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626 - David Cross- Skyhouse- up 1 | Otter.ai

626 - David Cross- Skyhouse- up 1

Enoch Sears52min

Speaker 1

00:00

In Britain, for example, I think a developer quite often is the sort of lone wolf. I think it's a mix of planning regulation, building regulation, funding red tape and legals and risk. Problem with modular or semi modular or modern methods of construction is you build so quick if your sales don't catch up. You end up with too much stock or work in progress, and that is disastrous for a small business. Hello and welcome to

Rion Willard

00:26

the Business of Architecture. I'm your host, Ryan Willard, and today I'm delighted to welcome an award winning architect and developer who's truly shaping the future of housing. David Cross as the founder of CODA, one of South York Sears and the UK's multi disciplinary architecture practices, David has earned a distinguished reputation for tackling the often overlooked, missing middle of the housing market. His development ventures include sky house CO and big city, which focus on innovative solutions for first time buyers, downsizers, and both urban and rural communities, David is often hailed as a purveyor of gentle density, natural sustainability and architecture that is as robust as it is timeless. His passion for terraced housing and linear master plans run through all of his work alongside his projects, David has lectured at Sheffield Hallam University and has taken to the international stage as a keynote speaker and panelist, particularly on topics of regeneration and housing. So very thrilled to have him today to explore his journey and his business career. We will be discussing the selling of an architecture practice and what a successful succession plan actually looks like. We'll talk about the business model, the very powerful business model of sky house as architect developer, and the other vertically integrated delivery services that includes and we're also we'll look at why the architect developer business model is such an important pathway to dealing with the housing crisis. So those of you who are again interested in the architecture developer business model, this one really is not one to miss. So sit back, relax, and of course, enjoy. David Cross, this episode is sponsored by Smart practice, business of architecture's flagship program to help you structure your firm for freedom, fulfillment and financial profit. If you want access for our free training on how to do this, please visit smart practice method.com or if you want to speak directly to one of our advisors about how he might be able to help you, please follow the link in the information. David, welcome to the Business of Architecture. How are you? I'm fine. Thank you. How are you? I'm very well. Thank you. Pleasure to be speaking with you. So you are a originally and an architect. You've worked at practices across the country. You've been the chairman of CODA studios, and currently, you are now the CEO of of sky house, and a purveyor, in your own words, of gentle density, a place maker and, and the house builder and, and actually, kind of dealing with a very important aspect of of housing that we see is a kind of a challenge right across the certainly in the sort of the Western world, if you like, of the disappearance of the starter home or the disappearance of the middle income housing. And you know, it's, it's quite it's quite extraordinary, really, the sort of challenges and how difficult it is for people to get onto the housing market and that sort of gap and sky house is an endeavor to challenge that and and to combat it. So perhaps we can, we just launched straight in, and you could give us a little, a little journey of, how did you get to found sky house, and perhaps you could explain what it. What is it? How would you describe

Speaker 1

03:59

what it is, I think you missed off the bio something about purveyor of linear master plans. So I was brought up in a northern town called Barnsley, which is famous for coal mining, right? And actually the great Netflix program at the moment called Strike about coal mining. So I grew up in a terraced house, which is effectively what I class as the missing middle of housing now in the UK, and I know America has got its same issues. He just said about that missing gap in the house market. So I grew up in a terrace house. My dad was a DIY enthusiast, knocking the house, about changing the house, adapting the house, and other than wanting to be a top gun fighter pilot, I thought I'd like to be an architect. I was good at art. I was interested in building, from seeing my dad doing all the work for as long as I can remember, I wanted to be an architect. So that's kind of the starting point. Is terrace housing in industrial north of England

Rion Willard

04:53

and and when you became an architect and you're working in in practice, what was. A lot of your experience about and some of the kind of insights that have kind of shaped your world view on architecture. Well, I

Speaker 1

05:08

started in practice doing healthcare in a place in Oxford, which I really enjoyed. But then when I moved, when I qualified, I moved back north into a city called Sheffield, and I worked for a practice called axis. And axis were probably at the front end of the sort of urban renewal part of the market, which was just starting in its infancy. So you think of New York lofts, London apartments, Manchester apartments. And this was like the sort of practice doing it in Sheffield. So we were converting Old Country factories into apartments. And I just absolutely love doing mix, you city center, residential, that kind of boutique architecture, adaptive, and just fell in love with it. We I also did some quite high end housing schemes, but that never really floated my boat. I think the architecture with budget is sort of easy in a way, when you've gotten limited budget and a great client, but I started becoming more and more fascinated with, how do we solve the macro housing problem of affordability, beauty, sustainability and urban renewal, and that's kind of what Coda was as a practice. And from there, I started doing my own developments with a friendly enough for business partner. My business partner was a banker in London who also grew up in a terraced house in Barnsley. So when I found my first development opportunity, I called in and said, Do you fancy having a puppet this with me? And he said, Yes. So we saw we started crossbow, which was my name, cross, and his part of his surname, Beau, was our first Development Company, which still exists to this day, but that was predicated more on sort of apartment schemes and selling to investors Off Plan. But the sort of germ of the idea, the kernel of the idea of missing middle, was already there. It just took a few more years to come out, and that's when sky house was bought.

Rion Willard

06:55

And what's the kind of business model then, of sky house? Are you a developer, or is it more of a traditional architecture practice, or is it a mix of the two?

Speaker 1

07:04

Yeah. Well, I classes as a house builder, place maker. So in Britain, for example, I think a developer quite often is this sort of lone wolf. Outsources everything from architecture, design, project management, contracting. So with crossbow, that was our model. The problem with that model, when we were working on projects that were, say, 3 million to 10 million, picking a contractor was very difficult. A tier one contractor could be quite expensive and litigious, and then a tier three, tier four mining up the balance sheet or the power to see the project through. So some of our projects were great successes. Others were failures, and the common denominator in that was the quality of the contractor. So when I sold to I eventually sold the practice. I grew COVID from 2003 to 2020 sold the practice then and said to Ian, look, I think she'd bring it all in house and be a proper business. So I class as now as a proper place making house builder, not the traditional developer. So we do everything in house. I do I still do the master plans for my design fix. I still design the house types. Play around with the typologies, some of the interiors, the kitchen designs, even down to that granular level. Um, we've got project managers, Qs, site managers, Assistant site managers, branding everything. I think we've got about 36 people in the team at the moment. And if you think about I sold the business in 2020 and started sky house proper in it was about March 2020 just in lockdown one by summer of that year, Ryan joined us as construction director, MB, and by the following January, so January 21 we were a fully fledged house builder, doing everything in house which was probably not the right time, looking back, given COVID, post COVID. And then we had all the sort of massive inflation repaired with the war in Ukraine, gas prices, and then we had the disastrous trust cor 10 budget in the UK, with gilts flying up the louver interest rate following. So, yeah, it's been, it's been a challenging period to be a startup house builder,

Rion Willard

09:14

amazing this kind of journey there, in terms of selling the practice, because selling CODA and kind of beginning this new venture. What were some of the things that led you, because a big decision to want to sell a practice? Was it something that you'd already planned for? Did the opportunity just kind of emerge organically, or was it a succession plan

Speaker 1

09:36

kind of goes all the way back to the beginning in a weird way, in a bizarre way, which I never thought of at the time. But I worked at Axis. Really enjoyed it. I realized I reached the ceiling in the practice. I thought, I need to try something. There were about 20 strong, 25 strong as a practice. Brilliant experience. Worked with a phenomenally talented architect called Kevin Sears, and I thought, I've got to move on. Do some. Indifferent. Try the cultural practice. Went to a larger firm, not mention the names I hated it. Got told off of wearing flip flops. And I thought, kind of this, this is not for me, really. So I was building a house at the time. I phoned my bank manager, Brian, and said, Brian, I hate my job. Can I leave? And he said, Gosh, you can. I said, Well, I've got this self build mortgage. And he said, Yeah, fine, you've got it now. Just do what you want. I went on my own as a one man band, and I was working, I was working from the front room of my terrace house, and I called the practice front room architects and managed to land a reasonably big contract. And one of the directors of that business that was building the contractor said the name front room's a bit parochial. You need to think of something else. By then, I started landing more projects, more city center projects, and managed to drag an old business partner, Mark kicking and screaming from axis as well. And we were playing around with different names. And rather than going down the traditional roof room route of saying the cross Hobbs partnership, or something like that. I said, we need something that's a bit more of a word about what we do and and so on. And I'm a terrible musician. I was playing the guitar one day in a sort of DSL code, and in my in my mind it meant to start, to start the beginning. It doesn't mean that, but in my mind it was a great name, coda. So that was the name of text mark. And he said, Yeah, that's a great name. So we called it coda. So even at that point, I wanted the practice to outlive the name. Then we moved into an old co op shop, which was a, probably a 1905 Victor Edwardian property, and when we were doing the little refurb on it. We networked it for 10 spaces. We had a reception and room for 10 people. But we'd said when we started the business, let's not employ anyone for a number of years. But we somehow decided to network it for 10 people, and very quickly, we employed our first member staff, and it sort of grew from there and and the business grew and grew. And actually the turning point for me was the great financial crash, because the business was largely an accidental business. I was an architect. I was a businessman, which stumbled upon this work stream. We'd got loads, loads of great clients doing great urban renewal projects in the north of England, and the business was just ticking over. Great we didn't think about marketing plans. We didn't think about financial forecasts. We just opened the doors on a Monday morning, and work came in, and cash flow was fine, and then the crash hit us, and I can remember floundering around for about a year, struggling with the bank. In that period, we bought a few properties together, so the bank seemed like a bit exposed and all this, it was awful time. And then weirdly, on LinkedIn, a guy called Larry messaged me and said, Why don't you come and look at Vistage? And I'd never heard of Vistage, and it's an American setup. It's kind of a peer to peer with a chairman organization, where you help each other run better businesses. I went to a tasting session, and just absolutely loved it. It was therapy, it was training, it was everything all wrapped up in one. And I started professionalizing the business after that, looking at systems and procedures and protocols, mission, vision, values, project, tracking, software, all sorts of stuff. And just amazing. Built the business properly. Ground up. Amazing. Not really ground up. We were probably 567, years old by then, and just started stitching into the business then professional systems and designing the organogram for how the business should work. And the business sort of took off again by 2013 and grew and grew and grew. By 2014 I was doing crossbow with Ian, my passion was starting to I was realizing that I was more interested in developing and then offered the guys, some of the other guys in the business, the chance to buy me out. It sort of split the business. There was a fact that what I call the young guns and the old guard. So the original guys that I was in business with was thought they would lead the business. The young buttons felt that they were the most valuable people, and they couldn't decide between them how to buy me out. And in the end, we sort of called off the MBO, and then we carried on trading. And then one day, I was coming back from Wales with family, and my old business partner said, Look, rather than us by you out, why aren't you buy us out? Ie the old guard. So we did. I bought out the old guard. So it was me and the young guns, and we cracks on. And then we started talking about succession planning. I put Matt into Vistage, and I moved out the office as chairman. Matt became MD. I was there helping just nudge the steering wheel every now and again, making sure they were okay that the two years. And then we said, right, do you want to go for it? There were some rumors in in the British press around the tax breaks were going to change for selling your business. So my accountant said, Look, if you're going to sell the business, you got to do it fast, because there might be it will be an entrepreneurs. But. Eight, and this was, I think Friday, by Monday, we had a drink together, and they agreed to buy the business. And Tuesday, we went to lawyers and signed the document. We did it all very light touch wrap. So it was Wednesday to sign the document. So within about three working days, we did a full MBO with due diligence legal documents and evaluation and all that kind of stuff. We just agreed a price, shook hands, and off they went with the business, and off I went. And I can remember sitting in the lawyer's office about to sign, thinking, shit, I've spent 17 years building this, and it was my baby, and it will always be. It's always going to be like your first born. And I almost text my wife to say, Are you sure? And if I had, she'd have text back, saying, Don't do it. And I didn't text her do it. And when I came home and told her that I was going to text her that, oh my god, if you'd have text, I said, Don't do it anyway. I did it. And we moved on, and we started sky house proper, and it was quite scary, because you're letting go of something, you know, it, like said earlier, like a granular level, I knew the business insight, I knew the team, I knew the stuff, and I knew all my clients were consultants. I knew the heartbeat of it, but I've just felt I needed a new chat, a new challenge. I started Coda when I was 27 so I was quite young. I'd only been qualified two years, yeah. And I remember thinking at the time when I when I was leaving the other practice with the flip flops, thinking, well, if I don't know, I'll just ask Dave salmons or phrases two guys. I really respectful. I've always been good at just asking, put my hand up and asking a question, and if I don't understand the last question again and say, Can you clarify that? So I've never been afraid of asking, and just thought, yeah, let's go for it. And we did

Rion Willard

16:47

amazing, brilliant as a brilliant, kind of story of the of a successful succession plan, and kind of just growing a business, and also very interesting in terms of, you know, the the what you were, the kind of turnaround, and how you kind of professionalize the business, with the with the consulting agency, and also kind of actually started to train the next succession of leaders in that, as well as running a business, because that's often, you know, we see that a lot with architecture practices, and it's not uncommon, I meet practices who are going through a succession plan, and even after the the purchase, I'll have a conversation with the new practice leaders. And they they're not in the mindset of being a business owner or a business leader. They're still architects and the other notion of having to win work or, you know, look at the financials, or this, all this kind of stuff. It can be quite overwhelming and and not what they always, you know, what they thought they'd signed up for. They thought they were going to be more there's going to be more architecture, more freedom. And actually it's, it can be quite different. So as that takes, that's a very kind of good, you know, very wise move there to sort of train the leaders and train the leaders up, so they've got the comfort,

Speaker 1

18:04

kind of the heart of Vistage as well. It wasn't just you, it was the next generation, the next generation. And, yeah, I got into architecture. My dad's friend was chairman of a firm, and I had experience there. So I still believe really strongly in work experience to this day. So I've got a 16 year old boy coming to my office in a few months to shadow me for a few weeks. And I just think that sort of succession planning whether it's a 16 year old, because actually, one of the guys that bought the business from me, he joined us on work experience as a six Wow, a 15 year old. He didn't, he didn't go to university. Start with he joined as an apprentice. He went to uni for a bit, didn't like it, and came to me, said, Can I leave? And I said, Well, it might limit your future progression. He said, I'm not bothered. I love what I what I do. He trained on the job, and he ended up being a director and owner of the practice, and that was 15 starts as a 15 year old boy,

Rion Willard

18:57

amazing. I love those I love those stories. So it's kind of started crossbow, and crossbow was happening at the, kind of at the end part of CODA, yeah, and then, and then it kind of grew into, into sky house. And so perhaps, yeah, what was the the original intention there with Sky house, and how did you want to make it different from what you had, you had been doing previously with, with coda, and what were the kind of market opportunities that you were, that you were seeing were present?

Speaker 1

19:29

Yeah, again. So it really sky house and crossbow started in the great financial crash again, because, and actually even before that, because, when you submit plan application in the UK quite often. Well, you always do a design access statement about why you design, what you do, and you might look at historic maps, street scenes, kind of stuff in context. And every time that we did a development in the city center, we would look at the historic maps. And there would be 1000s of Back to Back houses, which for American listeners or viewers who won't understand that. They were sort of housing, just back to, I don't accept got the same typology in America, but really high density. They were knocked down because of the slums. They were in poor, poor living conditions, damp. But what I loved about the street scenes was this really simple architecture. People that were working and living in the same place. You'd see a little factory next to it, some chimneys, a courtyard, laundry hat now. And whilst it must have been terrible to live there, they've been cold and hungry and damp and all that kind of stuff. They look great on photographs. And I thought this, we're missing something here about regenerating cities and not just doing apartment the crash. The crash came UK. Banks didn't particularly like apartments anymore, because, for whatever reason, they saw them as high risk. Our entire practice was predicated around mixed use apartment schemes, ground floor, Bucha, 123456, 1020, stories of apartments above. And I thought, well, how do we regenerate towns and cities without apartments? And the answer was looking seven in the face, which with the historic back to backs. So originally, I started playing around with the idea calling it back back, so using back and then mirroring the word back. And I thought, well, that's got too many connotations of slums. People might not want to buy a back to back house because it's called back to back. I started submitting sort of dummy planning applications to the council, saying, Look, if we did this, would you pass it leaking to the agents? If I built this, do you think you buyers would like it? The agents loved it. Then I spoke to the Chartered Surveyors and said, If we built this and the agents could sell them, would you tell the banks that they can lend on it? Yes. So squaring the circle before it even got a live site,

Rion Willard

21:39

right? Okay, yeah. So, so you're actually kind of designing the typology and what the buildings could look like we and were you using fictional sites or sites?

Speaker 1

21:48

Yeah. So it was literally testing the model, coming up with designs that were single aspect, that were back to back, that were three, four stories, and again, four story homes in England, you need a fire engine in solution. So look, testing the building regs, testing the planning policy, testing the market, even talking to people, would you buy this? And everyone, everyone agreed it was a good idea. Eventually, a back to back housing scheme was passed in Manchester. I sent, I sent a press clip into the planners in Sheffield and said, Look, we've been on about this for a long time. And they said, Okay, let's, in principle, we'll go for it if you find a site that was the sort of green light in theory. By then, we were building a scheme called done fields in Kellum Island and a large listed land remediation the like master developer that brings together huge regeneration projects contacted me and said, We love what you're doing at Kellam Island. Would you do something like that at Waverly? And we were and they sell land, 10 acres, 20 acres of time, to national house builders. So it was quite a privilege to be invited. And I said, yeah. So I designed a scheme. And they said, Would you really build that here? Yeah. So then they moved me from the periphery of the side more into the middle. I redesigned it. Would you really do that? Yeah, and moved me to the center. So we are literally now. We built the first phase of Waverly, which is 40 homes. We ended up building the second phase of 44 homes. We're now building 96 homes and a further phase of 50, all off the back of a back to back house typology that they saw and wanted us to bring Wow creation side. So that's so the idea was tested around the crash, planned on paper up to about 2014 15, by about 16, we were talking to this list. It took two years for them to actually finally get the land deal. By about 2018 we were on site with our first scheme. By about 2019 the builder had gone bust, and we were picking up the pieces of a bankrupt, insolvent development, which cost us a million pound more. But we'd proven the model. People queued to buy the houses there. They look fantastic, even to this day. And we proven the model. We knew we'd got something. And I said to my business partners. Look I think sky house. Well, go back to the name. I think sky house has got legs at this point. But I was talking to our branding guys and said, I think a bit like the front room name change from front room to coda. I said, back back isn't it doesn't convey what we're trying to do with the house. It's too, again, parochial. It's too they've got too many connotations of slums and the past, which aren't positive. And I said, so we started doing like, that word game where you just say you're firing words off. And they said, Well, what is it? And I said, Well, it's a it's a house, it's it's got roof garden, so it's sky, but big windows, you want to, you know, big windows and sky, and it's the sky house. And I went, That's it. And that was it. And that was just literally firing words out, yeah, and sky house was one of the words that ended up coming out of it, and that's where it stuck in a bit. I always talk about COVID had its own legs. It grew its own legs as a business and ran. And with me not really having to encourage it so much. And sky house was the same. Crossbow didn't find its own legs, but sky house did at Sky houses run, and it's got its own life now, and it's in its people like it and want us to bring skins to their sites. We don't really go out and particularly bid for sites. We get invitations to buy sites, which I think is quite unique. Yeah,

Rion Willard

25:23

that's, that's, that's fascinating. And who are, who tend to be the kind of vendors of this, of the sites, and how are they becoming available?

Speaker 1

25:31

So we've got Council site we're buying at the moment. We've got national house builders. We're working with one very closely at the minute, and they, well, we just finished the development. Actually, beautiful development, and they've got so they bought a big regenerated site, 22 million and part of that was an old paper mill, some some old workers cottages and a funny triangular piece of land on a river in a wooded valley. Beautiful site, but that for the National didn't fit their template model with just cookie cutter. And they said, Would you buy this site and deliver something special? And we said, yeah. So we so that was invitation. So the harwooth group invitation, they've asked us to deliver houses on their site. So it's, yeah, interesting.

Rion Willard

26:16

Well, that, I mean, that's a real unique position as a developer, is to kind of be getting first dibs on, yeah, on these kinds of sites. And that's that's such a one of the most difficult things about any sort of developer activity, one is the finance, and the other is actually finding the locations they're doing the to be able to in the buildings, I

Speaker 1

26:35

think, with with with that, though it's opportunistic, and I suppose we are sort of bottom feeding, so it's not as glamorous as it sounds. We're doing the bit that they don't want to do. But for me as an architect, yeah, well, it's the fun bit want to do. See, yeah, one to I want to take the challenging sites and deliver the nice, restore the old buildings, or create nice new, new places that. So, yeah, it's opportunistic rather than, well, it's,

Rion Willard

27:02

you know, the kind of movement, and something that we advocate for quite a lot is the architect developer model. And you know, even on a small scale, architects are incredibly visionary, and being able to take gap sites and see possibility and create something amazing insights that often get overlooked and that developers aren't willing to spend the time kind of investigating. And, you know, sometimes it's it, it, it perhaps is part of the business model as a developer, when you're hiring an architect to kind of just investigate random bits of land that something breaks down and doesn't work as well as, you know, something much more formulaic. So bringing the architectural vision and being able to take on a challenge in science only puts you in quite a quite an advantage. Do you do all of the architectural work in house, or do you just do that kind of, kind of master planning, kind of concept part and typology part and then, yes,

Speaker 1

28:00

I do the master planning. So we've got, like, a probably around 26 templates, if you like. I've stopped using word typology, making it more like a template or a chassis. We're trying to make sure we get the efficiencies and repetition of building and learning the house types and what works. So originally, my old firm did the architecture, and now it's becoming a bit more simple to do. We've got a couple of smaller firms that we work with, a one man band, guy who's fantastic, who knows his way around the tech, technical side of architecture. We've got Ross in house, passive house designer and architectural technician. He tends to be more design manager now, rather than actually drawing stuff, we sort of outsource, but with a very, very close eye from me Ross, making sure it's what we want. Yeah.

Rion Willard

28:51

So what does the the internal structure look like in sky house these days? Then like, what kind of expertise do you have in house and what part of the kind of the development process and the construction process are you actually, you know, you're delivering services to the projects yourselves. And which parts do you tend to liaison? Yeah,

Speaker 1

29:12

so we design and build and sell so and sometimes retain the buildings as investments, right?

Rion Willard

29:18

So you're selling it as well as the actual kind of construction and in house

Speaker 1

29:22

sales yet. So we, we really, if you think about main contractor, we are a main contractor as well, right? So whilst we don't particularly have brick layers or joiners on the books, we will, we, our construction team will subcontract the packages. So from Groundworks, um, sub structures, sub structures, roof, electrics, plumbing. So we have the project managers, the Qs, the procure teams to do all of that. So it's effectively a contracting outfit with a sales arm and a design arm.

Rion Willard

29:56

And so typically, these are always Built to Sell. Or do you hold on to any of them as a kind of rental portfolio? Yeah.

Speaker 1

30:03

So the initial idea was to sell on the open market. So that's most of our schemes historically have been that way. But given the UK housing market, I think it might be same in America. It's a bit challenging with interest rates. We've been very fortunate that, because we do urban schemes, they're in generally urban locations, city centers or city fringe. It's become very popular for the single family residential sort of BTR PRs market. So we've done a couple of institutional deals now with pension funds, investment houses, and we expect to do a lot more of that going forward, because we are niche. We deliver in urban locations where the rents are higher, car free schemes, design driven, E code driven, robust in its architecture. So we, we try, I try, to make sure that everything we do isn't fatty as well in terms of materials, can, can date, can damage, can be hard to replace. And I want the houses to be as robust and durable as a terrace house I grew up in. So I joke about a thing called the scooter test. My little boy isn't a little boy when I was 16, but when he was a little boy, if he crashed his scooter into the wall and didn't or broke a cladding panel, and that cladding panel no longer available, how do you fix the house? And I think something beautiful when, especially in the north of England as well, where it's it's raining down materials can can weather quite badly, whereas natural materials like brick and stone and timber tend to weather and patina quite nicely. So I want that robustness to be in every job that we do, so it looks good in 20 years, 30 years. So yeah,

Rion Willard

31:40

in terms of the kind of challenge that you're you're kind of directly helping solve the kind of that middle housing disappearance, as if we just step back for a moment, like, Why? Why has this section of housing disappeared? Like, from your perspective, and you've got really unique perspective here, of like, architect, developer, business person, and, you know, there's this massive housing crisis that's kind of existing. Why? Why is it such a challenge? There's no shortage of technological solutions, and architects, you can do great ideas. There's clearly a lot of other components here. What's your perspective on this?

Speaker 1

32:22

If I, if I take it right back to when I started in practice, in 1999 2000 we, when I worked for axis rep, a whole plethora of small developers that were fleet of foot, creative, entrepreneurial, and bit by bit, the planning system became more complex. So you'd originally submit a site plan, a location plan, floor plans, elevations, not even the section necessarily. And that was it. The planning form, the planning fee, not the UN that was it. And then it became more complex with ground investigations, acoustic reports, solid investigations, you name it, report after report after report, and that's got more and more complex and more and more and more expensive. Around the time of the crash, a lot of those developers went bust, so that niche urban market or smaller developer disappeared. I think the fine the funding finance market is very complicated as well, so banks are less trusting of the smaller builders. So it's balance sheet driven. It requires much more money invested in the project. The legal complexity of securing funding is a nightmare, collateral warranties, so it's become a very professionalized industry. Really. Availability of land is really difficult in England as well. Brownfield is less tricky in places like Sheffield, but the green field sites you have to go to strategic planning you need. And then house builders have got huge, huge portfolios of land and a pipeline of land. So they, you know, Barrett's might build 17,000 homes a year. It's dominated by four or five house builders in the UK. So really, you've got two ends in spectrum. You've got the national house builder building the cutting, cookie cutter model, and then add the urban developer that disappeared. That urban developer now has been replaced by the PRS pension fund, right jewels developments, 2030, 4050, 100 million pound PRs apartment schemes. But they're tricky to do now because of the building safety app with the Grenfell fire. So we're seeing, we're seeing we've got the poor, poor ends of the market, purpose built, student accommodation, PRs in the cities, national house builder in the suburbs. Then you had, in the olden days, you had councils that were building houses, affordable houses. They were sold off from the right to buy. Housing Associations now build, ostensibly the same model as the national house builder. So it's a suburban cul de sac driven model. You've got a whole missing middle there, which is bungalows, courtyard houses, townhouses, row houses, terrace houses, back to back houses, duplexes, you know, four plexes. American terms. We don't know that, but that's where we sort of spec. That's where we want to specialize. That missing middle, that gentle density. But. Where you might not necessarily want to guard and you might not necessarily want parking space. And historically in Britain, that was quite tricky to get planning permission for. You had two parking spaces. You had to have a 50 square meter garden. You had to have 21 meters window to window. Well, that creates a very formulaic urban design solution, which is actually really dull and Americanized, and that's all we get, is new builds. And then there are very few niche developers like us doing the urban infills, the car free developments, the funky stuff. So it's, I think it's a mix of planning regulation, building regulation, funding red tape and legals and risk,

Rion Willard

35:44

yeah, with with planning and kind of planning regulations, do you campaign for for change, or do you have, do you have any kind of advisory roles or positions where you're able To actually kind of consult with planning departments, or anything kind of higher up to advise on, you know, these, these are the things that we should be doing in order to actually unlock a lot of kind of housing potential.

Speaker 1

36:12

Yes. So under the previous government, there was a group I was in called an all party parliamentary group for housing growth and delivery, which was effectively a load of people with it could be playing consultants, architects, house builders, social housing, national housing, but people that were in that group were there to try to lobby government say, look, here are the challenges that we've got. This is what we need to help. So we've after various papers on how to help people like me, my business SMEs, with the challenges of navigating the planning system. So for example, it costs probably around 250,000 pound for a planning application. Now for 50 homes, it might cost another 50 to 100,000 for us to access finance. As a business like ours, we might need two or three of them rolling at any time. Well, that ties up enormous amount of cash. And then, if you think about the end of the project that we've got now, where we've got stock sat unsold because of high interest rates, we end up becoming involuntary landlords. We really want to do churning. So yeah, the A, P, P, G, which is now a parliamentary Liaison Group, we try to do that. And I'm also on the South Yorkshire mayor's Business Advisory Board, which doesn't have any lobbying or advisory in terms of changing national policy, but it gives me the ability to speak to the mayor directly about the challenges facing our region, in particular to South Yorkshire Sheffield City region

Rion Willard

37:38

in terms of finance. How do you guys typically develop your your kind of financial stack, if you like, is it? Do you use a lot of your own money? Are you using kind of banks, investing outside investors? So

Speaker 1

37:51

the original projects, when we did crossbow, were seed investment from Ian. I did the work. He put the initial cash in, and we would sell off plan using investors money. So they used to pay up to 50% deposit, which was fantastic. Then, unfortunately, there were a few rogue developers around that time that ran off with people's money. So the 50% deposit shrank to about 20% and then I think the maximum you can now do legally is around 10% and again, that's further short in the market for the number of SMEs, because that was a great source of seed cash. So that was the original projects. We were then fortunate to access homes England, which is government so effectively acting as a bank. So homes England now are the largest lender to SMEs in the UK, which is astonishing. Fact, really, if you think about they lend more to SMEs than the high street banks. Well, which is, which is a terrible indictment to the housing market, really, that high street banks won't lend to SMEs. So we've done a couple of deals with homes England. And then I think fortunately, because I think what we try to do is place making semi modular. So trying to build quicker, more efficiently, design driven. We've got all sorts of stain, sustainable things that we tried to do, zero gas, hedgehog, highway, Swift bricks, all that kind of stuff. We sort of stumbled upon, probably the best funding package I've heard of in this industry, which is, we're now funded by the South Yorkshire pension authority through a funding management called the call send brides activity they've given us, if almost a revolving credit facility, which is market leaving terms of interest rate and the loan to value that they've given us and what they want us to deliver, homes, beautiful homes, sustainable homes, create jobs, and we do that with gusto. So we've got a really, really phenomenal funding position with is

Rion Willard

39:47

that connected with the with the REITs, where, the where? No, no, it's not.

Speaker 1

39:52

If you work for the local authority in South Yorkshire, where these barsley Love and Doncaster Sheffield planner, anything to do with a civil. Service, your pension goes into the South Yorkshire pension authority pot, right? Okay, obviously fit, and we, we're just part small, sort of diversified pot that they're trying to do to deliver more housing. So it's right, it's a brilliant initiative, and I think amazing, yeah, actually, that'll be, wouldn't surprise me, under Keir starmer's government, if that's something that's going to be rolled out more with maybe homes, England's that helped with maybe private pension funds also getting involved to share the load. So, yeah, very lucky to access that. It's helped us grow the business way, way quicker than we we could have without it. Yeah.

Rion Willard

40:36

And then, and you find that that's better than kind of working with private investors who who want to come in and invest a large capital amount, yeah, where

Speaker 1

40:46

it goes back to the Vistage thing. Do you want to? Do? We want to give away equity or not this moment? We don't, you know, we've got, we've got a growth plan. We'll have an exit at some point from the business. I'm 48 now. My other main business parts 52 think years so few years left, we've got people in Vistage in the business as well already. We've got trading schemes. We've got mentoring schemes. So rather than giving equity away, yeah, it's much better to do it this way. Yeah. And

Rion Willard

41:18

tell us a little bit about then the kind of challenges, or the the construction part of it, and what, what your involvement is in the management of the construction, and the the kind of general contractor position that you hold. And then we can talk a little bit about the, the kind of, the the real estate part of it, because it's a, it's a really wonderful sort of, you know, fully vertically integrated,

Speaker 1

41:37

yeah, so on the construction side, I've got Ryan, who's the construction nd, Ryan's a very capable is quite young. Actually, forget how young things about 3334 he runs the construction side. We've got a team, I think under under Ryan must be 20 people. Perhaps I don't get that involved Construction wise. I understand construction detailing, but I try not to micromanage, because I piss them off a lot from the architect that wants to change the detail or changes I want this nice brick arch, but may want the Qs. Want to get rid of the arch because it's so expensive, so I'd visit site. I'm involved in some decisions on things like that and technical solutions, but I try not to micromanage on that side. And

Rion Willard

42:21

then in terms of the the actual, the kind of real estate part of the of the of the organization, you've got brokers who are selling for houses to the to, like, kind of, basically the end consumer,

Speaker 1

42:34

yeah, so we had our own right move portal at one point, which was right would, but yes, we use external agents. So it could be local agents, could be national agents, I mean, international agents, I guess. So they will deliver the leads to us. And in house, we've got Bucha, she's a head of sales, and she deals with the sales, or I might deal with the books. I quite like the sales side. So I might deal with some of the pension funds that we're dealing with, or partners, and try and broker the deals directly myself. In terms of appraising the sites, I tend to master plan them, run the initial fag packet appraisal, as I call it, then from to Ryan to check and sends check from a construction side of the numbers in there. Okay, we've got Richard O's head of procurement. He'll check the budgets and go, yeah, we've got the out turn on this project is roughly that, so we know we're in the right ballpark, or the prelims, right, the overhead, right. Have we got enough contingency in and so on and so forth, and yeah. So I'm quite involved from very early part all the way to the end. And sometimes I might be quite immersed, and other times might not be in there. So I've my workload can be quite sporadic, in terms of very busy to not very busy at all. Do

Rion Willard

43:46

you find that you you sell more of the homes to individual people? Or do you get mass buyers, who kind of buy kind of quite a lot of units at once, and then they have their own kind of rental organization happening with it? Or do you try and stop that? Or the

Speaker 1

44:03

original model was to really sell to the open market. But the problem moment is that the buyer demand isn't there. Again, in England, with probably priced buyers out to the market with regulation, the standards were SOC, pump, Ev, chargers, PV is quite expensive to build, so at the moment, the market is a bit subdued. We are selling still to the open market, but our model will be, probably, well, it definitely will be to split it, what I've called a try tenure model. So 30% open market, 70% partnership, and that could be local authorities. It could be registered who are affordable housing providers. It could be family officers. It could be individual buy to let investors, or it could be institutional investors. So so we get faster exits, because the problem with modular or semi modular or modern methods of construction is you build so quick if your sales don't catch up, you end up with too much stock or working four. Rest, and that is disastrous for a small business. We need to be a conveyor belt. So we think we've learned after this, what is it four years that actually we need, we can't rely on the open market for all of our exits. We need to make sure we're blended

Rion Willard

45:12

right when you so if you, let's say that you kind of get a bit of a bottleneck with stock, and you can't sell it as quickly as you need to. What happens to the stock? Are you? Is it too is it then just become too complicated to be able to rent it? Yeah, and then hold on to it? Or, well, actually,

Speaker 1

45:28

we're in that situation right now. Actually, we've got probably too much weight, uh, waveless Central, but we've got institutional buyers that are looking at buying stock offers now, which the benefit of what we've done with the model is our price point, really, apart from a few houses, is perfect for the rental model, from a one back to a three bed house. It fits the model, so its end value is actually not far off its yield value. So we've been quite lucky in that regard,

Rion Willard

45:57

amazing. And at the moment, you're kind of quite geographically focused, and in the area that you are up and around Sheffield and north, is there any plans to expand it elsewhere or other parts of the country? Yeah,

Speaker 1

46:13

I would love to my wife, probably less so she works in the business. I think sometimes I'm quite bombastic and ambitious, and then that can run away with me. We're probably just going to go through a little period now where we we we calm down a bit, retrench a little bit, and then make sure we know what we're doing, because we've grown very quickly over the last four years, from really me, Ian and Philip, to about, I think we had a peak about 42 people. It's got, it's been really fast, high paced, high pressure, with lots of global events like COVID, post COVID, Ukraine, interest rates and so on. It's been a whirlwind that I think we might need to just take stock for the next couple of years. But ask me again, in the year will probably be in Manchester.

Rion Willard

47:03

Yeah, do you think there's quite a big difference between the housing market, between the North and the South in the UK?

Speaker 1

47:10

No, I think that the benefit of this, well, is it a benefit? The South is very expensive and there's a huge shortage. I think sky house would work anywhere in the UK, we've got a talk about our sort of opportunistic approach. We'll problem solve so we will deliver our single level dwellings, bungalows in a rural location or an urban location. It could be a luxury bungalow or urban terrace bungalow. So we utter Ridge site is a rural urban scheme. So it's a restoration of an old paper mill sat in them in the middle of hundreds of acres of woodland and Riverside. But it's an urban type scheme. So we can go anywhere with that model. It could be in a historic setting. We can use our templates and dress the building to suit a historic setting. It could be very contemporary, because we chose to abandon the robustness. We could use a cladding system. So, yeah, I think, I think the model could work anywhere. And I don't think the housing market in the UK is, is dramatically different anywhere.

Rion Willard

48:15

Amazing, brilliant. I mean, that was, that was fantastic. Perfect place to conclude maybe one last question, what's the what's the plan for the rest of 2025 and beyond?

Speaker 1

48:27

This year is all about positivity. It's about coming out of the last two years, which has been very tough. We're moving this next week and, yeah, stabilizing, ready for the next growth. Yeah, amazing,

Rion Willard

48:41

brilliant. Well, thank you, David, that's been a real kind of mind blowing conversation, actually, of a really incredible sort of business career and some extraordinary ventures. And thank you very much for coming on and sharing No

Unknown Speaker

48:56

problem. Thank you. And that's a wrap. Hey,

Enoch Sears

48:59

Enoch Sears here and I have a request, since you are a listener here of the Business of Architecture podcast, Ryan and I, we love putting this podcast together. We love sharing information as much as we can glean from all the other industries that we're a part of, to bring it back to empower you as an architect and a designer. One thing that helps us in our mission. Is the growth of this podcast simply because it helps other architects stand for more of their value. Spreads the business information that we're sharing to empower architects together so architects, designers, engineers, can really step into their greatness, whatever that looks like for each individual. And so here my simple ask is for you to join us and be part of our community by doing the following, heading over to iTunes and leaving a review of the podcast. And as an expression of our sincere thanks, we would like to give you a free CEU course that can get you one professional development unit. But more importantly, we'll give. You a very solid and firm foundation on your journey to becoming a profitable and thriving architect. So here's the process for that. After you leave us a review, send an email to support at businessof architecture.com let us know the username that you use to leave the review, and we will send you that free training. On the training, you'll discover what 99% of architecture firm owners wish they would have known 20 years ago, and the other 1% well, they just didn't even know that. They didn't know head over to iTunes and leave us a review. Now we'd

Speaker 2

50:42

like to acknowledge the following smart practice firms in the 200 304 100 clubs. The 200 club means these firms have achieved a financial performance of earning $200,000

Rion Willard

50:56

or more of revenue per employee, which puts them in the top 10% of small firms worldwide. To find out more about this prestigious award and how you can apply for recognition, go to Business of architecture.com. Forward slash 200 the 400 club, Drew and Justine Tindall. 300 club, Christopher Rollins, Jorge catrain and Christopher Brandon. 200 club, Julia Aria, Philip Lang, Sean, kakigi, Yogesh, Mistry, Marina, Rubina, Ryan Smith, Brad Hubble and Suzanne, Daly, Peter Spruance, Frank and Megan Lynn, well done team. Let's go. This episode is sponsored by Smart practice, business of architecture's flagship program to help you structure your firm for freedom, fulfillment and financial profit. If you want access for our free training on how to do this, please visit smartpractice method.com or if you want to speak directly to one of our advisors about how he might be able to help you, please follow the link in the information. Hello, listeners. We hope you're enjoying our show. We love bringing you these insightful conversations, but we couldn't do it about the support of our amazing sponsors. If you're a business owner or know someone who would be an excellent fit for our audience, we'd love to hear from you. Partnering with us means your brand will reach over 40,000 engaged listeners each month. Interested in becoming a sponsor, please send us an email at support at businessof architecture.com the views expressed on this show by my guests do not represent those of the host and I make no representation. Promise, guarantee, pledge, warranty, contract, bond or commitment, except to help you be unstoppable. You.

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