The monthly magazine providing news analysis and professional research for the discerning private investor/landlord

Core Fundamentals

Tim Hodges of Vincit Group comments on his latest activity in property development

Interesting times is one way to describe the recent events of Brexit, and whichever camp you're in I think we can all agree 'the times they are a-changin'. I've been asked several times what as a company will we change; will it be our strategies, our due diligence or our financing model. If there was ever a time to emphasize how important location and margins are, it is now!

We are not making drastic knee jerk decisions other than making sure our margins are circa 30% on GDV and our locations have a high PTAL (Public Transport Accessibility Levels) rating. The developers with healthy margins and great site locations shouldn't have too much to worry about; it's the sites working on typical 20% margins that should be concerned as there isn't a sufficient security blanket in place. You only need to look at the 2008 crash where the majority of developers that went bust were working on 15-20% margins. Now, I'm not saying there is going to be a crash but every business should stress test its projects whether it's 2008 or 2016.

In fact, the councils' section 106 requirements should be amended as their requirement for a developer to make no more than 20% margin is poor business practice, a matter to be discussed another time.

So in short, at the Vincit Group we are not overly worried just concentrating on the fundamentals; in fact, we see this as an opportunity as no doubt 'Berkshire Hathaway' does. So to repeat: great locations (demand is high, high PTAL, high population density) and healthy margins close to 30%. One recent site we secured mirrors these fundamentals.

Want the full article?