By David Mackenzie, written April 2020
To give context to this case study, please ensure that you have first read our blog ‘Young Early Years Business Model’
As you will now know, Young bought residential developments wholesale and sold retail at very compelling prices. We spotted gaps in the market and shared that insight and upside with our clients.
One of the areas less in vogue for investors back in 2006 was East London, an area that we happened to be very keen on. Not exactly fashionable in those days, but for us it ticked all the investment boxes.
After another period of pounding the streets, we were really excited to find a new development of 34 private one- and two-bedroom residential apartments on Dalston Lane, due for completion in 2008.
The InterchangE8 was one of the first new build developments in the area. It was privately gated and included quality finishes and private balconies. Dalston Kingsland train station existed, the area was served with a legion of buses and cycling was very popular. Both remain true today and Dalston is now part of the CS1 Cycle Superhighway.
Importantly, Dalston was due to have a new train station built as part of the Overground orbital extension project in transport zone 2, and this was completed in 2010. Back then, Dalston could best be described as ‘edgy’ – populated by a younger demographic, especially those working in creative industries and the media. Due to its proximity to the City, more and more young professionals, priced out of nearby Islington, were relocating to live in the area.
Dalston is now a vibrant location with a multicultural demographic which gives it an exciting atmosphere. It has fantastic exotic culinary offerings and the music and nightlife scene is a big draw. The renowned Ridley Road Market, in situ since 1880s, once featured on Alan Sugar’s TV programme The Apprentice is around the corner.
With due diligence completed and prices and yields thoroughly researched, Young forward purchased the development. Many clients implicitly trusted our advice and bought without having seen the area or the product.
This was a purchase that sought to combine income and capital growth over a 10-year period. The gross yield hit our 5% target and the development was quickly reserved by our clients. As always, the partners of Young invested personally and bought apartments that we still retain today.
Using the Young Group of companies, we managed the entire process on behalf of our clients, including the conveyancing, mortgages, furnishing, snagging, handover, marketing for residents and ongoing asset management.
Bearing in mind that 2008 was the start of the worst financial crisis in decades with mortgage offers being pulled by the lenders in unprecedented volume. Young’s relationship with various major lenders, along with our reputation and very realistic sales prices, ensured that all apartments valued up and proceeded to completion. Our advice in relation to mortgages at that time was to select tracker products as we anticipated a base rate drop and a sustained period of low base rates.
The InterchangE8 proved very popular when it first hit the rental market and that holds true today. Looking at our own portfolio over the past 12 years, the occupancy rate averages 98.4%. Annual rental and capital growth have averaged 3.5% and 12% respectively. Return on cash totals 833% to date.
In the intervening 12 years, Dalston has, true to our forecast, become more and more popular as a place to live, play and work. In the past 8 years there has been an explosion of residential construction with the associated lift in infrastructure, amenity and food and beverage offerings – all positively affecting rent levels and capital prices.
We are proud to say that in 2020 the vast majority of Young’s clients still own the apartments they purchased from us. We are delighted that those clients are still thanking us for the opportunity, our care and our continued counsel; a testament to our good advice and the trust that our clients place in us.
Another example of how we deliver wealth and value whilst investing alongside our clients.
At Young, we listen to our clients’ needs and present appropriate Placemade Returns.
At Young, we spot gaps in the market and act.
At Young, we listen, we think, we care.
Please do get in touch.
David Mackenzie
Client Partner
Contact David