Asset Performance Evaluation
and Asset Management
Strategy
Who we?
 Mervyn Jones, Head of Housing Consultancy
 Nigel Page, Director, Housing Consultancy
CWAG
Asset Performance
Decision Making
Asset Management Strategy
New homes and asset strategy
Delivery Mechanisms
Future environment
How do you behave?
Cobblers and Kwikfit!
Do all properties perform equally?
Understanding the performance of your assets
 Measure the long term
performance of your property
portfolio
 Use modelling techniques to
analyse worth to the business plan
 Provides an objective baseline on
which to make investment
decisions and demonstrate value
for money
 Identifies properties requiring an
option appraisal
So what is effective asset management?
 In –depth and consistent understanding of:
 Local markets
 The long term performance of the overall property portfolio
 The investment performance of each individual property
 The outcomes you require
 Unlocking potential, building capacity, releasing resources
Balancing your objectives:
Effective asset management
 Incorporates the return
on your investment
 The triple bottom line
 Economic
 Social
 Environmental
Social
Equitable
Bearable
Sustainable
Environment
Economic
Viable
How do we measure performance and worth?






Group similar properties - Asset Groups
Separate analysis for non housing assets
Assemble data - agree assumptions
Generate cash flows
Review outputs- sense check
Agree candidate list of poor performers
and understand performance drivers
 Agree next steps – e.g.
 Run scenarios
 Prepare position statement
 Asset Management Strategy
 Programme of Options Appraisals
Results and decisions
OPTION
APPRAISAL
RECOVERY
AND
IMPROVEMENT
PLAN
OK TO INVEST
OPTIMISE
PROCUREMENT
Net cash flow per annum
Example of different groups of properties
Output
Area Profiles: Future Values
Not all about the money – social returns
Source: Savills APE model
Presentation of results - 30 yr NPV in GIS
Additional analysis - yield
 Green = yield measured by annual gross income / vp value
 Red = the number of properties at each yield value
Additional analysis – Underlying asset value
Using asset performance to set decision framework
 Something for something
 At each letting – series of decisions
 Preparing for conversions and
considering disposal strategies –
avoiding delay and maximising value
at each letting
 Flagging/traffic lighting in operations
systems
 Asset registers
 Key missing information – legal and
political constraints on action
Source: Example from other RP’s use of asset model
17
Asset
Group
Units
A
NPV
Soc rent Aff rent
T/O
Yield
OMV
9
-£4,051 £67.04 £170.98
0.00
2.15% £166,303
B
24
-£3,412 £50.43 £149.70
0.00
2.03% £128,866
C
8
-£1,935 £51.28 £157.78
0.07
2.22% £123,800
D
89
-£1,415 £88.50 £149.70
0.23
3.57% £128,866
E
28
£414
£92.02 £149.70
0.31
3.71% £128,866
F
7
£1,264
£64.79 £149.70
0.22
2.61% £128,866
G
3
£2,357
£68.26 £149.70
0.67
2.75% £128,866
H
11
£2,806
£69.22 £109.23
0.08
4.16% £94,300
I
31
£2,856
£67.70 £128.04
0.27
3.75% £107,997
J
26
£4,499 £106.57 £149.70
0.37
4.30% £128,866
K
24
£4,942
£59.54 £149.70
0.23
2.40% £128,866
L
15
£6,782 £107.62 £149.70
2.29
4.34% £128,866
So what? – active asset management strategy
 Strengthen business plan
 Make more efficient use of capital resources
available
 Consider long-term planning for
obsolescence
 Obtain a balance between new build,
remodelling & stock investment
 Test alternative strategies
 Enable balanced investment decisions and
support difficult decision making
 Communicate reasons to members, staff and
residents
 Assist the organisation in delivering its social,
financial and housing objectives
Case study – Circle Housing Group
 Asset performance evaluation as part of
strategy to “Optimise value through
assets”
 Over 50,000 homes across 9 RP partners
 Data collection and cleansing from
multiple sources – data improvement plan
now in place
Market Value
 Support streamlined decision making and
coherent strategy within complex group
structure
 Identify group wide benchmarks for
performance improvement
 Vacant disposals and tenanted transfers
NPV
Case study – Southampton Council
 Asset performance evaluation linked to
regeneration strategy
 Six estates identified for social/economic
reasons
 Asset performance evaluated to identify
land assembly and phasing options
 Supporting partnership working with RPs
and developers combined with direct
Council delivery
New homes and asset strategy
 Increasing Supply is a Duty
 There is a Duty to Maximise the Use of Public
Land
 Value for Money is being redefined to link to new
supply
 Regeneration is the Best Route to Improved
Social Outcomes
 Regeneration/Redevelopment will be the only
way to reduce fuel poverty/carbon dioxide
emissions.
2 million homes from Public Land?
Knowns:
Central Government estate
600,000
GLA land
100,000+
Known Unknowns:
NHS
300,000+
Local Authorities
1,000,000
As many as 2 million homes?
Unknowns: What do we know about LA land?
 Local authorities - 46%
of public estate
LA’s Land and Property: £114 billion
 LA Land and Property:
DCLG/ Audit Comm
£114 bn March 2014
Under
construction
£5.3
 Localis estimates LAs
will develop £13.4
billion worth in next
five years
Investment
Properties
£10.2
 HRA self financing –
regen & densification
opportunities
Source: DCLG: Value of LA land and buildings 31 March 2014
Surplus
Assets £2.5
For sale £0.9
Other £50.7
Education
£44.1
NB: Chart excludes council housing: £66bn
Unknowns: What do we know about LA land?
 Council Housing: £66 billion
 2 million houses
 Self financing – review assets
 Regeneration and Intensification of
council housing - Savills
unpublished research
 More and better housing
 New streets
 Strengthen communities
Source: DCLG: Value of LA land and buildings 31 March 2014
Investment strategy –
riding the long term property cycle??
 Value uplift
potential
 Unlocking
hidden value
 house prices
 travel times
 quality of
place
Unknowns: LA Land: How many homes?
 Not done detailed work – no coherent
assets data
 What order of magnitude?
 Much local authority land is urban
 We followed approach similar to public land
 Scope for intensification/ reconfiguration of
operational sites
Perhaps another 1m capacity if there is
appetite to intensify?
1,000,000
Unknowns: Local Authority Land - Case Study
LB Ealing: pulling info together, doing more
LB Ealing: Strategic assessment of various council depts land holdings (yellow) alongside HRA land (purple)
Delivery Mechanisms
 Asset Management Strategies – will need to be
much more dynamic
 APE is a suite of business plans by asset group
that add up the HRA Business Plan
 Integration of asset data into financial plans
 Stress Testing
 Asset registers – will need to support much more
dynamic activity, including charging and
disposal.
 Options Appraisal – these will have to be
widened from modernise/remodel/redevelop to
cover develop for market housing and sell
vacant/build elsewhere.
Delivery Mechanisms
 The Debt Cap is not ....
 Council sponsored companies
 PWLB borrowing
 Use of RtB receipts
 Mixed tenure development
 Ways Forward – more commercial skills or
partnership with private developers and FPRPs?
Delivery Mechanisms
 ALMO lead or Council lead?
 These are strategies about capital: improving
value and making investment
 ALMO could be agent, but the Council is the
asset owner
 Managing conflicting interests
 EG decanting and new letting can be
inconvenient to an ALMO
Future environment
 Lyons Report
 Elphicke and House
 Policy Exchange
 Institution building
 The Alternative
 managed decline
 “Council Estates” look incongruously old
fashioned
 surrounded by improved private street
property (with extensions and megabasements) or ranks of modern tower blocks
Recent clients
Over the last 3 yrs we’ve modelled 35 RPs and LAs with a total stock of over 350,000
Contact details
Mervyn Jones
mejones@savills.com
020 7409 992
07973 294560
Nigel Page
npage@savills.com
07968 553391