Empty offices offer up a solution to lack of homes

Group business correspondent

Wednesday 20 March 2013

AN EDINBURGH-based investment company has identified office buildings left empty in the wake of the recession as the solution to pent-up demand for social housing in Scotland.

RENTAL AGREEMENT: Andrew Montague and Mark Emlick of Consensus Capital Property. Picture: Chris James

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SCOTT WRIGHT

Consensus Capital Property, a subsidiary of asset management specialist Consensus Capital plc, has unveiled plans to roll out 25 residential developments in the UK over the next two years, providing housing associations with 1200 city centre apartments.

Its first project is currently under way in Perth, where the company is converting a former office into 18 apartments for Caledonia Housing Association, due for completion in the autumn.The company revealed a deal had also been secured to build 48 flats next to Hibernian's Easter Road Stadium in Edinburgh.Five further projects in Glasgow, Manchester, Birmingham, London and elsewhere in the Scottish capital are in the pipeline as part of a £50 million programme to convert empty office buildings into flats.Social housing has been earmarked as a major growth area for Consenus Capital, which was established by CEO Mark Emlick in 2010.The model developed by its property arm is based on securing commercial properties in prime city centre sites, applying to planners for change of use and converting the buildings into residential developments. The properties are then leased to housing associations for up to 20 years on full repair and insurance leases.The funds are provided by a private investors, whom the company will aim to provide with a fixed-income return of 5% a year "plus upside on exit".Andrew Montague, managing director of Consensus Capital Property, said the model is a neat response to the problems housing associations have faced in accessing new housing stock.Mr Montague said: "RSLs (registered social landlords) have been massively affected over the past five years due to cuts and to the economic environment."There have been enormous cutbacks in grants, [and] access to money has been limited for the grants that are available."Our model works well for them because it requires no capital outlay. The structure we've got built into the lease ensures the RSL maintains an income back to the housing association from management fees, service charges, planned maintenance [and] unplanned maintenance."More importantly, at the end of the day they have the option to buy the properties back."Mr Montague added that the risk to investors was also minimised by the model, which he has been developing for the past three years.He said the many office blocks that have been lying vacant around the UK since the downturn took hold are an "opportunity for the company", providing that "the building is in the right location".Mr Montague said the company has so far encountered little opposition from planners in securing applications to convert commercial properties into living space.Its apartments are a mix of social, mid-market and open market rental housing.Mr Montague added: "If we're sitting on a building that's about to take on the liability of business rates with no relief I think people would rather see an apartment there rather than a bankrupted landlord who can't afford to pay its rates."

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Empty offices offer up a solution to lack of homes

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