Business Development Strategy
2017 to 2020
Contents
No. Section
Page
1
Introduction
3
2
Background
3
3
Context
3
4
Developing the strategy
4
5
Current position/activities
5
6
Proposals for future development
6
7
Objectives of the strategy
9
8
Value for Money
11
9
Implementation
11
10
Equality and diversity
11
11
Monitoring and review
11
12
Appendix One – Strategy action plan
12
Author:
Date approved:
Date for review:
Mark Crosby, Business Development Director
20 March 2017
March 2020
Page 2 of 15
1.0
Introduction
1.1
This strategy sets out the key objectives for our investment in development activity
for the three years from 2017 to 2020. It is more flexible and more challenging than
any previous strategy. It also presents new risks and opportunities as we continue to
respond to significant changes in our operating environment.
2.0
Background
2.1
A decade ago our development programme was largely opportunistic. This was
necessary in order to build up a profile, reputation and network that would allow
Saxon Weald to make more selective choices. We have also needed to build up the
experience to manage our resources and diverse activities in a successful way.
2.2
There have been many successes and we have (amongst many other things):
a)
b)
c)
d)
e)
f)
g)
h)
Built more than 1,400 new homes;
Completed 11 extra care schemes;
Become a lead partner with the HCA for the last five years;
Built the first Code 5 houses in the Country;
Built the first PassivHaus homes in the County;
Invested more than £75m in new homes in the Horsham District;
Acquired 81 market rented homes; and
Delivered our first outright sales and care service in a new model of extra care.
2.3
We have also developed excellent staff who have delivered these successes in line
with a strategy that has evolved with increasing sophistication to respond to the
changing needs of the business. We now operate an active programme in five local
authority areas, instead of the 14 of seven years ago. We measure performance
against more demanding financial criteria and are exploring new and challenging ideas
around delivery that many larger associations have not yet needed to consider.
2.4
Some of this innovation is born out of necessity. Other aspects are born of a desire
to be the best we can be in the areas that are important to us. As a charitable
association with a specialism in housing for older people we aim to be financially
astute developers whilst delivering positive social outcomes.
3.0
Context
3.1
Since the last strategy was approved in December 2014, we have seen enormous
political and policy change. The summer budget of 2015 brought sweeping and
unexpected adverse changes to our revenue stream and increased threats to housing
benefit for many of our tenants.
3.2
The policy of funding affordable housing through higher rents has continued whilst
capital grant has been focussed more on sale products rather than rented homes.
Meanwhile, local authority partners have become gradually more protective of the
commuted sums they might have previously used to grant fund development and are
actively considering setting up their own housing companies.
Page 3 of 15
3.3
Our response to this changing adverse environment has been a revised business plan
with a focus on delivering savings to offset the depth of rent reductions expected by
2019-20. The development department has made a contribution to savings through a
reduction in staff but also aims to deliver c£400k in additional revenue from a c£18m
investment in development by 2019-20.
3.4
The acquisition of 81 market rented homes at Pelham and Waverley Courts in
Horsham in 2016 is expected to generate c£700k in revenue contribution by 201920. Whilst the remaining bond finance is expected to produce a further c£350k of
revenue contribution after planning delays to our major redevelopment at
Winterton Court.
3.5
Meanwhile the government’s push to build more homes has brought local plans with
additional housing and some significant strategic sites. However, local government
resources have also continued to become more stretched. Reducing budgets has
often meant fewer staff. In turn, whilst many strategic opportunities have come
forward, the opportunities to deliver better affordable housing outcomes have
sometimes gone unexploited through lack of time or skill, or both.
3.6
Therefore, there are many potential opportunities for developing housing
associations. Perversely, these come at a time when:
a) Our development investment needs to generate a positive financial return as
early as possible;
b) Affordable rented homes require substantial cross subsidy in order to perform
positively;
c) Competition from other HAs with deeper balance sheet capacity, cheaper
finance and greater surpluses remains strong; and
d) Local government is less well placed in some respects to work proactively.
3.7
Nonetheless, we retain positive relationships with both East and West Sussex
County Councils and the Borough and District Councils, particularly in Horsham,
Mid Sussex, Wealden, Arun and Lewes. We also have a strong relationship with the
HCA regional investment team.
4.0
Developing this strategy
4.1
This strategy was developed after the Board seminar of November 2016 where
three main strategic points were established to direct the broad thrust of this
strategy. These were:
1. The programme of development should deliver a neutral or better long term
contribution to the revenue surplus.
2. There is no minimum expectation for social outcomes from this programme.
3. A further extra care scheme should be a priority.
Page 4 of 15
5.0
Current position
5.1
Development activity is currently focussed on delivering the best possible financial
outcome from the c£18m remaining bond finance. This is costing 5.5% whether it is
utilised or not and gaining c1% by remaining on deposit. Therefore, a programme of
schemes was approved by the Board in December 2016 that aims to deliver £350k
in revenue surplus by 2019-20.
5.2
Currently, two of these identified schemes have started on site. The remaining
schemes are subject to planning consents and procurement. Therefore, considerable
focus needs to remain on delivering all of these schemes into production during
2017.
5.3
The other limb of the Business Development department is the sales function. The
Highwood Mill extra care scheme includes 45 leasehold sales to the open market.
These have a value of c£13m and represent a significant opportunity to generate a
capital surplus but also are a risk if sales are not managed effectively. Therefore, this
is the single largest focus for the Sales team.
5.4
Meanwhile, we have a further 39 shared ownership sales committed and phased over
several years beginning in 2017. A further 21 shared ownership units are forecast on
the Pelham garage site in Horsham from 2018 and represents a further significant
opportunity and exposure. Additional sales are likely from our unidentified
programme and our total exposure and commitments will need careful monitoring.
5.5
In financial terms, the remaining bond money will be used to finance the identified
schemes aimed at contributing £350k in revenue surplus by 2019-20. Most of the
£20m Santander revolving loan is therefore available to fund some further
development activity. However, we need to retain a minimum £5m cash balance in
accordance with our plan to manage the risk of a property market downturn (Board
approved a plan in July 2016). We also retain a £3m overdraft facility and the ability
to curtail other capital expenditure commitments amongst other mitigating actions.
5.6
We also have some further capacity for borrowing once our revenue surplus begins
to improve after 2019-20 and some available security for that additional borrowing.
The scale, timing and type of borrowing will need to be determined as part of the
finance plan that will be a necessary part of the future treasury plan.
5.7
However, our target for our programme to be largely revenue neutral will be very
demanding. Our refinement of the calculation of the profit and loss impact from
potential schemes suggest that a carefully managed programme could deliver positive
contributions far earlier than ever before. However, it is almost certain that we will
need to apply other ‘internal subsidy’ in order to achieve the short to medium term
performance we seek.
Page 5 of 15
6.0
The proposals for future development
The overall type of development
6.1
The broad objectives of this strategy for further development were set by the Board
at its November 2016 seminar. However, the detail that then flows from those
headlines is mainly around the volume and type of activity that is likely to produce
the results we seek. At the November 2016 seminar, the Board reviewed indicative
schemes that indicated:

Redevelopment of sites we control such as low density housing sites, garage
areas or existing schemes that require substantial reinvestment could yield a
good fit with our overall objectives and probably the best financial return.
However, some of the key challenges with this type of development are likely to
be the relatively time intensive work to release the sites, a potentially limited net
gain and the planning and pre-commencement expenditure risks.

The need for subsidy to generate a favourable financial return leads us towards
increasing the volume of sales or market rent investment activity. Sales could
either be shared ownership or outright sales. Increasing sales also requires
appropriate risk management, including managing the volume of sales dependency
in such a way that it does not threaten the core business.

Seeking grant wherever possible must remain a target. At present government
policy appears to favour affordable sales products such as shared ownership.
However, there are some indications that grant for affordable rented homes
could become available.

Extra care schemes are likely to be substantial investments requiring c£25m in
project finance and are likely to be largely outright sale schemes in order to
cross-subsidise the extensive communal areas and any affordable apartments.
The sales exposure from a single extra care scheme may well inhibit our ability
to undertake other significant sales risks of general market housing.
6.2
Therefore, our conventionally funded programme is likely to be mainly based on
redevelopment opportunities including a larger proportion of sales units or other
subsidy in the form of grant. A few s106 sites with developers may be feasible even
in a competitive market where special factors favour us. A single further
commitment to fund and own a new extra care scheme is likely to be a realistic limit
for the time being.
6.3
This leaves the question as to the likely outcome in terms of social housing. Planning
policies will expect a 30-35% ‘quota’ of affordable housing. However, this is likely to
need to include higher proportions of shared ownership homes to be viable.
Therefore, it might be a realistic forecast to expect 30% of our programme to be
affordable (shared ownership or affordable rent) as a lower threshold with an
improvement on this where we can secure subsidy through outright sales, low value
land, grant, or a combination of these.
Page 6 of 15
The scale of development
6.4
The overall volume of development is to a large extent constrained by the likelihood
that much of our conventionally funded programme will be redevelopment work.
Whilst these will generate some of the best financial returns, they will also be more
time consuming to produce and annual output per project manager will fall. A
realistic but stretching programme including our identified schemes over three years
might be:
Forecast Profit &
Loss (incl.
depreciation)
£
Positive
Neutral - Positive
Negative
Negative - Neutral
Positive
Identified sites
Redeveloped
s106
Acquired
Extra Care
2017/18
starts
2018/19
starts
2019/20
starts
Total
starts
Probability
of delivery (1)
119
0
20
0
0
139
15
50
40
20
0
125
12
50
20
0
100
182
146
100
80
20
100
446
90%
80%
50%
30%
50%
Totals
6.5
This would produce a total of almost 150 starts per annum on average over a threeyear period. However, the deliverability of this programme is variable as we aim to
meet a combination of financial, planning and social outcomes. Therefore, the
outcome is likely to fall within the range of 300 to 450 starts over the three-year
timeframe. The business plan will need to accommodate this whilst annual capital
budgets will need to reflect our progress in managing a pipeline of schemes.
The delivery of development
6.6
Redevelopment sites are likely to be presented as packages for planning purposes.
This has some technical difficulties, but is likely to be vital in optimising the
outcomes. In practice this might mean that one site with a favourable location for
sales could be entirely sale (as with Pelham for example) whilst another could be
entirely affordable. The aim would be to deliver a planning policy compliant
affordable ‘quota’ of 35% that is at least equal to the existing numbers of affordable
homes on the sites but possibly distributed in a different way.
6.7
Smaller s106 sites with developers will be all affordable quotas with an assumed
25:75 rent : SO split. An extra care scheme is likely to be largely an outright sale
scheme with up to 25% of the units being affordable, subject to viability. Rents in
extra care are expected to be above the Local Housing Allowance (LHA). Acquired
sites (bought at market value) for general needs housing may well need to be
blended with a package of other redeveloped sites to improve viability.
6.8
Some HCA grant is assumed to be feasible and we will target every opportunity.
s106 sites are likely to remain excluded from grant and bidding for HCA grant on
redeveloped sites may be difficult, unless additional affordable homes are being
created. Shared ownership schemes have good potential to attract grant. We may
also want to convert outright sales units to shared ownership where sufficient grant
can be secured as this reduces our risk and improves affordable outcomes.
(1)
The probability of delivery is a professional judgement based on experience.
Page 7 of 15
6.9
There also remains the potential for some development where we are facilitators
and managers, but not owners. This could be for an investment fund, or a local
authority for example and our understanding of how this might work has increased
over the last year. In our area, where the market is strong and values are high, this
might be limited to where a combination of special factors exists.
Geographical focus
6.10
Our geographical area of prime focus remains largely unchanged. It is based on
management efficiencies, strategic and operational relationships and where
development activity and policies are favourable to us. A programme focussed
heavily on redevelopment will naturally tend to suggest Horsham for much of our
work. However, it would be prudent to retain an active programme across several
key local authority areas and to be open to others where a sound business case can
be made. Therefore, our preferred areas particularly for general needs development
remain:





Horsham
Mid Sussex
Arun
Lewes
Wealden
6.11
However, it would be entirely feasible to propose an opportunity in an adjoining
district (e.g. Waverley) where a very good case for proceeding with investment
could be made.
6.12
Extra care is different in that it can be considered on an individual basis and
therefore, it is appropriate to remain open to a range of possibilities. However, a
maximum travel time from Horsham of around one hour or consolidating within the
current geographical limits of existing extra care schemes would be a reasonable
broad expectation.
Financial outcomes
6.13
We aim for a neutral or better profit and loss outcome across the programme. This
will be measured on the approved starts in any financial year. However, we have
already acknowledged that this will be very challenging to achieve. Therefore, we
may need to apply some additional internal subsidy to generate our target financial
outcomes. These additional internal inputs include:

Saxon Weald as a business generates a positive cash flow each year of around
£2.5m, after allowing for use of Recycled Capital Grant Fund (RCGF)/disposal
proceeds fund and a contingency, around £1m of cash could be used to fund
development in 2017/18. This would reduce the interest cost and therefore
impact of new developments on the revenue surplus by around £45,000 per
annum (assuming a 4.5% rate of interest). Similar amounts could be applied in
subsequent financial years.
Page 8 of 15

Value for money savings across the business in 2017-18 may generate around
£250k in savings which might be treated in a similar way.

Disposals receipts could also generate significant capital sums that would reduce
borrowing. These could also be applied to reduce the interest payable and
support the financial performance of schemes. This has been a commonly
adopted practice for a number of developing RPs for some years.

RCGF can be a substantial time-limited fund that must be recycled into new
eligible schemes or repaid to the HCA. Whilst it is not cash-backed and will
come from borrowing, we have benefitted in reduced borrowing due to the past
capital receipt. Therefore, when these funds are applied to a scheme it is
appropriate not to assume interest on those funds and therefore, scheme
performance is improved.
6.14
The use of these funds in this way must be consistent with the priorities of our value
for money strategy and must not mask the underlying performance of schemes
where we will still seek an acceptable payback and the earliest possible positive
revenue contribution. However, although paybacks are likely to be more extended
than previously, the use of these funds supports the delivery of a programme that is
likely to be a key part of generating long-term revenue growth for the organisation
and regenerating our assets.
6.15
The work being undertaken in modelling the performance of our existing assets
(using the Proactive Asset Management tool presented to Board in December 2016)
will connect well with the potential for redevelopment. Identifying poorer
performing stock and considering the options for re-investment and redevelopment
will be key features in becoming more efficient social housing investors in the future.
7.0
Objectives of the strategy
Objective one – We will deliver a multi-tenure programme of development
through to 2020 that makes an early positive financial contribution to our
revenue surplus.
To achieve this, we will:
 Deliver a revenue contribution of at least £350k in 2019-20 from our identified
schemes using the remaining bond finance;
 Focus largely on redevelopment opportunities from our existing stock;
 Be opportunistic in response to smaller site acquisitions, acquiring existing stock or
s106 deals where these can deliver the right outcomes;
 Utilise corporate value for money savings, disposal proceeds and positive operating cash
generation identified in the business plan and annual budgets effectively;
 Review the appropriate measures and monitoring of financial performance for the
programme;
 Identify and acquire a site for a further extra care scheme before 2020.
Page 9 of 15
Objective two – We will identify a viable basis on which we can deliver an
unconventional programme where we facilitate and manage new schemes but
do not own the assets.
To achieve this, we will:
 Continue the positive dialogue with key partners;
 Establish the circumstances under which this is likely to be viable;
 Facilitate the opportunities by introducing the right strategic partners;
Objective three – We will continue to develop our sales, disposals and
marketing and commercial approaches to deliver and exceed our targets
To achieve this, we will:
 Increase the commercial input into feasibility stage market assessments to add to our
own local knowledge and experience to maximise opportunity and minimise risk;
 Build our approach to marketing using our experience, supplementing our resources
and knowledge with external support where the commercial exposure and return
warrants it;
 Review the key performance indicators we use to ensure they are aligned with the
commercial outcomes we seek;
 Increase our analysis of market trends and sales feedback to inform our marketing and
sales process;
 Build and maintain positive strategic relationships particularly with Horsham District
Council at both Officer and Member level.
Objective four – We will invest in the training and development of excellent
staff to lead, manage and implement the changes expected from this strategy
effectively
To achieve this, we will:
 Examine the business case for succession planning and supporting scheme and sales
delivery through a graduate post to be trained towards a professional qualification;
 Identify the new skills and experience needed by existing staff to successfully deliver a
significant and larger redevelopment programme;
 Ensure that the essential training, personal and professional needs are funded and met;
 Capture the ongoing learning from schemes through key stage project reviews with
other departments.
Page 10 of 15
8.0
Value for Money
8.1
The value of new development is partly in the financial contribution it can make to
the business. In the past, schemes were often revenue negative for the medium term
and achieved payback at 30 years or sometimes beyond. We are now delivering
schemes that offer a positive revenue contribution much earlier than before and
sometimes from year one.
8.2
The social outcome is critical to us. Delivering financial value helps to support our
core business. However, we also expect to deliver new affordable homes. This
programme may well deliver a lower percentage of affordable homes than we have in
the past. Nonetheless, these will still be an addition to stock and an important social
contribution.
8.3
To generate the financial returns we need, we always look at the optimum number
and mix of homes and the best way to procure land and build contracts.
Nonetheless, there is more to be done. Our commercial skills need to continue to
grow so that we can maximise these opportunities in a challenging environment. Our
ability to be creative and effective in offsetting build cost inflation as far as possible
will be an area for close scrutiny. Where our existing skills and experience need to
be enhanced we will invest in training for our staff and secure appropriate consultant
support to provide the right experience.
9.0
Implementation
9.1
The strategy will be implemented by the Business Development Director through
the departmental management team, drawing in expertise from other departments
as required.
10.0
Equality and diversity
10.1
This strategy will be developed and implemented in conjunction with Saxon Weald’s
Equality and Diversity policy.
10.2
Saxon Weald aims to achieve equality of opportunity in relation to the services we
provide as a landlord and as an employer. This means that no person or group
seeking housing, jobs or contracts with us will be treated less favourably because of
their or their partner’s, family’s, friend’s or associated person’s protected
characteristics. In law, protected characteristics specifically cover: age, disability,
gender reassignment, marriage and civil partnership, pregnancy and maternity, race,
religion or belief, sex and sexual orientation. In addition to these, Saxon Weald will
not treat anybody less favourably for any reason.
11.0
Monitoring and review
11.1
There are a number of overlapping uncertainties and challenges in delivering this
strategy. Therefore, the action plan is focussed on several broad, medium term
outcomes. As our ability to resolve the challenges and remove uncertainties
becomes clearer we may want to identify further interim objectives.
11.2
The action plan will be reviewed and an annual update will be reported to the Board.
Page 11 of 15
Business Development Strategy Action Plan 2017 – 2020
Strat
Ref.
1.0
1.1
1.2
1.3
1.4
1.5
1.6
Action
Appendix 1
Outcome
Lead
Due date
Objective one – We will deliver a multi-tenure programme of development through to 2020 that makes an early positive
financial contribution to our revenue surplus.
We will deliver a revenue contribution of at
least £350k in 2019-20 from our identified
schemes using the remaining bond finance.
Focus largely on redevelopment
opportunities from our existing stock.
Be opportunistic in response to smaller site
acquisitions, acquiring existing stock or s106
deals where these can deliver the right
outcomes.
Utilise corporate value for money savings,
disposal proceeds and positive operating
cashflows identified in the business plan and
annual budgets effectively.
Review the appropriate measures and
monitoring of financial performance for the
programme.
Identify and acquire a site for a further extra
care scheme before 2020.
Measurable contribution of at least £350k in
2019-20.
Delivery of at least 300 starts by 2020.
A programme of starts each year with at
least a neutral financial impact to the revenue
surplus.
Revised key measures that reflect the
current focus and priorities of the strategy
and business plan.
A viable site in contract.
Page 12 of 15
Head of
Programme and
Sales
Senior New
Business Manager
Senior New
Business Manager
March 2020
Business
Development
Director
March 2020
Head of
Programme and
Sales
Senior New
Business Manager
April 2017
March 2020
March 2020
December
2019
Strat
Ref.
3.0
Action
Outcome
Lead
Due date
Objective two – We will identify a viable basis on which we can deliver an unconventional programme where we
facilitate and manage new schemes but do not own the assets.
Continue the positive dialogue with key
partners.
3.1
3.2
Establish the circumstances under which this
is likely to be viable.
3.3
Facilitate the opportunities by introducing
the right strategic partners.
Maintain contact with key parties to monitor
potentially favourable circumstances for this
form of development to work and to
establish the parameters within which it will
work.
Prepare a report for Board.
Make introductions and facilitate the
exchange of appraisal information.
Page 13 of 15
Business
Development
Director
Ongoing
Business
Development
Director
Business
Development
Director
May 2017
Ongoing
Strat
Ref.
4.0
4.1
4.2
4.3
4.4
4.5
Action
Outcome
Lead
Due date
Objective three – We will continue to develop our sales, disposals and marketing and commercial approaches to deliver
and exceed our targets
Increase the commercial input into feasibility
stage market assessments to add to our own
local knowledge and experience to maximise
opportunity and minimise risk.
Build our approach to marketing using our
experience, supplementing our resources and
knowledge with external support where the
commercial exposure and return warrants it.
Review the key performance indicators we
use to ensure they are aligned with the
commercial outcomes we seek.
Increase our analysis of market trends and
sales feedback to inform our marketing and
sales process.
Build and maintain positive strategic
relationships particularly with Horsham
District Council at both Officer and Member
level.
Rigorous external and specialist early stage
appraisals of the market for a potential
scheme to demonstrate deliverability before
significant time or at risk-expenditure is
committed.
Utilise the commercial contacts made
through developers and others to support
marketing, sales and new business activity –
especially for outright sales activity in extra
care or general market housing.
Revise the indicators used to be more
commercially focussed.
Senior New
Business Manager
June 2017
Head of
Programme and
Sales
October
2017
Head of
Programme and
Sales
April 2017
Accurate trend data on web traffic,
responses to marketing campaigns and
conversion of leads to reservations to
support continuing decisions on sales and
marketing activity.
Develop a continuing strategic discussion
around housing and planning themes that
develops joint working potential and
enhances the chances of planning consents at
first application.
Head of
Programme and
Sales
June 2017
Business
Development
Director
Ongoing
Page 14 of 15
Strat
Ref.
5.0
Action
Outcome
5.1
A budget bid included for the 2018-19
financial year if the production rate and
future programme supports it.
5.2
Identify the new skills and experience needed
by existing staff to successfully deliver a
significant and larger redevelopment
programme.
Identify the training needs and incorporate
into the annual training plan.
Ensure that the essential training, personal
and professional needs are funded and met.
Ensure that an adequate training and
professional development programme is
budgeted for and implemented.
Capture the ongoing learning from schemes
through key stage project reviews with other
departments.
Undertake ongoing project out-turn reviews
with the asset management team, HomeFix
and housing departments in particular to
identify the learning points that can be taken
forward into new schemes. Report the key
outcomes to Committee or Board.
5.4
Due date
Objective four – We will invest in the training and development of excellent staff to lead, manage and implement the
changes expected from this strategy effectively
Examine the business case for succession
planning and supporting scheme and sales
delivery through a graduate post to be
trained towards a professional qualification.
5.3
Lead
Page 15 of 15
Business
Development
Director
October
2017
Head of
Programme and
Sales
April 2017
Business
Development
Director
March 2018
Head of
Programme and
Sales
Ongoing