Rockfire Capital

Originally published in Rockfire Capital news under Build to Rent

UK home ownership is at its lowest rate for 30 years [1], the Government needs to build 300,000 homes each year [2] or, if the population looks set to reach 80 million by 2040, it will need to build a new home every ten minutes.[3].  Not a day goes by without one medium or another reminding us that we are headed for a residential calamity.

In an earlier article, Rockfire explored some of the potential solutions that are currently enjoying popularity.  Another is build-to-rent.  Relatively unknown in Britain, this area is “thriving in Germany and the US”[4]  And on the back of all this experience, investors from both countries are turning their attention to the UK market.  One of the biggest operators in the US market, Greystar, has already ratcheted up its activity in the UK, backing a 2,000 unit rental project in Greenford, West London and planning to own 10,000 apartments across London by 2021.

“I think that the opportunities coming our way have increased a little since the Brexit vote”

Mark Allnutt, Managing Director of Investments, Greystar

This view is shared by APG Asset Management, currently backing a 44-storey tower in London and looking for further opportunities

“If the market remains as it currently is, I feel there will be more such deals to come”

Martijn Vos, Senior Real Estate Portfolio Manager, APG Asset Management

According to the British Property Federation [5], there are almost 68,000 build-to-rent units completed, under construction or with planning permission.  In total, a mere 22.5% of the annual requirement according to the ‘Building More Homes’ report mentioned above. [2].  This report recommends that the government relaxes the rules governing local authorities and permits them to enter into agreements with housing associations and institutional investors.  This suggestion would go some way towards answering the question posed by the Chairman of the Residential Landlords’ Association:

               “The big issue is not about more housing – but who funds it.” [6]

               Alan Ward, Chairman, Residential Landlords’

Some robust firms, with a pipeline of land that was purchased prior to the stamp duty hike announced by George Osborne in his last budget, are surging ahead with their planned developments: Grainger, the UK’s largest listed residential landlord, plans to invest £850m in build-to-let by 2020 and L&G is in a venture with Dutch pension fund PGGM to generate 4,000 new homes for an investment of £600m.[7]  But others have been put off or pushed out of the market by the increased stamp duty, creating just the sort of vacuum that nature abhors.  If, as hoped, the rules are relaxed regarding partnering with local authorities, some very attractive opportunities might emerge.

[1] Property Week.  Why public sector needs to embrace build-to-rent.  20 October 2016.  www.propertyweek.com

[2] Telegraph.  England needs to build 50pc more new homes.  15 July 2016.   www.telegraph.co.uk

[3] Full Fact.  Do we need a new house every four minutes?  10 June 2016.  www.fullfact.org

[4] Reuters.  London builders turn to funds.  21 October 2016.  money.aol.co.uk

[5] British Property Federation.  BPF Build to Rent Map of the UK.  www.bpf.org.uk

[6] Residential Landlords’ Association.  How the PRS can solve the housing crisis.  News.rla.org.uk

Originally published in Rockfire News about  Online Education | An Investment Opportunity for Someone

A small percentage – less than 0.4% – of school children in the UK are home schooled. [1]  But that number is rising and the list of accomplished people who were home-schooled  goes some way to explaining why.  It is easy to dismiss the domestic education of 13 US Presidents, Thomas Edison and Virginia Woolf as a 19th Century social norm but not quite as easy to explain the success of Condoleeza Rice or Emma Watson on that basis.  Like him or loathe him, it is also difficult to deny that Julian Assange is smart and he is another product of home schooling.

Emma Thompson and Greg Wise removed their daughter from the ‘sausage factory’ pressures of her London school at 15 and have been educating her at home since.  It is not a way of life for the faint of heart and requires an endless supply of creative ideas from the parents and willingness and diligence from the children.  It is very popular and widespread in the USA and Canada, illegal in Germany and frowned upon in Spain but tolerated in the UK where parents do not have to adhere to the National Curriculum although most work towards GCSEs and A levels and many send their children to school at some point.

Like anything, home education has its disadvantages and detractors but it suits children who are too quick or too slow for their class, are bullied or inattentive or whose parents live too far away from schools that satisfy their academic, cultural or other requirements. Local councils can direct families to groups of likeminded home educators and these provide some of the social interaction that critics claim home schooled children miss.

As the trend grows, so does the requirement for learning material.   Although home education is permitted in the UK, the Government is uncharacteristically restrained on the subject.  Responsibility has been devolved to local councils and not all provide much information regarding study groups or even resources.  Surrey is an exception and provides a helpful list of organisations that can provide remote tuition via correspondence, video or Internet.[2]

Whilst many home schooling parents undertake the daunting task of educating their children themselves, others, with busy jobs or unpredictable routines (presumably Emma Thompson and husband Greg Wise fall into this category) choose to place the tuition in the hands of experts.  My Tutor and other sites such as Tutor Hunt are popular sources of teachers, often undergraduates paying their way through university.

But if there is lots of suitable content available online, it is poorly organised and promoted.  There is an opportunity there for someone.  Certainly, the founders of Azoomee created their child-friendly Internet product when they found one of their children looking online for a nursery rhyme and coming across something quite different.  Though Azoomee was not designed specifically with home education in mind, it will certainly be a tool of interest to parents and perhaps inspire a new round of investment in products and platforms that can serve this growing market.

[1] BBC.  Rising numbers of pupils home educated.  21 December 2015.   www.bbc.co.uk

Originally posted in Rockfire Capital News

There is a dark irony in using air conditioners to combat rising temperatures when those very systems are contributors to global warming. So, too, are refrigerators, aerosols and foams. All emit hydrofluorocarbons (HFCs), gases that, like methane, linger in the atmosphere for a relatively short time (15 years) but trap up to 11,700 times as much heat as CO², according to the USA’s Environmental Protection Agency.[1]

HFCs have done the job of ozone-damaging CFCs since those were outlawed by the 1987 Montreal Protocol on Substances that deplete the Ozone Layer. As scientists have realised that the substitute may not pose a threat to the ozone layer but is damaging in different ways, governments have agreed that efforts should be made to reduce emissions from HFCs also.

The 28th meeting of the Parties to the Montreal Protocol has been held this week in Kigali, the capital of Rwanda, whose aim is to agree a target on HFC emissions reduction before the close of play today. It is a feather in Rwanda’s cap to host such a significant gathering of the world’s sustainability elite: around three quarters of the signatory nations to the original protocol are in attendance including Secretary of State John Kerry who took time out from brokering a ceasefire in Yemen to fly in yesterday evening.

Africa, like the USA, is keen to enforce national obligations to cut HFC emissions at the earliest possible date but manufacturing nations with significant output of the gases are arguing for a longer preparation period. China would prefer to defer until 2022 the ‘baseline’ point after which emissions must decline and India is talking about 2024.[2]

Scientists argue that 100-200 billion tonnes of CO² equivalent emissions could be avoided by adhering to a 2020 deadline, slowing the rate of rising temperatures by 0.5%. They cite the positive effects of the Montreal Protocol’s CFC work which achieved a reduction of135 billion tonnes of CO² equivalent emissions and forced manufacturers to design new air conditioning systems resulting in increased efficiency of 60% in some cases.[2]

HFCs, like CFCs, are man-made but there are already refrigerators available that are cooled using natural gases such as ammonia and hydrocarbons.

As the Executive Director of the United Nations Environmental Program, UNEP, said in his opening address:

“No one, frankly, will forgive you if you cannot find a compromise at this conference”

Erik Solheim, executive director of United Nations Environmental Program (UNEP).

Originally published on Rockfire Capital News

                  UK Housing Shortage - Rockfire Capital                                              

With or without immigrants, the UK housing supply is failing to keep up with demand. For the past twenty years, housing stock has Increased annually by 100-170,000 dwellings but that is only half the required amount.[1]

                  UK Housing Shortage - Rockfire Capital                                              

As prices have continued to rise [2], the average age of first time buyers has risen to 30[3] and the Housing Minister, Gavin Barwell, this week suggested that grandparents should help the young on to the property ladder by disinheriting their children and leaving their houses to their grandchildren. It happens that his mother has just made this change to her will and has five grandchildren so it is likely, after inheritance tax is paid, that they might each have enough of a nest egg to enable them to make a deposit on a modest first home. Some families are larger and the spoils would have to be shared between more cousins. The idea is a kind gesture but unlikely to solve the housing crisis.

Highly controversial is the scheme to build on land zoned as green belt. Supporters claim that green belt zoning has been used by councils to withhold relatively worthless land for monoculture farming or even car parks and that it should be put to residential use.[4] Critics such as the Campaign to Protect Rural England (CPRE) claim that green belts act as a buffer between towns and villages, preventing sprawl, protecting wildlife and generating oxygen for the densely populated areas they surround. Development goes beyond the construction of houses. In order to live in and access those houses, people will need water supply, mains drainage, roads and possibly even, services such as doctors’ surgeries and schools.

Less controversial is the plan to build on brownfield sites. Last year, the former government went so far as to announce that planning permission for building on brownfield sites would be granted automatically. The reaction was broadly positive to this announcement but property consultants Daniel Watney had this to say:

The greatest challenge to developing on brownfield land isn’t the speed of the planning process, but remediation costs

Even without complex and pricey remediation, Savills calculates that it costs roughly £100 per square foot to build a home on a brownfield site and that it must then be sold on at £200/sq ft in order for the developer to cover additional land purchase and financing costs and turn a profit. This often pushes these homes into the upper quartile in their local market and many are built in former industrial zones or otherwise removed from city centres; access can be a problem and buyers are unlikely to pay a premium price for living there.

Nor is the cost of developing brownfield sites the only problem with them. The other is, again, supply. There are only 66,000 hectares of this poor quality, remediable land in the UK and not quite half of that quantity is deemed suitable for housing.[4] It would take a high density of almost 50 dwellings per hectare to achieve the government’s aim of 1.5 million homes on brownfield.

So what is the solution? A combination of the above? If we combined two recent trends – teleworking and the shared economy, we might see abandoned offices converted into residential complexes. Or hotels, undone by AirBnB, shedding excess assets.

Then again, we might just try providing finance to housebuilders. To this end the former government established the Housing and Finance Institute in 2015, to provide local councils and businesses with new finance models and development opportunities. On its website, it lists a number of ‘key housing and infrastructure questions’. Top of the list: “How do we build more homes faster?”[5]   [1] The Telegraph.  We must build on the green belt.  20 April 2016.  www.telegraph.co.uk

[2] International Monetary Fund.  Real house prices over the past year.  2016/Q1.  www.imf.org

[3] Halifax.  Seven year age gap revealed between UK’s youngest and oldest first time buyers.  Static.halifax.co.uk

[4] Department for Communities and Local Government.   www.gov.uk

[4] The Guardian.  Six reasons why we should build on the green belt.  21 May 2014.  www.theguardian.com

Black gold became a fashionable term for oil when the gas-guzzling West sat up and took note of rapidly diminishing reserves of the precious fossil fuel.  No wonder, then, that water should now receive the moniker of blue gold; as the Chairman of Nestle, Peter Brabeck-Letmathe, has repeatedly claimed,

We will run out of water before we run out of oil [1]

Nuclear energy was today temporarily displaced as chief ‘thorn in the side’ of renewable energy as 27,500m3 of US-produced shale gas arrived in the UK.

Earlier this month, General Motors (GM) pledged to generate 100% of its global energy requirements from renewable sources by 2050. Apple, which already uses renewable energy to power 93% of its worldwide operations, also announced that it had signed up to the RE100 initiative, a grouping of corporations committed to 100% independence from fossil fuels. 

Vienna-based European Smart Cities[1] recognises Malaga as a city with a ‘smart environment’, with particular approval applied to ecological awareness and a nod to its clean air quality and sustainable resource management

Rockfire Investment Management provides a range of specialist services notable for flexibility and for being client-focused and tailored to each client’s particular needs. Rockfire Capital is a business that can assist in producing investment offer documents when required. Investment offer documents refer to a variety of documents that are utilised in order to secure an investment from an investor in accordance with the investment offer's clear terms and conditions. Most cases require that the investment offer document is drafted in compliance with the applicable regulations relevant to the content and issuing of financial promotions. Under section 21 of FSMA 2000, either an authorised firm must undertake a financial promotion or the content of the communication in question must be approved by an authorised firm. It is a criminal offence for a financial promotion to be undertaken otherwise, with 'financial promotion' here used to mean inviting or inducing another party to engage in investment activity.

As Rockfire Capital is an authorised firm, it is capable of assisting in the production of an effective investment offer document, thus optimising fund raising while ensuring adherence to the regulations surrounding this activity. Rockfire Capital professionals are highly experienced and knowledgeable, making them able to expertly produce documents containing all the information that an investor could need, including the relevant application forms.

Rockfire Capital understands the requirements of an investment offer document, which include details such as applicable asset valuations, an executive summary of the fund, the funds' investment objective, any applicable debt facilities and tax advice, explanations of fund structures used, and relevant investor application forms. This list of details does not cover all of the details which may be included. Rockfire Investment Management has the expertise necessary to produce effective investment offer documents with the necessary details.

Recent announcements from the Bank of England, as well as positive data releases from across various sectors would suggest that recovery in the UK economy is picking up speed. This makes it more likely that Bank of England base rate will start to rise in the medium term (with many commentators suggesting that increases will start to be implemented in the first quarter of 2015). However, it will almost certainly be the case that such increases will be incremental in nature so as to avoid jeopardising the chances of further recovery. This means the time when interest rates are going to recover to their pre-financial crisis levels is still a long way in the future. Small wonder therefore, that investors are increasingly looking to alternative investments. A key characteristic of these investments is that they can be used as a means of countering low returns from the type of traditional investments where the level of return is dependent directly or indirectly on the Bank of England base rate.

Under the leadership of Liam Kavanagh Rockfire offers a range of services in specialist investment and alternative asset management. One such alternative investment area in which Rockfire Capital operates is in relation to mini-bonds. In essence, a mini-bond is an investment vehicle whereby investors lend money to organisations for a fixed period. For anyone thinking of investing in mini-bonds, it is important to remember that such investment vehicles are not suitable for novices in the financial sector. They are not the same, for example, as gilts, corporate bonds or retail bonds. Investors should also be aware that mini-bonds are not covered by the Financial Services Compensation Scheme in the event that the issuing company goes into administration. Rockfire Investment Management suggests that individuals (no matter how financially sophisticated they are) should always consult with an independent financial advisor before considering investing in this area.

The range of investments that fall into the category of alternative investments is very wide. They include, for example, investments in forestry, renewable energy and other emerging technologies, in addition to art and fine wine. As Rockfire Capital is aware, what each of these types of investment has in common is that they offer a real alternative to traditional means of investment such as property, cash deposits, stocks and bonds.

One important reason for the popularity of alternative investments is that they provide a solution to the problems that are par for the course with more traditional forms of investment. For cautious and/or inexperienced investors, the fallback position is generally to invest most – if not all assets in high street institutions. One of the biggest advantages of this approach is that it guarantees security of capital. Even if a bank was to collapse, the investor has the Financial Services Compensation Scheme to fall back on. The downside is in relation to limited capital growth. It is of course the case that we are currently in an era of historically low interest rates.

All the indications at present are that interest rates are set to increase in the not too distant future, (with many commentators suggesting that this will start to happen in the early part of 2015). Nevertheless, the Bank of England has made it clear that rate rises will be incremental. This means it is going to be a long time before the UK is likely to see the level of interest rates that were prevalent prior to the financial crisis of 2008. Cash investors have had to learn to live with disappointingly low capital growth and this is likely to remain a reality (for the time being at least).

The British Chamber of Commerce (BCC) recently conducted a poll showing that 85 per cent throughout the UK want Scotland to vote against independence. Some UK investment firms believe that if a split occurs, it could interfere with cross-border trade, as well as dilute the pound.

2,400 firms throughout England, Wales, and Northern Ireland participated in the BCC’s poll, which concluded that the majority of them want Scotland to stay in the UK. In addition, just under two-thirds of the firms believe that independence would keep them from gaining new business. Furthermore, the poll concluded that only 11 per cent of the firms who participated were in favor of Scotland breaking away from the UK.

John Longworth, BCC’s director general stressed the participating firms’ general consensus about the matter. He reiterated that while businesses in England, Northern Ireland, and Wales are not particularly interested in the heated debate taking place in Scotland, they are interested in the way the decision will impact the country’s relationship with the UK as a whole. If Scotland votes in favor of independence, currency arrangements as well as cross-border trading could be affected. On the other hand, if Scotland votes against independence, further debates will take place concerning the distribution of power and public funding across UK’s nations.

Rockfire Investment Management has been discussing the recent poll, which further clarifies that while Scottish businesses were concerned about the prospect of independence, the UK businesses were every bit as concerned.  Businesses on both sides, many of whom are well educated, are equally apprehensive at the thought of breaking apart an economic system that is highly successful. Furthermore, because the SNP has not clearly identified the economic repercussions of the split, businesses and investors are beginning to worry even more.

But, while many Scottish businesses have trepidations, others are intrigued by the thought of independence. In fact, a survey conducted by the Scottish Champers of Commerce concluded that 53 per cent of members are optimistic about the possibilities independence could create. On the other hand, the majority of the participants were concerned about the risks involved with gaining independence and were generally in favor of staying in the UK.