The mum test
Rather sweetly, and refreshingly, they quote “the mum test – building to a quality that would make your mum proud. We need to have people who want our homes, who are excited by our homes.”
With that in mind the firm has started to identify sites, looking to build in the arc along the top of the northern M25 – Bucks, Herts, Beds, north London and Essex – with Werth having the expertise to the west, Bohr to the east and the office in the middle at Enfield.
Bohr brought in two sites – one in Hitchin, Herts and one in Abbess Roding, Essex (see box below) – with more to follow in Amersham, bought from Inland Homes, Finchley and Pinner.
(Pictured) At Amersham there will be five homes, four private – work starting in the autumn and prices expected to be up to £1.2 million
Which brings us to the challenges of establishing a new small housebuilder in this environment. Werth and Bohr have found some sites, they know how to work with planners, but still there is the finance challenge.
“Despite the experience of our management team and backers it is a challenge for us to raise the clearing bank borrowings that we need,” says Werth. “With £10 million of equity we are looking at raising £12 million of debt for a £22 million fund. This is so much more difficult now – we feel that the Royal Bank of Scotland is trying hard to help but there are so many control processes that they struggle to lend to us even if they want to. SMEs can’t meet their requirements – I know that the government is very frustrated and looking to do something with funding through the Homes and Communities Agency, so let’s see. But for now this is a major constraint on SMEs.”
Even with the names they have lining up behind them, which the bank accepts has a good track record, Troy is being offered little or no flexibility.
“Ideally we want a facility like Banner had – a revolving credit facility,” says Werth. “We want repeat business rather than site-based finances which can mean having different banks for different sites which makes life very difficult.”
Werth stops himself there – he wants to express his frustration about how hard it is to get financing for a small housebuilding business, but he does not want everything to be about that. He has his investors, he is building his team, he has some sites and he has a strategy.
“We are looking at a £30 million turnover by March 2018, and a £100 million turnover in five years …perhaps with the opportunity to consolidate with a smaller housebuilder in the future, maybe even look to the stock market.”
Werth and Bohr may have some challenges ahead, but you sense they have every chance of making it work. “We have our feet firmly on the ground – we will use all our experience, provide a range of product – we know there will be bumps and potholes ahead. But we are ready.”
PUBLISHED: Housebuilder July/August 2016