In this interview, Melanie shares her experience, insights into property investment and the biggest challenges and opportunities that the Acorn Property Group faces.
Q: How long have you been at Acorn Property Group?
I’ve been with the company for almost 20 years. I started out as a funding assistant and development manager, which harnessed my previous experience in estate agency and banking. My role was to manage new projects from inception through to sales of the end product. I’ve been in my current role for ten years, focusing on procuring and managing funding for all Acorn site purchases and their development. I’ve raised funding for a wide range of different projects across London and the South West, from house conversions to large mixed-use schemes that include affordable housing and commercial property.
Q: How has the company changed during that time?
When I joined there were 20 of us in the London office. Since then, we’ve opened offices in Newquay in 2006, Bristol in 2012, Cardiff in 2013 and Exeter in 2017 and now have a team of over 140. In 2019 we launched Acorn Property Invest to widen investor access to our schemes and help Acorn grow our business. Then in 2021, we created Acorn Green to reflect our commitment to working towards making truly sustainable homes with lower running costs and lower carbon emissions.
Q: What is your role in relation to Acorn Property Invest?
For Acorn Property Invest my day-to-day role involves working with our Finance and Land teams to determine the best funding structure for each project. We look at a range of commercial decisions, such as the likely duration of any elements requiring funding, before deciding whether the mezzanine finance should come via Acorn Property Invest and if so, whether it should come from investors in our fixed-income portfolio or directly from investors in the project.
I also assist our many joint venture partners in raising finance. The majority of our joint venture partners are the landowners themselves. By delivering projects and providing the equity and funding necessary to do so, we enable them to get the best possible return from their assets. I also manage a number of joint ventures with banks and High Net Worth Individuals, which allows Acorn to take on larger sites and spread our financial risk.
When we decide to raise mezzanine finance via Acorn Property Invest, we take into consideration our required margin, the type of security (such as redeemable shares), and the type or location of the properties being built, to ensure the rate of return and profit share on offer are both competitive and achievable. The rates we offer investors generally reflect the Loan-to-value and security available.
Q: What are the biggest challenges for Acorn in the coming years?
It’s a very interesting and exciting, but also a very challenging time to be a housebuilder. One of the biggest obstacles we face is the fact that our local and national planning system is overly complex and uncoordinated. This makes it very difficult for us to deliver the number of homes we would like and causes significant delays. It is frustrating, particularly as there is such an acute shortage of housing in this country.
Rising costs and a shortage of skilled labour are also major issues facing all sectors of the industry. Although this makes it hard to predict build costs over a typical, four-year project lifecycle, our experienced, direct construction teams in each region protect the business from many of these disruptions. In the last 3-4 years some significant macro-economic issues, notably Brexit and Covid-19, have had a huge knock-on effect on housebuilders. But despite this slowing our growth plans and creating short-term losses we’ve continued to build our portfolio of exceptional sites, and our losses have been more than offset by the increase in value of our coastal and rural South West developments.
While rising inflation and interest rates are causing some uncertainty, we feel we’re past the worst effects of Brexit and the pandemic, and the next few years will prove very profitable.
Q: And what are the biggest opportunities?
One of the biggest challenges, and also the biggest opportunities, is sustainability. The Government has introduced some tough new regulations for housebuilders as it tries to meet its 2050 net-zero target. We know that awareness of energy efficiency is rising rapidly among house buyers, and we’re expecting this to accelerate further over the coming decade. Acorn have been focused on sustainability since we installed our first ground source heat pump 15 years ago. We are constantly striving to introduce new technologies and modern construction methods that will create truly sustainable homes with lower running costs and lower carbon emissions.
A key part of our ethos is to be a positive force for change, building homes and open spaces that benefit their environment and their community. As part of this, we try and incorporate new public realm, new squares and park areas into our designs, adding biodiversity and repurposing our heritage building stock wherever possible. This sets us apart from many housebuilders and is increasingly valued both by local authorities and house buyers.
Covid-19 accelerated some societal changes that have had a direct, positive effect on our markets. The ‘race for space’, heightened by the Stamp Duty holiday, led to a huge increase in demand for our rural and coastal homes in the South West, which cater for the lifestyle changes that so many new homeowners are seeking. Most of our development sites are either coastal or commutable to Bristol, Exeter or Cardiff and are ideally placed to take full advantage of this demand. And the worsening gap between supply and demand in sought-after areas, coupled with population growth, should continue to benefit our development strategy in the longer term.
Meeting the housing needs of an ageing population also presents a significant opportunity for us. Duporth, which provides senior living of the highest standard, is our first Lifetime Living development and we certainly plan to build more of this type of housing.
Q: Why have you launched an IFISA-friendly product?
We decided to launch IFISA peer-to-peer loans because we wanted to offer investors a tax-free way of investing in our developments. We are always looking at new and flexible ways to appeal to investors, both existing and new. IFISAs are becoming increasingly popular as a way of diversifying into property, and peer-to-peer investors are looking for housebuilders with a proven track record, as well as market-beating returns. Many investors are also actively choosing to fund housebuilders with a demonstrable commitment to sustainability, and that is where Acorn comes in.
Q: What other new investment products might Acorn Property Invest consider?
As we have had such a positive response from investors wanting tax-free returns, we’ll be looking at offering more IFISA-friendly peer-to-peer loans. We have a current development pipeline of 2,200 homes, with a gross development value of £1.2 billion, focused on the South West of England so we’ll be offering investors many more redeemable share offers. We’ll also be bringing on stream more portfolio products to appeal to investors looking for income. Our range of investment products is designed to enable investors to build a portfolio of Acorn investments and earn a mix of both capital growth and income, as well as share in our profits.