#202 Successful regeneration needs time, vision, capital, and a little bit of flexibility, says Urban Splash Residential Fund boss

PropCast

Listen on Apple, Amazon, Spotify, or SoundCloud. Hosts: Andrew Teacher

In this episode of PropCast, Andrew Teacher speaks to Akeel Malik, co-architect behind the Urban Splash Residential Fund, on connecting capital and the regeneration of regional cities, how technology can keep communities connected, and why real estate must grow closer to its customers.

Akeel Malik operates at the intersection of brands, technology and institutional investment, not just as a partner at SURE Capital – a new investment management business with a focus on sustainable urban real estate in the UK, and a partnership with Urban Splash Group on its residential strategy – but also as a technology entrepreneur and co-founder of a residential investment fund. Malik’s relationship with residential property was catalysed at an early age. Malik, of Pakistani and Irish heritage, grew up in Wilmslow on the outskirts of Manchester’s city centre within a family with some experience of residential development, mainly in “private rented sector and senior living.” Even as far back as school, this familial connection to property and the transformational effects that Urban Splash was having on his local neighbourhood “were definitely on the radar.” After studying Economics and Management at the University of Oxford, Malik worked in London for UBS in its Real Estate, Lodging and Leisure Team, advising on M&A and capital markets. It wasn’t long before he was drawn back to Manchester. Seeking to find quality rental accommodation post-university, Malik and his friends found that many regional city centres lacked decent properties. These personal, familial and professional experiences would converge around Malik’s vision for “using the physical landscape and creating branded, well-designed properties at affordable prices.” Malik found his ideal partner in Urban Splash and its founder Tom Bloxham, launching the Urban Splash Residential Fund together, along with Paul Gough from STAR Capital. The Fund now owns and operates 500 homes across the UK, with first look access over the £1.2bn pipeline of Urban Splash as well as working with other developer partners. It seeks to provide investors with the opportunity to co-invest in a branded, institutional quality portfolio of residential properties for rent. Malik attributes much of Urban Splash’s success to the close match between commitment and delivery. In his words: “Knowing what a company does and what sort of product they’re going to deliver over an extended period of time across different scenarios is what’s made Urban Splash what it is today.” This track record, for Malik, has fostered “trust between the public and private sector.” Because of its 20-year regeneration of inner-city district New Islington, Urban Splash is primarily associated with Manchester. But its next generation of schemes also include Campbell Park, where 1500 homes will be delivered in partnership with the Milton Keynes Development Corporation, while Port Loop in Birmingham is being delivered in a joint venture with Places for People. Malik says: “It’s an island site, 15-20 minutes’ walk from Brindley Place but it is a great opportunity to create an island community. The land was previously industrial, and we got to engage with the community at an early stage.” For Malik, the scale and type of these projects are more akin to major regeneration schemes, unlike “transforming unused mill and warehouse buildings in Northern cities” for which Urban Splash was originally known. Malik now sees Urban Splash as working on the kind of schemes that will act as prototypes for the Government’s proposed New Towns. A focus on larger regeneration schemes means that Urban Splash is not confined to residential development. It has “two million square feet of flexible workspace across regional cities, concentrated in Manchester, Liverpool and also extending to Royal William Yard in Plymouth.” Tailwinds supporting these investments include “high university retention rates, a focus on a particular cluster or industry and investment which confer a halo effect on other capital flows.” Where these elements are not present, “it can be challenging to look toward regeneration and placemaking from a pure private markets perspective.” Malik recalls that the regeneration of Manchester required “a forward thinking, pragmatic and proactive leadership of the council. Partnership between public and private sectors is really the only way to make things work at the scale the UK housing needs.” For Malik, that still creates challenges in making investment stack up. “The choice is to look at existing assets where there has been some form of repricing and value can be found, or in the delivery of new stock.” The risk remains that traditional and complex supply chains with “many mouths to feed from developer to contractor to subcontractor to ultimate funder” are unlikely to yield viability in such circumstances. The preferable alternative is to involve “long-term patient capital with a 30-year view, and with a willingness to see rental residential housing as an inflation-linked income stream, for which the benchmark is more like 1 percent than the 5 percent base rate. The developer and others could then participate in the upside as and when things stabilise, and have a long-term, reliable capital partner.” Malik’s hope for the new Government is for a stable policy environment that provides long-term clarity for business planning: “I think over the last three to five years there have been plenty of reasons to press pause on things. There’ll be external factors to balance but a measure of stability from Government is helpful.” A further feather in Malik’s hat is technology platform Ark. In Malik’s words, Ark is “a digital noticeboard and communication tool to cultivate community in residential blocks.” Residents in 40,000 homes across the UK have the ability “to speak with each other, find out what’s going on around them, and to communicate with managers and landlords.” In Malik’s view, communication tools such as this can assist regulatory duties such as those under the Building Safety Act. For Malik: “Regulatory change without a support infrastructure that helps people to adjust runs the risk of failure.” In his view, the property industry has not historically been good at adapting and changing on the hoof. “That’s where technology becomes super important, and regulatory change might now be assisted further by artificial intelligence.” Beyond regulatory compliance, Malik says that communication tools like Ark represent an opportunity for a supplier (the building owner/operator) to get closer to the customer. The byproduct is keeping “customer satisfaction and customer experience as a KPI and metric for business success.” Asked about the future, Malik says the Urban Splash Residential Fund will continue to work with investors to build its platform on the reputation the company has built for delivery, hard-earned over the last 30 years. The aim: to work with institutional investors and delivery partners to create a 3000-home strong rental brand such that “people can know when they are moving place-to-place that they can get good quality, mid-market, affordable, design-led rental homes with a frictionless experience.” You can listen to this podcast via {Apple}, {Amazon}, {Spotify}, or {SoundCloud} (and many other platforms) or just use the player above.