding and the recycling. But I looked very hard at setting up the structure, the regulator structure called a For Profit RP which allows you basically to dividend money out as opposed to the regular RPs or the not for profits and looked very hard at how we might be able to do it and who was out in that market. So I’d sort of researched quite a lot about who was active there. We ended up selling the homes, the affordable homes quite a lot of them to Legal & General affordable homes so I was on that project, I worked through it. That was done sitting in my front room during Covid which made it very interesting and took probably twice as long but you know, and really understanding how they thought about it and I always felt that I’d been good at sort of generating profit in my various different roles and profit for me isn’t a dirty word and especially as I said you know, the unique attraction of this company is that that profit gets recycled into creating more affordable homes so again if you can create that to get that nice excellent circularity and prosperity then it’s you know, it’s doubly welcome. But not only that you know, you’ve got a number of investors who are interested in providing housing but these investors, all of these pension funds have a fiduciary duty to make sure that they are making financial returns and they need to make profit because that’s their primary goal and so you know, in order for private capital to come into this market you need to be showing that you can make strong financial returns and risk adjusted appropriate returns. So again it’s sort of, it’s, it’s a natural place for me to think that, that the two should coexist.
Susan Freeman
And PFP Capital rebranded to Thriving Investments. What does the new name sort of signify and does it affect your strategy or is just a sort of rebranding?
Cath Webster
So PFP Capital for me, it was, it didn’t signify what we were trying to do. So it had the, you know the Places For People, is often shortened to PFP for those that know the company but the word capital could be anything, you could be an estate agent, you could be an advisor, you could be an investor and I really wanted to make it more simple. It was confusing for people, they didn’t necessarily know whether we worked for externals, third parties or internal and I didn’t you know, it wasn’t me trying to get away from our parent because that for me is, is one of our USPs but I didn’t feel it really served us in helping describe what our own priorities were or are which really is about trying to create thriving communities. That’s what we always said we are trying to do, we’re trying to bring private capital in to the housing market to help be part of the solution to the housing crisis. And while we do it, it’s about long-term ownership and creating those thriving communities so places where people really want to live, where it’s multiple tenures and people can be in that community and grow and, and move into different types of housing as well. And so I am not a marketing person at all, that is not my background. We got other people to come in and help and I probably would have come out with something way simpler in terms of just saying something like Living Investments or something you know, what it does on the tin. But the word Thriving kept coming up in what we were talking about and actually for us it was quite an interesting word because it sort of implies living but at an elevated better status and that we felt was a nice way of trying to describe what we were trying to do. And so the other part of what we were branding and thinking about, we launched it all with our four different guiding principles and we changed the logo and we changed the colours and we chose bright colours, our major colour is hot pink. If you look at most of the investment managers or at least property companies it is navy blue isn’t it. Everybody loves a navy blue out there and we’re hot pink and purple and gold anyway so we are definitely trying to show that where I suppose come at it at a slightly different angle but also we have underneath our name that we are powered by Places For People and that as I say was our way of really showing what our relationship was with our parent group, that they are the people behind us and that’s what we are you know, we’re trying to do the purpose of what that group wants to do which is create more homes but we are doing it with other people’s money. So that was what we were trying to encapsulate all at the same time but we felt that it was a good time to you know, re-energise everything.
Susan Freeman
Well I think people have certainly noticed because I am sure people are asking you all the time what was behind the name change. So I think what would be really useful for our listeners is to talk a little bit about how you create these you know, communities, how you operate, what sort of homes you, you provide and I know you have you know, certain sort of you know flagship sort of strategies and funds. Maybe you know, the best way of talking us through is talking about you know, what’s going on on that front?
Cath Webster
Yeah I’d love to. So I mean we’ve already talked about build to rent and single family housing, that’s, that was the first fund that was established, done before I turned up. That’s been going since 2018. It’s coming up to about 2000 homes now, it’s a joint venture with USS and that is UK wide and it’s basically new homes or new single family homes and the suburban build to rent that we’ve talked about. The second fund that was launched was what we call a keyworker housing fund, there is no real definition around the keyworker other than the fact that one of our real focuses about affordability for people who are earning an average or median or lower quartile wage in any area. They are often called the squeezed middle and they are the people that can never get to the top of a housing list for social housing but they find it really difficult to afford market rent or market for sale and so the rental product that we have the first fund we did was up in Scotland. It’s a public private partnership with we’ve got LGPS funds and social impact investors in there alongside the Scottish Government and we are delivering, it’s a Scottish tenure called mid-market rent but for those who don’t know the Scottish tenures, it’s probably mostly similar to discount market rent in England and there are caps on household income which is why we think of it as our keyworker rental. So we’ve got 1200 homes been delivered on that. That’s additionality so what we do is we take what would have been probably a market for sale product and we convert the whole into this new tenure, the mid-market rent. It’s normally part of a scheme that’s going on, it can be a standalone development. Often we will take sort of a portion of a wider scheme as well which as I say creates that ability for people to live tenure blind, it looks exactly like everybody else’s home and they can be part of the community that they’ve grown up in but these are new builds, they are EPC A or B which means they are energy efficient and they are close to the people’s place of work in cities and close to public transport etc., so it just allows that, that portion, that demographic to be able to live in a decent home close to where they work and have it an affordable level. So we have finished that fund in terms of committing all of the capital. The Scottish Government liked the process and what we’ve achieved there so much they’ve actually pledged another 100 million so we’ve got 45 million in the first fund, they’ve pledged another 100 million to replicate this or similar type of fund and that’s being discussed right now which we would love to run. That fund also won an outstanding fund achievement award and has been doing really well so we are very proud of that. We’re emulating it in Manchester now, Greater Manchester so we launched that in March this year and doing the same thing, it’s discount market rent, it’s got the Greater Manchester Combined Authority providing the subsidiary to allow for that discount to the rent and we’ve got another local government pension scheme and another social impact investor in there as well. And that fund is out deploying right now and also looking to grown and then we’re talking to other Combined Authorities and to the, what will be the new National Housing Bank about trying to do that elsewhere because we particularly love that. So that’s our second one. The third angle that we were looking at was then again thinking still about those keyworkers, they can’t afford to buy full market houses for sale right now and shared ownership is a really interesting tenure for helping that demographic again. And not only that, our parent group has a development platform which is one of the highest outputs in terms of registered providers for developments every year and consistently developing new homes. One of the tenures that it was producing and it’s, it probably had less of an appetite to hold in the long-term is shared ownership so we have a pipeline of it and we have existing homes coming from our parent group and so we were looking to create a fund in shared ownership. There are a couple of funds that are also out already doing it and actually when we were talking generically to them, realised that trying to compete might not be the right thing in terms of capital but what might be the right thing is to partner and collaborate and where we ended up was collaborating with a fund that Gresham House is running called Residential Secure Income. And so we have the property management agreement with them, so we run the acquisitions, we run the asset management and the property management which is done through our sister company, Touchstone and they’re the Athem, so they are the fund manager and they do, have retained the, most of the discussion with the investors as well so we’ve split roles and as far as we are concerned from both sides, that’s a win win. We can very much bring forward a pipeline through our parent, through the use of its strategic partnership with Homes England and the grant. They have the relationship with those investors and the Athem role and the funding and the finance which they can continue to do so that the investors are comfortable, obviously making sure that the clients are clear on what we are doing is primarily important but we can really bring forward that property management side because we are managing homes throughout the group, throughout the country. We can do it at scale and that means that we can do it efficiently and so that just helped everything work together and by collaborating as I say, we’re not now competing with another fund talking to investors saying, ‘come to us’, we’re saying you know, you don’t have to think between the you know, Gresham and us, now we’re one and we can, you know the power of collaboration can hopefully create more. And then our last thing that we have is a regeneration strategy with our subsidiary company called Igloo who has actually been around for longer than we have, way longer than we have. They are a fantastic regeneration company, really interesting, focus very much with again public private partnerships, developing around the country in brownfield sites and creating homes and really are doing quite a lot of excellent place making work alongside it. And so that really provides us with the opportunity again to not only understand all these different markets but also to create more homes generically and from the outset, not just buy from other people out in the market which is what a number of those funds do.
Susan Freeman
And it’s interesting you talking about collaboration with Gresham, I think Igloo is collaborating with Urban Splash on the Festival Gardens regeneration project in Liverpool. That looked really interesting because I think you mentioned that they will bring in smaller developers to you know, get involved and, and collaborate on the project so I just wondered how that will work because that, that wasn’t mentioned in the press release that I saw?
Cath Webster
No it wasn’t. So Urban Splash and Igloo, again probably most people would look at it and think aren’t they competitors but in the same way that we sat and thought about how we bring different things to the party and Gresham brings different things and why compete when you can collaborate and you know, it’s a win win. That’s how these two parties work together and actually work really well together and then for Festival Gardens it’s very much about if you work with smaller local investment and also if the developers are going to create different tenures as well the absorption rate and your delivery rate can be much higher. So the site has probably got the ability to deliver around 800 homes or so but half, over half of that can be delivered in stage one and if you were looking at that as you know, more of a let’s say, a traditional house builder approach, you would probably slow that delivery down and not have you know, 400, 450 homes coming on to the market at the same time. But because we’ve got, because that joint venture has taken the approach that dealing with local small, medium developers and dealing with different tenures you can actually activate the site so much more quickly and that’s a win win as well because the people who want to come and live there or rent there or buy there are in a place that they don’t feel is a development site for the next however many years. So it’s something we work on quite a lot especially when we talk about the sort of size and communities that we are doing, it’s very much thinking about multi tenure, it definitely helps with delivery which is one of the things that we’re all focussed on and the Governments very focussed on obviously in terms of being able to deliver quickly and so that helps us to think about how we can innovate and think more differently. I think the other thing really to bear in mind is that in terms of how developers out there can think about different plots that they can work on, if you’ve got Igloo and Urban Splash as your master developer and providing that infrastructure and providing those serviced plots, that’s a really nice way to bring those parties in to something that they wouldn’t ever be able to look at probably by themselves because it’s just way too big. And being able to harness all of those different developers and that expertise is a great way of helping deliver more homes. If you look at the sort of the range of different people who are out there delivering your RPs are a big delivery area but they are cash flow constrained, your house builders huge, huge in terms of delivery but they’re, they have a number of them or a majority of them have really you know, strong financing through being listed etc., and then you’ve got the SMEs which are finding it more and more difficult now that viability is getting tighter and tighter and also you know, the sort of the risks involved that they are taking on so we always try and think of different ways that we can help that sector as well and in fact the keyworker housing funds that we’ve got really try and focus on helping the SMEs because we are forward funding. We come in and take 100% of their site, as I said, we convert the whole thing to this new tenure and so effectively we’re making sure (1) that they get a profit but (2) they, they don’t have that sales risk and they don’t have funding risk either which are the two areas that are very key for those you know, those smaller developers. So we will continue to try and help that as a source really.
Susan Freeman
So you bring in the smaller developers on your site so that you know, they will come in and actually build some of the, some of the homes for you?
Cath Webster
Or actually the other way around. We’ll try and find the smaller developers who are perhaps stalled because they are nervous about the risk or the viability and actually the way that we approach it means that we can unlock it. So we actually get quite a lot of referrals especially up for the Scotland fund. We got a number of referrals from Planning Authorities and the like saying, ‘this is a scheme that’s stalled and we want it to come forward, it’s got planning, would you look’ and we have been able to help on there.
Susan Freeman
So is the strategy to roll out the Manchester fund across the country with other Local Authorities if you can?
Cath Webster
If we can yeah. So it does need the subsidiary as I say, that’s the thing that takes it from being just a build to rent investment to being a discounted market rent investment so it involves more steps. That’s fine. Complication is not a problem. Just at the moment we are still awaiting for clarity really on where the, where the grants are going to the different Combined Authorities but we are talking to a number of them and really quite a lot of that grant is going to be available as of April next year so the conversations are live across a number of different areas.
Susan Freeman
That sounds good. And I mean is it difficult to raise funds at the moment when you’re competing with you know, some of the very big funds like you know, the Blackstones that are out there?
Cath Webster
Yes it is. I mean it’s, you know we mentioned before the sort of October 2022 budget creating a real change in how the different pension funds look at residential real estate in general. A lot of people like real estate, a lot of people like residential as I’ve said before, it, it acts very differently and it’s got very strong links to a sort of inflation linked income and it’s the standard deviation and the movement in those returns is very low but the defined benefit pension fund that were the sort of the big lovers of real estate funds of you know, years and decades before are no longer really there in their droves and you know the new funds that we’re getting coming through are of the defined contribution types are yet to come in, in scale. We think that’s coming, I think everyone thinks that’s coming but we’re working towards that. A lot of investment right now is with the local Government pension schemes but they are also slightly distracted, that’s an under estimation by the pooling that’s going on that the Governments asked them to do as well but it is difficult, it’s never easy and as I say, it is low yielding and we are at a time when you know, if you look over the last 5 years the, the gilts which is our reference rate for a lot of these investors are quite high, especially at the longer end which is where we are trying to focus quite a lot of our funds. So it’s not easy but we are managing it and there are a lot of people who see that providing housing is the right thing to do, it provides good enough returns really you know, we’re, we’re sort of high single digits so it’s still a decent premium over those gilts and it also does provide that social impact when you’re providing those affordable tenures as well.
Susan Freeman
And just to give our listeners an idea of the extent of you know, the portfolio that you’ve built up to date, I mean what, what is the extent you know, how many homes, you know what, what’s the value that you’ve got under management at the moment?
Cath Webster
So it moves quite often, we’ve got several more under offer but at the moment we’re, we’re just shy of 5,200 homes under management advisory so that’s about 1.2 billion and our goal is to get to 20,000 so we’re really thinking I mean, the assets under management at that point will probably be something around 5 billion or so but really for us it’s about the delivery of homes as opposed to sort of the pounds under management and also just making sure obviously at the same time that we are diversifying and bringing in new investors really and making sure obviously that we’re giving them the right financial returns but those are our two goals; grow the number of homes really and do so in a way that’s providing that nice long steady return profile.
Susan Freeman
And I know you’ve mentioned in the past that you were looking at student accommodation as you know, it had become a little bit elitist in places, I mean have you found any opportunities there?
Cath Webster
No, we did look at it quite seriously probably coming up for nearly 2 years ago now and it is a, it’s a long established market so if you are trying to look at different ways to bring investors who maybe haven’t been in residential but are interested, if you are trying to bring them into this sector you have a lot of data about student accommodation which is why we thought that it would be a really interesting idea for us. Also within the group we have a student accommodation manager so that also helps because that just means that we’ve got the ability to do that at the roots level. But yes as you say, you know the pricing on some of these schemes is elitist, you read about where people are having to live to commute and how far they have to commute some of them to be able to afford the accommodation and go to university. You then hear stories about how people are choosing their universities based on where they might be able to afford to live versus whether the course is right for them and that for me is just, it’s heart breaking isn’t it you know, it would never have considered or entered my mind back in the you know, late 80s, early 90s about I can’t go to this university because I can’t afford to live there but you know, these are real factors for people right now on top of the fact that it’s changed. I didn’t have to pay for education, or my university education at that point and so we were trying to see whether there was a, an opportunity for us to come in at smaller schemes, a lot of the bigger schemes were what lots of people were focussing on in terms of scale and where they felt most comfortable and see whether we could pick up smaller schemes and really work on the affordability front. We did get quite far with that but it was such a competitive market that we were unable to make that viability work and there were enough people out there who were also trying and there are you know, there are some of the big players out there obviously understand all of this affordability part and do help that as well. So we haven’t done it, it’s on ice. We may do it at another time, that sector is going through a, still a big change but we’ll see, we’ll see. We would like to solve that but there’s a number of things that we are, we are not sitting back and not doing anything, we’ve got like, we have several thumbs in different pies basically.
Susan Freeman
Exactly with a lot of change happening and change on the horizon so it must you know, it’s certainly challenging. One of the things I, I wanted to ask you as a woman who has had you know, various leadership roles in real estate. Have you ever, have you had any issues sort of navigating the sort of challenges or stereotypes and what sort of advice would you give to women who want to get to the top, who want to be leaders?
Cath Webster
Yeah it’s a very different world now to how it was when I started my career back in the 90s and there weren’t really role models then at all, there were a few but really very few and far between and so when I, I distinctly remember starting work and sort of looking around me as to how you behave and what you do and you know, my, neither of my parents were in, were in any sort of, my mother was a teacher and my father was a butcher so there wasn’t a professional background in that but all you could look at was how the men were behaving and actually you know, emulating that was one thing but didn’t feel, it felt wrong, it felt like I was a bit of a fraud but soon I think I suppose you know, I just felt more comfortable in being able to be myself. That probably took quite a number of years but that’s really the advice I think that I you know, I tell everybody else. It’s like, especially in residential you know, we are creating a world that is occupied by you know, men and women and you know the thoughts and the processes and the design and how it’s operated and who you work with and all the rest of it you know, we’re 50% of the community that we’re creating and working for and, and what we feel and what we do is relevant, totally relevant and maybe I didn’t feel that right at the beginning but I whole heartedly encourage that for all the people that I mentor now and thinking about how they can make things work. But it was also you know, I, I’m the senior sponsor for a group internally across the entire Places For People Group for parents and carers and actually it’s, it’s really great just to see how open people can be about a conversation about how difficult it can be being a parent and working and you know and having the men and the women both contribute and how actually that now just feels like it’s not there yet totally but it just feels way more equitable between the group of people coming up behind us in terms of you know, how they support each other for parenting and all the rest and you know, you do probably for the way that cost of living works right now, need two incomes to, especially in London, to be able to afford to live here so you know it needs to work that both people are able to do that. So I suppose that’s it really, to be open, be honest and don’t you know, you don’t have to emulate everybody else around you, you can be yourself and that as I say, it took, it took a while for me to feel comfortable with that but I think we’ve got there.
Susan Freeman
And you talk about your career as involving a number of sideways moves along the way and I know you’ve talked about the dangers of becoming too comfortable in a role and I, again I wondered you know whether you would recommend to somebody coming up through the industry that they should challenge themselves more and that they should look for those sideways moves. I mean is that something that you’d recommend?
Cath Webster
Whole heartedly, absolutely. I think it’s you know and it was scary doing the first one. It was, the first one probably was when I moved from the fund management business with what at the time, Teachers Pension Fund was the largest pension fund in the world or something, I mean it was just huge and it was like why would you walk away from the security and all of that to move into corporate finance which you’ve never done before and you’re stepping back to do it but it just opened up an entire world to me beyond you know, what I already knew and what I already understood and every time I’ve done it even if it has been a step sideways or backwards let’s face it, a number of them you know haven’t always been you know at the same level. You can quickly bring some of the other things that you’ve learnt to the table and actually progress quickly through you know, some of the levels that others are already working through and so I always think you just end up being a much more rounded person being able to bring different aspects and different ways of thinking into that you know, working environment and for me it’s essential because it sort of keeps my brain thinking and being active and intrigued and, and that’s, that’s what I get up for every morning is to think about how we might be able to solve some things or do new things.
Susan Freeman
But you have to be quite brave to do that because for a lot of people especially you know if they’ve got a young family it’s very daunting to give something up when you’re not quite sure you know, whether the sideways move is going to work for you?
Cath Webster
Yeah I know I think you’re actually right, you do need that but you’ve also got to underst… well maybe is that right, I mean you can always go back, you can always just say, ‘I tried it, it wasn’t what I wanted to do, I’ve you know, I’ve come back’ and I think a lot of people wouldn’t have an issue with that. They you know, would be fine and just say, ‘understood’. So I would always urge it and encourage it and yeah I just think it stops you from getting stale as well and you know, we spend enough of our wor… of our life don’t we at work and doing that so it, for me, it should be stimulating.
Susan Freeman
That’s great, I think that’s a great place to stop Cath, thank you very much.
Cath Webster
Thank you Susan, it’s been great.
Susan Freeman
Thank you Cath for a fascinating overview of your career and the value of sideways moves. It’s great that you’re able to put all your skills to work in your current role at Thriving Investments.
So that’s it for now. I hope you enjoyed today’s conversation. Please join us for the next PropertyShe podcast interview coming very soon.
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