“The good thing about the current Government with housing is they’ve seen the problems, they recognise it and they’re trying to do something about it. I think they could do more and I think unfortunately there’s so many structural issues, even though politicians at the top make the right noises, actually seeing that implemented through and come to fruition I think is far harder than just using the words, but because we have the team in place, because we know it and because we’re well connected in it and we still have this appetite to carry on going and I think if you get it right, you know, there are the right rewards, but it certainly isn’t for the faint-hearted.”
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 Ian Rickwood. Ian is a seasoned investor and serial entrepreneur with experience across geography and markets. He founded and became CEO of Henley in 2006. Henley is now a full service investment firm focussed on alternative assets. They originate and manage real estate investment opportunities either through discretionary funds, segregated mandates or opportunity specific SPV funds. Henley works with institutional family office and high net worth limited partners who coinvest with them. Ian has grown Henley into the broad investment business it is today, creating many new successful ventures in that time. Prior to Henley Ian and managed and grew two retail companies, one a complete start up between 1996 and 2006, along with a private real estate company and a consultancy business. Ian has a degree in Economics and started life in the corporate world with Procter and Gamble, later moving to PepsiCo where he was the European Sales Marketing Director.
So now we’re going to hear from Ian Rickwood about setting up and growing a real estate investment business over a period of twenty years, we’re going to hear about their business model and some of the diverse investments they are currently involved in. Ian, good afternoon. Where are you speaking to me from?
Ian Rickwood
I’m in West Palm Beach today.
Susan Freeman
Oh fantastic. I think the last time we met was at MIPIM in March at the Property Week editor’s dinner and funnily enough, the weather was a bit like being in a car wash wasn’t it, including the wind tunnel and we’ll come, we’ll come to car washes shortly. Was MIPIM useful for you this year?
Ian Rickwood
It was interesting, it’s the first time I’d gone back to MIPIM since I think, well certainly since pre-Covid so, quite a long time. It’s really interesting MIPIM, it’s always good to go to and meet with people and there’s some very interesting conversations. I often say to the team how much business do we generate from it? And over the years, I’m not sure how good it’s actually been directly for generating business, although obviously you do layer on relationships over time which are important, but interestingly coming out of this year’s one, there’s actually a couple of things that have come out of it directly so, on that basis it must have been very worthwhile, yes.
Susan Freeman
Good. So, we will start with a little bit about you and your background because for a property person, you have an unusual background, it was initially in brand and I think you left a pretty sort of senior role at Pepsi in 1996 and one of the things I, I wondered about was how far that first part of your career and the brand background influences the way you think about property and fundraising and investment.
Ian Rickwood
Yeah, no, it’s a, it’s a good question and I guess to an extent I’m sort of an accidental property person, I didn’t start out expecting to end up in, in property or real estate doing what we’re doing, I suppose a lot of careers perhaps go that way but no, I graduated with a degree in Economics, yeah, I applied for a job on the Milk Round back in those days and got in at Procter and Gamble, which was a great place to start, you know, a fantastic business, incredibly process driven, great you know marketing, sales, communications etc, so I learned a tonne of things there, got poached by a previous boss from P&G who’d moved to Pepsi, who then took me to Pepsi and had another four good years at Pepsi, different culture, probably more entrepreneurial, you know, and slightly different creatively to P&G’s approach so you learned some new sort of methodologies of marketing through Pepsi but you know, again, a really well run, tremendous business to learn at. And that’s where, yeah, that’s where I met my to become wife, she was there as well and we were both similar in that we’re entrepreneurially minded and sort of started a journey of sort of thirty years of being entrepreneurs and we began by signing up Subway, so Subway had come to Pepsi as a client, they were a big client in North America, and they were looking at expanding into Europe, at the time I was running sales and marketing for Europe for Pepsi and so got to meet with Subway, got to know them quite well, was intrigued at the proposition and at the time my wife was working for PepsiCo restaurants and so we thought it could be an interesting opportunity so we agreed to take the master franchise for most of London with Subway and started on, on that route and it was then through opening stores and really kind of the learning of taking a vacant store and putting a fifteen year or twenty year Subway lease on it that you suddenly saw this explosion of value on the real estate that kind of intrigued us and we realised there was probably far more margin in that than there was in sandwiches so, we set up a real estate company alongside the stores that we were taking and where we could, we acquired and we 6.01 and activity like that and, so that was our first venture into it but, but you’re right, that initial grounding of eight years at Procter and Gamble and Pepsi, very brand led, very consumer led, what, what’s a consumer want, what are, you know really thinking with, with that mindset, what’s the proposition you’re trying to deliver to the consumer, has definitely then informed how our career has gone subsequently and, you know, where appropriately how we look at it in the real estate market.
Susan Freeman
It’s really interesting. And then after Subway I think there was also Benjy’s and you didn’t go straight into setting up Henley.
Ian Rickwood
Yeah, that’s right, we, we sort of grew Subway and we were in our twenties then, kind of late twenties I guess, we were married, had two children at the time, young, young children at the time and so life was pretty hectic. I think we got to about 17 Subways, something like that in London and I think the next largest sort of development agent or franchisee probably had two stores so we were far and away the largest in the UK at that time and we were probably young and impatient and you know probably a touch of arrogance and so were keen to go onto the next thing so, yeah, we were able to sell that business and then we were able to do a buy out of Benjy’s at the time from, which was a family business, and bought that business, had a about 30 stores, all in Central London, people may remember it, it was a value proposition, you know really interesting transaction to do, very difficult to buy because, you know, some of the, you know the accounting and some of the labour records and various other things were of a certain vintage shall we say, so it required quite a lot of diligence and, and, and assumption driven diligence rather than fact driven diligence, but we bought it, we did a lot of work on the brand, on the proposition, we, one of the big parts of that business was it, it just you know created a brand new central production unit but it wasn’t running very effectively or very efficiently so we had to go and sort all of that out, which we did, and we grew that to about 100 stores in total with a mix of company owned and franchised and we had great fun, we developed something called the “vanchise” back in those days as well, which was a, a small, it was a Vauxhall, I forget what the van was called now, it was a Vauxhall Vita or Vitaro or something van that we specially kitted out with some really clever engineers to open up into this kind of mobile sandwich store that we then, we vanchised rather than franchised so people would buy a van or a couple of vans and they’d take it to industrial estates and places that you know where there wasn’t other, other services at the time and I think we got to about 150 or 170 of those across the UK with sort of three or four distribution centres so, it was good, unfortunately that particular business it, we didn’t unfortunately sell it for what we hoped, it was, it became slightly distressed and it was a kind of really good learning for us that the core of what we’d purchased, you know, they were really well located stores, so well located that at the time you may remember Tesco and Sainsbury’s and M&S and Waitrose went into the small format and they thought it was, you know, particularly Sainsbury’s opened pretty much next door to every one of our stores and every time they did, we lost about 25% of our revenue and it was hard to get it back, we always ended up 15/20 points down and so we were fighting that kind of wall of, of change so, so we sold Benjy’s anyway in 2006, I think we probably had a couple of days off and then said well we’re probably unemployable after the last ten years or so of being entrepreneurs and I’m not sure we wanted to go back into a job for somebody anyway so we said what do we do next and I think by the time that had happened, we’d already started a, a single family home development in the Surrey hills, we’d acquired some land about a year before and my wife had retrained through that period as well, you know, in architecture so she was already kind of interested in, you know, in the real estate side and so we thought well why don’t we do, focus on that so we, we ended up buying two or three other land lots, going for planning permission and that was the kind of birth of Henley.
Susan Freeman
And that was what 2006 so, just before the financial crisis. Did that hit you?
Ian Rickwood
Yeah, very much, yeah. And again, you know you, that’s the great thing with life isn’t it, you keep learning, you think you, you know as soon as you think you kind of understand things, something comes and knocks you sideways and you think okay, I’d better, better keep on learning so, yeah, 2006 we, you know back then we were thinking let’s just do two or three developments a year, we’ll stay local, we’ll stay in Surrey, we’ll use our own capital and that was great to begin with until you know kind of 07/08 happened and suddenly prices went down and you know we were over extended and kind of staring into the abyss a little bit with land values that had gone down, planning that had taken longer to achieve and, and finding this thing that was looking expensive. So it was quite a tricky time and I think you know we, we managed to get through that period but coming out of it, the learning was okay, let’s diversify a bit more, let’s make sure that yes we’ll use our own money but let’s try and bring other people’s money in alongside as well and take the risk down and that will open up the opportunity for diversification and so that was, that was the sort of key learning that came from that period and then that really birthed Henley as it is today as a, a much more of a, of a sort of private equity business.
Susan Freeman
So the, the strategy, the vision behind Henley is very much about entrepreneurs backing other entrepreneurs and, and sort of adding value, I mean how do people come to you, how do they know about what you’re doing?
Ian Rickwood
Yeah, so, I guess we’ve had quite a scrappy journey to an extent with where we’ve got to and, and not having a pureplay, you know, investment banking or a pureplay real estate background to develop the company that we have done, we’ve had to be entrepreneurial, had to be entrepreneurial in what we look at, had to be entrepreneurial in how we raise capital and so that’s very much within the DNA of the firm and that period really from you know post GFC so that kind of 2009 period when we came out the other side of it and said okay we need this diversification programme, we need to raid other people’s capital as well as using our own. Through that period, we were very fortunate that we came across some other entrepreneurs who were also finding post GFC that was difficult to raise money but they had, you know, good backgrounds and they had good ideas and the great thing back then of course was because money was so hard to come by and because people were still managing so many buyers, if you didn’t have a lot of buyers yourself because you were fairly new and you could raise money, there were some great deals to be done. So, you know, we found the right people to work with, we did some of our own deals as well and we just put together a, you know a platform really that, that at the right time was able to go out and deploy, you know that kind of gave us the, the growth that we were looking for and yeah, I think the idea of entrepreneurs are back, entrepreneurs came out of that because what was resonating was people who said you know the capital partners they used to have and the players I used to go to, they’re no longer there or they can’t provide capital for me, I’m not seeing so much opportunity in this particular niche that I’ve been involved in and I can’t get money and I want to do something and I want to grow again and start a platform again and as that, you know as that resonated and, and the market had changed, the capital market had changed and we were perhaps more institutional in how we thought about things, it just made for a very good link that we’d take you know those, those sorts of entrepreneurs, bolt them onto what we were doing and then collectively, our efforts would, would see the business flourish.
Susan Freeman
And now, I mean it’s twenty years on isn’t it, what is the size of the business? What have you got in the way of assets under management?
Ian Rickwood
Well, we’ve deployed about $4 billion of capital so far. I’m not sure that’s necessarily the best measure or I’m not sure AUM is necessarily the best measure for what we do because it’s, it’s so different. So, to give you some sort of flavour of Henley today so, within Europe we operate across the core opportunistic spectrum, within the core space we have you know discretionary fund capital with local government pension funds and corporate pension funds who’ve invested with us, on the value add opportunistic side, you know we have activity in Poland, Ireland, Germany, Holland and the UK and we sort of have this model of, you know, backing entrepreneurs, so co-GP’ing with people in those different markets and then we have our own in-house development team and so, you know, with some of the developments we’ve got are very sizeable and we may come on to talk about some of those but in total, at the moment, we’re sort of processing and/or building out and/or processing through planning or about to start construction over about 12,000 homes in the UK so, you know, that’s a very sizeable number and I’m not sure that’s reflected in the AUM number that we often quote so, and then of course in the US we’re doing, you know, something similar with the real estate side, you know, which we’ve done traditionally and we’re getting back doing more real estate back in the US and we have this carwash business as well so, yeah, I’m not sure a 14.50 is necessarily the best measure but it’s, you know, safe to say there’s a lot of you know sizeable projects that we’re managing at the moment.
Susan Freeman
And you’ve been, I mean for the extent and size of the projects that you’ve got underway, I think you’ve been relatively low profile.
Ian Rickwood
Yeah, I’ve heard people say that about us. I think that we’ve sort of just gone on and done our thing and been focussed probably more on the business, to be honest. I think that, you know, profile can be very good because you can obviously yield you know opportunity and I guess that’s why people go for it. I think from a personal experience, I’ve personally had the benefit of great PR, I’ve also suffered some negative PR in the past and that’s probably framed a little bit about how I feel, you know, about what we say and therefore I think and generally as a business our focus has been more about getting on and doing what we do and letting word and mouth carry us as opposed to being particularly out front and vocal within the industry and there’s plenty of people who do that who are very good at it in the real estate market, you know we’ve tended to be more focussed on, you know, on getting on with what we do and then, and then let the results you know shine for themselves.
Susan Freeman
Well that makes a lot of sense if, if the right people are finding their way to you. And one of the things I was wondering, you know, hearing you talk about the way you, you work with other entrepreneurs, what are your criteria for backing a business when somebody comes to you with, with a deal?
Ian Rickwood
So, we’re pretty agnostic on sector but the things that we’re looking for, firstly on the sort of on the opportunity, so whether that be a, a sector or a deal, a specific deal, the things that we, the two kind of big things I’m always saying to the team to focus on are size of the prize and executional risk. So, the biggest limitation we have as a business is time, there’s too many things to do, there’s only a certain amount of resource that we’ve got so we’ve got to use our time really wisely and productively and I think that that means being very focussed on what reward we’re going to get if it goes well, is very, very important because you know working super hard to make very little isn’t very motivating for people, in my experience, so therefore being very clear about what’s the size of the prize and how do you get to that is important. The second thing is executional risk, you know, chasing a dream that can never happen is also very demotivating in the long term so, that’s the axis that I, you know, tend to think about as a business, we, we try and judge any opportunity on. Then when you’re talking about working with the entrepreneur really, it’s about character so, if you like the proposition of what they’ve got, it’s then about character, you know, are they culturally a good fit with how we are? Are they going to be difficult to work with? You know, is their integrity good? If you’re going to get into difficulties, are they going to roll up their sleeves and work with you to try and fix it or they just out of there? How important is to them? You know, those are the sorts of questions that we ask, the character ultimately I think is the most important thing and to an extent, the sort of specific track record of the person is slightly less relevant, we’re not necessarily looking for someone who’s done it a hundred times, great if they have but they may not need us, it may be people who’ve got a particular opportunity, they’ve got 25% of the skillset required to deliver the opportunity and we can supplement that, you know with the sort of missing 75% with the skills that we’ve got in-house so, we’re much more of a plug in to entrepreneurs. If you’re the polished, finished article then you probably don’t, you know, you don’t need to work with Henley, you know, if you’re an ambitious, young, hungry and you’ve got 25%, 45%, 50% of the package of what it’s going to take to grow a business, then we’re a great place you know to come and, to work with and we can help build out a, a sizeable platform with you.
Susan Freeman
That’s great and you said at the beginning of the conversation that you know what happened at the beginning of the Henley journey led to you to diversify and you know the thing that struck me, looking at you know everything that you’re doing at the moment, is that it is very diverse so, I think we’ll perhaps just maybe talk about some of the specific schemes so that our listeners have a flavour of, of what you’re, you’re up to and I think we will start with AquaSonic, the new car wash business that you’ve just launched. I have to say, I don’t know that much about the car wash concept but I understand you, you see great potential in a very fragmented market so, and it all sounds incredibly high tec and wish I had one down the road so, could you tell us a little bit about you know the concept, how it works and why we need more car washes.
Ian Rickwood
No, absolutely, just to start with, it’s worth saying for people listening in the UK in particular, there is nothing like this in the UK, this is not driving up to an industrial estate where you, you know, get out the car and some people who you’re not sure have previously been on Crime Watch start cleaning it, it’s not that kind of set up at all, it is, it’s very, very different. Yeah, so we, we got into the business by mis… well, not by mistake, we got into the business by backing some guys originally as a co-GP. Now, as it turns out, the guys we backed weren’t great and they had a flawed strategy and, and so we, you know, we kind of learned the hard way with what we’d bought and had to manage our way back out of it, but we fundamentally liked the macros of the space so we said let’s take our time, knowing that the macros were really good, let’s think about what does the best in class execution look like and so we spent two years building up the brand that we’ve now created called AquaSonic. The reason that we liked the macros, you know at a very high level within the US market and as I say, it doesn’t really exist this market in Europe at the moment, but the reason we like it is because it’s large, about a $15-20 billion market, it’s growing at 6% 20.31, it’s highly fragmented. Within the US there’s about 60,000 car washes in total, which is actually twice as many McDonalds and Starbucks combined, so it’s a, you know, serious number of units within the US, the single biggest brand has about 400 units only out of 60,000, so it’s incredibly fragmented. Within that there are three bits of the market, you know, there’s the gas station rollover carwashes that none of us like that we do have in the UK that do a very average job and often you have to queue for a while to go through them and they often break things, there’s the self-service which obviously is a dying part of the market, people don’t want to go and clean their own car these days, and then what you’ve got in the US is something called “express tunnels” and that’s the bit that we’re focussed on and they represent about 25% of the volume but about 50% of the value of the market and that’s where we’re focussed. That just doesn’t exist in the UK at all and you know, to sort of describe it for people, firstly go to AquaSoniccarwash.com and you’ll see one but to describe it for people, think of an acre of land, think of a 5000 to 6000 square foot building, which is effectively you know a tunnel, and what you’ve got is a queue of cars coming in through pay lanes, into the tunnel, you’ve have 6, 7, 8 cars on the conveyor belt running through the tunnel at any one time and the whole thing is fully automated, you know, with an exceptional clean and dry, they’ll come out of the tunnel, they’ll either exit the premises or they’ll drive into an area, car parking area with about 20 to 24 vacuums in and the person will get out and clean the car themselves so, essentially what you’ve got is a very high tec, low labour, high volume proposition and the beauty of car washing and I think the thing that’s transformed it over the last five or six years as an economic model, is the introduction of membership, unlimited membership, so rather than turning up as a retail customer periodically and spending $15, $20, $25 you know whatever, people will now pay $30, $40 a month and have unlimited washing, so they’ll come three, four, five times a month and they’ll be recognised at the barrier because you’ve got licence plate recognition, they’ll be recognised, they’ll drive straight through a member lane and they’re in and out of this process with a fantastically clean car inside of three minutes so, much, much faster, super convenient, you don’t need to get out of the car, you end up with a great product and actually, it’s very affordable because of the monthly membership and if you get that combination right, about 80% of your revenue is recurring revenue from members so you get a very steady cashflow and then sort of the final sort of cherry on it if you like is the fact that it runs at about a 55% EBITDA margin so you know if you turn it into kind of real estate speak, you can build these assets you know for something like 17% yield on costs and if you think of the rest of the real estate market, I mean people get excited with self-storage because that kind of prints to about a 10, you know 9 or 10% yield on costs and that’s very good, you know this is at 17 so it’s way, way higher than that, you know in traditional real estate, you know, as you know Susan, traditional real estate you’re probably playing in the 7, 8’s, 9’s so it’s materially more profitable so if you get it right, it’s a really interesting space to be in.
Susan Freeman
So, would it work in the UK? I mean, you said picture an acre, an acre of land, I mean would you need so much space? Would it work in, in London for instance where you know there are such space constraints?
Ian Rickwood
I think that’s a good question and you know you’ve got two different things, you know obviously in the States where we, and in Florida where we started, you’ve got plenty of space, so that’s one big difference and also they, the sort of American attitude to cars is slightly different to the British attitude to cars, I’d say, I think over Europe, different countries have slightly different relationship with their car, you know the Americans, particularly in Florida, like, they’ve got into the habit of car washing now and they like it and it’s part of the ritual of life but I think all of us would say we don’t really like getting into a filthy, dirty car, you know we may put up with it because of the weather sometimes and we’re busy and whatever else, but we don’t really like it, there is something nice about getting into a clean car. So I think yes, from a consumer point of view it would do very well in the UK. The constraint on space is something that we’re thinking about so, you can make these tunnels smaller, the impact is that you can wash less cars ultimately, but you know to put some sort of numbers around it, you know on 140 foot in the US, effectively you can wash one car per foot per hour, so you can do 140 cars per hour, probably slightly more actually, maybe 160, but call it a foot a car, so 140 foot tunnel, you’re doing 140 per hour, so if you’re open for 10 hours a day, theoretically you can do 1400 cars a day, you know you multiply that by the number of days and you’re sort of well over half a million cars per year, which is huge volume. So, I think in the UK we would need to scale that down, maybe you do a 70 foot tunnel and you make it work on half an acre and then you’re probably slightly capped on, on the volume that you can do but you can still have an incredibly profitable car wash, you know even up a quarter of the number that I just quoted.
Susan Freeman
If it’s really that quick, I mean it would even work at service stations on, on motorways.
Ian Rickwood
Yep.
Susan Freeman
Why not?
Ian Rickwood
Yep, no, that’s right. I think the only reason you, and Susan I agree because you’ve got the volume of cars there, the only one watch out there is would you get the unlimited membership because what we’ve found is the majority of customers come within 10 minutes or three miles of the store, so very localised so it’s not a destination, you know a shop, it’s a convenience and for the unlimited membership it needs to be local.
Susan Freeman
Well I’ll leave, I’ll leave that to the experts. And in terms of getting investors for this for this business, how have you done that?
Ian Rickwood
So we developed an OpCo/PropCo structure. We funded the OpCo with our own balance sheet and then on the PropCo, you know we knew it would be difficult to raise because it was a brand new business in Florida and the traditional investors that we would go to, the kind of large Wall Street type firms, weren’t going to be interested in getting in at the start up phase, they’d be very interested when we got 10, 15 open, recapitalising and, and providing growth capital for it, but they weren’t going to be interested at the start up so, we again took a fairly entrepreneurial route through on this, we thought what we need is high net worth and family office type investors who are just a bit more entrepreneurial, bit more like take the risk, we thought why don’t we try and find people in Florida because if we can get local people who invest and can also be ambassadors for us, you know, we get even more value out of it, so we set about advertising on Instagram and Facebook, which sounds ridiculous, but we did, we, we spent money on that, we created some pretty good ads to be honest and that garnered some decent response and then we put up a sales nurture process with some callbacks and ongoing nurture and today we have about five and a half thousand high net worth investors through that mechanism, who we talk to regularly and I think we’ve probably raised getting on for $25 million now from that particular channel over the course of the last two years and I would say for everybody who has invested, there’s probably at least another ten who are waiting for the results of this first store that we opened you know two weeks ago so I’m expecting the, that number to increase significantly you know from here.
Susan Freeman
Do you think we’re going to see more of fundraising through social media, Instagram, I mean it’s a way to reach people isn’t it.
Ian Rickwood
It is and it’s really, it’s really interesting isn’t it because if you look at the big, big firms now, whether it’s you know Blackstone or Starwood, you know, Apollo, you know so many of these large firms now are really raising money from, from high net worth and almost direct to consumer with the various REITs they’ve established and the various mechanisms that they’ve created to, to attract that sort of investor so, you know, almost, as opposed to going to the larger institutions that might have been their LPs that you know pulled money from pension funds and directly from retail, they’re going directly to retail themselves and creating a direct access to that channel and that’s what we’re really doing you know through the social media ads that we’re running so, you know I think that’s the way that the market is going so, yeah, we, you know certainly we’re pleased with the results so far, I think we can carry on doing better but I won’t say what we’ve spent, we haven’t spent a huge amount of money to raise an awful lot, if I look at my costs of dollar equity, I’m running at a very efficient number at the moment by pursuing this channel.
Susan Freeman
And that’s been presumably largely in, in the US and I wonder whether you would get the same sort of response on social media in the UK or in Europe?
Ian Rickwood
Do you know what, we’re not allowed to do it in the UK or in Europe, I mean, it actually takes you to a really interesting point that you know as a business that’s across the Atlantic you know with activity in the US and, and Europe, it’s just so much easier to do business in the US. I don’t think you could have launched the car wash business the way we’ve launched it in the UK, I don’t think it would have been possible to have done that with the regulatory framework that we have, which is in some ways is a sad thing to say, but it’s a current reality, it is just much harder in all areas, it’s much harder doing business in the UK at the moment.
Susan Freeman
Okay, that is a shame. So, we are now going to turn to just illustrate the sheer diversification of your portfolio, we’re now going to turn to regeneration in the UK which I know is another, you know it’s a big theme for you, obviously it’s a far cry from car washes but this is something that you’ve been doing for some years and you invest in, so I understand it, in specialist supported housing and you’ve been doing that for over seven years and I wondered if you could talk to us a little bit about how it works, you know how you raised money for it and how you make the numbers work because you know we’re always hearing that it is quite difficult to develop you know housing, social housing people you know who need, who need special accommodation, I mean how do you make the numbers work?
Ian Rickwood
Yes, so sort of a couple of things there really in terms of what we do, so just on the supported housing side, you know we’ve actually been in this space for about twelve, thirteen years now, in many ways I think we were one of the pioneers of the space, seeing the opportunity and trying to put together what was a complex picture because supported housing, ultimately you’re providing housing to a vulnerable adult along with a physical or mental disability but is capable of independent living who might currently either be at home with parents or might be institutionalised in some way at great cost to the state so, you know unlocking that and making their life better and providing them the independence and saving money for the state, you know is a very desirable and good thing all around but to make that happen for that person, you’ve got to work with local authority, you know clinical services, you’ve got to work with local authority housing benefit, you’ve got to work with a care provider, you’ve got to work with a housing association and obviously you’ve got the underlying tenant so, trying to get all those things joined up is incredibly complex and, and something that used to be very complex, we’ve managed to make it a bit more streamlined now but still is, that’s a lot of counterparties to bring together so, you know, we started that business thirteen years ago, initially try to put those people together, find property, fit the property out specifically to the needs of the individual that you are, that you are seeking to house and then once you’ve done that, wrap it up and then sell it into an institutional investor. So we started on the front end being on the opportunistic side, as we got to learn the space we sort of changed views and, and now today, you are right, we have two core funds that provide long term housing that are the sort of permanent investor for this housing. The sorts of investors who are interested in that frankly, are those who are, have a long duration, are looking for core returns, so our funds in that space are not levered at all so they got very low volatility relative to the rest of real estate. They’re generally people who have some kind of impact intent so you know we’ve heard a lot over the last few years about impact investing, SIPUT I and SPUT II are the name of our two funds, specifically in supported housing. You know, I think they are fantastic examples of making an impact and, and you know making an impact investment because you are transforming people’s lives. If you read the stories or you talk to the people, the tenants who are in these houses, just how happy they are at the independence they’re being given compared to where they were previously, you know, it’s transformational so, you know, I think those are the types of investors that we appeal to, people who really want to make a difference. I observed before, something which I find in a way deeply frustrating, is when you meet a very institutional type investor who’s got money and would be happy with the return profile of this investment but they say ah well you know, yes I do agree it’s got great impact but you know what, I’m so worried about one of these houses having a story in the Daily Mail or The Sun or whatever at some point that I can’t possibly be associated with it. I mean, I get people have got manage their firm’s reputation, of course, you know we all have to do that but that just seems wrong inherently to me, if you’re so risk averse about some you know remote risk that might come from that, you’ll prevent yourself from making real impact investments that will make a real difference to people’s lives, then I think you’ve got your priorities wrong and that has happened occasionally. Fortunately, there are plenty of local government pension schemes however who don’t have that view and are incredibly supportive of the investment thesis and I think where, where we’re able particularly to provide housing within you know the are that that local authority is, that you know really dovetails even more into, into their investment so, that’s the supported housing piece, on the regen side, that is different, I don’t know if you wanted to sort of discuss that next but that presents different sorts of challenges to us.
Susan Freeman
Yeah, I was just actually going to, I wanted to just understand you know what, what’s the scale of your investment in supported housing?
Ian Rickwood
Yeah so, today we deploy around 600 million sterling into the space and continue to add new investors to the fund and you know look to deploy more.
Susan Freeman
So, yes let’s also move onto a sort of general regeneration and is there any particular scheme you would like to start with?
Ian Rickwood
Yeah, so we’ve got a, you know we’ve sort of got a range of different projects running at the moment. We like regen as a project, you know we like the long term nature of the projects so we have Ebbsfleet is a major project that we, and a joint venture with our partner there who is Camland, and we’ve been in that venture now with them for getting on for ten years, we’ve probably got another ten years to go frankly, to see that project through. For those that don’t know it, Ebbsfleet, it was a designated area for a Garden City by the Government, I think it was all the way back in about 2004 or 2005 I think originally so some time ago. We were working down there with the development corporation to deliver it, so about six and a half thousand homes in total when it’s complete. We’re making you know steady progress given the headwinds of Covid and the interest rate cycle at the moment, it’s obviously not been without its challenges as you can imagine, but it’s transformational, it’s a great location, we’re building schools, we’re putting in town centres, we’re putting in you know large pads for housebuilders to construct, we’ve got a mixed tenure down there, you know from build to sell to build to rent and also unit variety as well so, you know really, a really fun and interesting project, a huge amount of earth moving required because it was on an old quarry site so lots of technical challenges but just really, you know kind of something very substantial and really capable of leaving a legacy. So we enjoy being in that space and really coming from that, you know we’d like to do more projects like that. The other ones that we’ve got are more town centre oriented so we’re looking at commencing construction next year on about 300 units on the water in Fulham with a site that we got consent for last year and going through various amendments to that at the moment to get that ready to start construction next year. We’re due to go to planning committee I think it’s next week on our site in Salford which we are, fingers crossed, will be approved, it’s going through with a recommendation to approve and that’ll be, you know, a great site, that’ll be three and a half thousand, just under three and a half thousand units if we get that consented, a huge regeneration and redevelopment for the area providing jobs, better retail, new housing, a good mix of social housing within that as well as part of the agreement that we’ve gone for. And then we’re looking at other areas as well so, so we like it, but you’re right, it is incredibly challenging, you know home building in the UK at the moment you know is it’s, it’s very, very challenging.
Susan Freeman
Yes, I mean does that put your off? So if you’re for instance looking at building this car wash business where you know you don’t have the same issues and planning challenges to deal with that you have over here, I mean does it actually put you off or does it make you more incentivised to actually make it work?
Ian Rickwood
So, it’s something we do debate and I’ll just give you an example of the differences without sort of naming individual councils but we’ve had various projects over the last few years where it can, it has taken us on one occasion it took us I think just under six years to get a planning consent for what effectively was unused industrial land to pop, you know, a tower up, I think it was about 190 units, something like that, took us about six years to finally and it was a political football and we wasted so much time and money, had to keep redoing the development that I don’t know what the costs were in the end but they were a fortune and you know it’s very, very demotivating when you go through that. You know, by contrast we acquired or in fact we got under contract, haven’t actually acquired the land yet, but we got under contract nine months ago last September/October, a land assembly in Florida, on some water and we will have that fully entitled by this September so, within twelve months, we’ll have that fully entitled for 113 slip marina and 66 condos on the water and so, you know, that, that should not be the case, that really should not be the case, it shouldn’t be that hard, our country’s crying out for more housing and yet it’s so, so difficult to get. So, yes, it is a challenge, you know we’ve got a team, we’re in this space, we know the space, we appreciate that the politicians, you know I think the current government, the good thing about the current Government with housing is they’ve seen the problems, they recognise it and they’re trying to do something about it. I think they could do more than I think unfortunately there’s so many structural issues even though politicians at the top make the right noises, actually seeing that implemented through and come to fruition I think is far harder than just using the words. But because we have the team in place, because we know it and because we’re well connected in it, we sort of this, we still have this appetite to carry on going and I think if you get it right, you know there are the right rewards, but it certainly isn’t for the faint-hearted.
Susan Freeman
No, you’re obviously somebody who, who likes a challenge and I just wondered, I mean you were saying that you know the Government could do more. What would you do I mean if you were Housing Minister, what would you do to unlock all this?
Ian Rickwood
So I think, I think it’s a series of challenges that fundamentally you need an Elon Musk type character, you need someone who’s going to come in with radical change and, and be prepared to, to tear up a lot of the rules that currently exist so, firstly the industry is way over taxed and I was, I haven’t run the number, I’m going to run the number at some point but if I look at, if I look at the amount of CIL that you need to pay to do something, you know particularly in London, if I then look at the amount of social housing that you need to provide for a development, if I then look at the corporation tax that you pay on any profit at the end you know and then this special developer’s tax that you pay on top of corporation tax for residential, if I then look at the Stamp Duty that goes into every single… the thing is taxed to death, you know we should know by now as a country that if you over tax something, money moves elsewhere, they say you know money goes where it’s welcome and if you don’t, if you make it unwelcome by taxing it too much then it goes elsewhere and I think residential development is over taxed and all that’s doing is pushing up the price so then you end up with this affordability issue because people have got to make money to want to invest you know in a development and see it through and if you take that opportunity away, you know, you don’t get the, the supply of product because nobody can make money and that pushes up prices even more so, I think I’d start with thinking about what’s the economic model I want as a country and I remember you know years ago, I think again I’ve looked to these stats recently but years ago people would move on average about every seven years back in the 1990s, I think it was about every seven years people stayed in a home. I want to say today, I think it’s up to fourteen or fifteen years so we, you know we’ve absolutely pressed down on the amount of transactions. Now, you’re a lawyer so you’ll appreciate that, you know transactions are what drive, you know economic activity because people need to use lawyers, they need to use estate agents, they go out and buy you know removal, they have removal firms, they go out and buy furniture etc, so by, by putting so much tax into the system we’ve just reduced the amount of social mobility and transactions that there are so, that’s the first place I’d, I’d start to look at what we’re doing. I think secondly, in, in regulation, I mean we have examples of planning applications we’ve put in recently and you have to do these, as you know you have to do the statutory enquiries so it goes out to all the different statutory bodies, it’s just blown my mind somebody who you go to, to try and get an opinion from, there’s so many quangos you didn’t even know existed and so many of them are either understaffed or they’re overweight of work or inefficient, I don’t know what the issue is but they don’t come back within the timetable and then you’ll find, you think you’ve got a consent about ready and then they do come back after the timetable and the whole thing gets held up because of a particular objection that they’ve got and that needs to be handled, so there’s just way too much regulation, you know, if we really want to get these houses built and then you’ve got all of the nimbyism as well and the local sort of politics and I get it to an extent, people want to have some control over their local area but that really conflicts with the sort of building requirement that we’ve got as a country so, I think the honest answer is you’ve got to start with the big picture, what do we want to be, you know what’s the population, how do we want that population to live, where do we want it to live, you know across the country, how do we provide the right financial incentives, how do we remove regulation, how do we make sure local authority is aligned to actually providing the housing within the areas that we’ve got, you know so that level is where the change needs to occur.
Susan Freeman
And it’s difficult because we get new regulation obviously for all good reasons, we’ve got the Building Safety Act and now you know there are towers that are just stuck and they can’t be occupied because of the delays.
Ian Rickwood
Exactly, and the BSA, listen, things are always done with a good intent, it’s not that people have got a bad intent generally so, you know, obviously Grenfell was incredibly terrible, you know awful disaster and, and some of the things that you know occurred should never have happened, you know, there should have been better oversight and there should be penalties for people who did things that were wrong and hopefully that is, you know, that will be the case. It’s all about trade-offs and getting the balance right and I agree with you, the BSA unfortunately, even if you agreed with what it’s trying to do, which from an intent point of view may be good but from an execution point isn’t, that it’s not staffed properly anyway to be able to provide the services it needs to in order to unlock the housing so now it’s just a barrier so, as you say, it takes longer to get schemes approved to start construction and even when you complete construction, there are towers that are sat there that are empty.
Susan Freeman
Well, Ian, don’t let it put you off because we need you developing in the UK and I think you’re looking at something in New York State at the moment so, I can see that you know it is easier to develop over there. And is that, is that multi-family that you’re looking there?
Ian Rickwood
It is, yeah, so we are, we have a new, a new partner in New York State and yeah, we’re looking at getting going on some ground that multi-family development over in that part and obviously again it’s really interesting and an idea that we could pinch from the US, Boris Johnson brought this levelling, levelling up idea in didn’t he a few years ago, I don’t know how successful that, that was but yeah it was a good idea conceptually I think. In the US they have these opportunity zones and we’re looking at an opportunity zone and there are, again, there are attractive tax benefits which attracts money, which attracts the potential to go and develop there and I think that would be a good idea for certain parts of the UK if we could look at something like that.
Susan Freeman
No, I agree, I agree, I was on a very interesting Opportunity London trip to New York last, last summer and everywhere we went, all the developments we saw had all been kickstarted by some sort of, either opportunity zone or government or local authority grants and you know that’s what you need to, to get things kickstarted isn’t it. I was actually wondering, as an entrepreneur, you, you look for new opportunities and I wondered if you’d had the opportunity to just you know experiment with anything, you know, new, something that hadn’t been done before, even it if, you know if it didn’t work because real estate is generally very bad at experimentation because people don’t like to get things wrong but I just wondered whether you had been able to experiment at all?
Ian Rickwood
I think an example I can think of that is really something that we’re doing back in the car wash business on the real estate side, which is site selection and so we’ve embraced AI in a big way with that and yeah, we got in a, a young guy who has a Masters in Data Science to come and work with us a couple of years ago and we said look, we’re going to be looking to develop this brand out, we’re going to want to find plenty of sites, every time we do a site evaluation currently within the team it takes three to four hours, we’d love to try and built some efficiency around that, can you help us do that? And so he set about that, you know, about that task and he’d done a great job for us and, and today we, we now are able to, we’ve built our own model that’s able to sort of review something like 110 different data bases that are available, stroke something like 350 different variables across that, push that through a 46.41 model that we’ve built, a weighting model that we’ve built and it’ll spit out a score for a given site which is great and it’s able to do that in just over a minute and that used to take three or four hours, so that’s a, that’s an interesting innovation you know sort of embracing you know coding and, and AI. And what he’s now been able to do, that was the kind of start of it, what we’ve now been able to do is go even further and take a couple of things we’ve done which I think are super smart, you know, we’ve been able to look at, at our competitor set, particularly where we know we get volume and then build out an algorithm so for any site we’re looking at now we’re able to match it up against equivalent sites across the US and therefore to provide a likely volume that we’re going to get from, you know from that particular site opportunity, which is great. And then what it’s also been able to do, the next level we’ve just taken it to is he’s now gone through and has stored every piece of land in Florida, whether it’s available for sale or not, doesn’t matter, we looked at every single parcel and then I’ll say you know if you were to take 200 parcels of land in Florida for this proposition against the criteria that we’ve got, where would they be? And it’s given us the most top 200 prime sites and now obviously what we’re able to do is go to our realtors and say great, can you go out and meet with these landowners please and see what we can buy from this particular list? So, I think that’s a good example of using AI and innovation to transform the methodology of acquisition for real estate land.
Susan Freeman
I think that’s the future isn’t it. And Ian, I mean I don’t know if you have any downtime but when, you know, you’re not, you know, running these various businesses and how do you spend your time?
Ian Rickwood
So, we’re fortunate in that you know the whole family is involved in the business so that kind of keeps us very connected, which is great, so obviously my wife and I have worked together for thirty years now and now both of the, my kids, who are in their mid-twenties are working within the business, so that’s, that’s great. I think from a kind of social point of view, so my big hobby is, outside of golf which I play, is supporting Manchester City so, that’s been an interesting ride over the last thirty years as well because they were abysmal for most of that, I’ve been a season ticket holder for years and it’s amazing what you know a couple of billion pounds and the world’s best coach can do to your team, it’s been a transformation over the last ten/fifteen years, it’s been, been, we’ve had some great fun games, some great games and Champions League final in Turkey and many trips to Wembley and it’s, you know, as well as spending time up in Manchester.
Susan Freeman
So is that the reason for the scheme in Manchester?
Ian Rickwood
Actually, ironically, it’s in Salford so it’s closer to United than City.
Susan Freeman
Okay. I think we’re out of time but that’s great because I think you’ve really given us a, a flavour of the very diversified Henley portfolio so, thank you very much and, and I hope all goes well with, with the car wash launch.
Ian Rickwood
Appreciate it, thanks very much for your time.
Susan Freeman
Thank you so much Ian Rickwood for taking the time off from launching your new car wash business, to talk to us about Henley’s entrepreneurial approach to real estate investment and the sheer scale and diversity of the schemes you are investing in.
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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