Behind The Scenes Of A £200m Property Development Company | Dorian Payne

Watch the podcast with Dorian here: https://youtu.be/ACjh5WvGmlA

In this video Dorian Payne of Castell Construction takes Tyler round 3 of his social housing property development sites in Wales. Dorian is a 28 year old developer with a development pipeline of £200m.

Dorian is the founder of Castell Construction, a land-led Social Housing development & construction company based in Wales. Dorian is also a member of The Developers Club.

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Chapters:
00:00 Intro
00:36– Site #1
10:07 – Site #2
20:28 – Site #3

Where are we so this side is the old Victoria in in Newport Nash Road the original building actually mimics kind of the footprint that was here so we we knocked it down um we took a conditional contract position on it so we didn’t buy it we just took a legal position on it

And took it for planet and finally got the permission took about a year and a half yeah Qui forward sold it to a Housing Association yeah uh sold them the land and purchased it the same day so we backto backed it and uh and then yeah went straight onto the demolition

Piled foundations and 18 Flats in a nutshell let’s take a look let’s have a look so we had an issue here with the flood zone uh they modeled this that it would flood and then we had to spend 10,000 on a flood modeling assessment yeah uh there a flood risk assessment

Flood consequence assessment and then 10,000 on a modeling assessment basically and I really don’t want to do anyone disservice here some computer program that you change levels and stuff and it tells you how the the flood’s going to react so now we managed to get it where the the site it’ll flood around

The site but not the site some somehow how have you done that 10 grand and a model in a side it’s above my pay grade that is so this is a standard setup here got a stacked uh welfare canteen on the ground floor site office on the upstairs

Toilets by there uh like I said there an 18 apartment site at the moment we still got scaffolding up but the full super structure is done we’re just waiting for the rendering but we’re in the middle of uh winter so okay if it rains everything

All rendering goes on so how long is a bill program on this did you say 18 months 18 months hello so this is our site manager Sean Sean how you doing mate hi Sean see you you well yeah great to meet you so this is this is obviously social housing that you’re

Building yeah in a nutshell for those that have never heard the term social housing before yeah what is it so social housing is a sub brand of affordable housing it’s effectively housing for those that have no income in it really all all very very minimal income and

They dependent on the state to to help them house to help house them as their necessity so how it works especially in Wes is that the local Authority Welsh government will have a budget for delivery of x amount of social housing uh social homes across Wales which is

Derived from market research that they instruct and then each local Authority will have a Target to to build x amount of homes and then housing associations more recently local authorities come back into it but mainly housing associations they will have their targets of how many homes they want to

Build in different areas and then when we take them aside or they find one themselves they’ll get approval from Welsh government for Grant support to fund it so then between uh if for this development for example call it3 million 70% of that up to 7% may come

From social housing Grant and then the rest of that then will come from either the housing association’s own reserves uh or money that they’ve you know re res securitized from their portfolio but then the rent is local housing allowance effectively a social housing so it’s housing benefit because typically the

People who move in they have very minimal income they’ either on benefits they’ve been homeless or fell on hard times so that’s what it’s for and then affordable housing which is a little bit of also what we do that’s for when people they have income but it’s below

The average effectively and they can’t afford Market rates or they can’t afford to get onto the ladder so the affordable housing is a step up does that make sense and what so what’s the core differences in terms of what you’re building how you’re Building compared to

If it was a If This Were private Apartments I mean if I if I’m being completely honest with you especially in Wales some of these developments we build are a better standard than private for social housing we have to build everything to epca in Wales they don’t

Have the same Target in England uhhuh but it’s a Welsh government kind of initiative uh to increase both Energy Efficiency but also modern methods of construction as well so some of the other s this is obviously masonry and traditional some of other ones now are sit build uh closed panel timber frame

Systems Etc one of the things we do as as developers especially Brownfield Specialists is when we come and we identify a site obviously we need to try to maximize what we can put on the site for its given y you know it’s it’s in the settlement boundary principle for

Development is accepted but in an area like this one of the big things that dictates how much you can build is what’s around you and also parking uh as well as things like flood I’ve mentioned so if you look around everything is twostory and you can see

That we’ve managed to take the build height higher than everything around here mhm but you’ll notice that there’s a set there’s a there’s a step level down there when we first went into planning we wanted everything this height but then planning was saying if you look around you’re having too much

Of a detrimental impact so we have to step it down so the the level gradually comes up rather than it being a big jumper up what’s the uh approximate total value of of this project this is a £3 million project the different to uh London eh a little bit so we’re putting

In an infrared wallpaper system on this uh we’re trying so explain to me how it works basically the Border ceiling and the what your little wires put through sure you CLI a Wi on there it’s only 20 12v system you CLI a on there Wi on

There uh then so there’ll be loads and loads of strips and that all goes to a uh Central Transformer there so when you and a thermostat in every room so you turn up to what temperature you want and you’ll heat the room up to the temperature just the radiant heat feels

Like the sun warm on your in your living room it’s what’s the Handover process like with these guys from the hous association point of view one thing I’d say especially if developers want to get in it you actually have to be good at the delivery with a private developer with with due

Respect you can quite you can shambles the delivery but in a rising market all your mistakes get masked and everyone wants toy buy your place and and you you’ll make money one of those once in in a development like this you fix your sale price so that’s done and you’re in

A contract you then got to give a program and you’ve got to deliver to that program and then every month you’ll have an employer agent come around valuing what the works you’ve done to then give you a draw down and also checking themselves for risk because they’re the bank uh they’re effectively

Working on behalf of the client as as the bank and then you’ve got the client’s clar of Works come around or project manager come around weekly weekly sometimes more check in what you’re doing is it being done correctly I’m impressed it’s it’s a nice place to

Live even if it’s private this is the beginning yeah and these this will be the fire compartment in here and then the other walls there’s there’s a suspended ceiling sure but no fire can spread through that and once you’re in this area you’re safe from fire it’s the

Ex out the loft is just above yeah so if you look maybe the one next door you’ll see uh like metal going all the way around about 300 down from the top okay so any partition walls don’t have to go up to the CE cuz that’s the only fire

Department yeah so these are the that’s that’s the safety side of what’s that what’s that green barrier for oh cuz BR in the Attic yeah you’ve got to put a waterproof me well you don’t have to but you always put a waterproof membrane so that’s a waterproof membrane that’s a

Water remembering so you don’t get condensation running in oh look at that okay it’s good to know uh is all double boarded and the boards have to be not only sealed like you can see but they kind overlaps you can’t put all the joints must be sted mhm so your so your

Your business then put simply is you’re finding land yes which has the potential for development and you take it through that planning permission process and you get the planning yeah and then you find a an RSL which stands for registered social landlord Wales they buy it from

You yeah at an agreed price yeah Which is higher than what you’ve agreed to buy the land for ideally ideally yeah doesn’t always work that way but yeah and then you enter a build so are you the contractor as well yes yes so you

Get paid to pay yeah and then is there a bullet payment at the end where you get paid or they pay us monthly they pay monthly or spread over so there will be a retainer yeah there will be a retainer but you get half of that back at the end

Uh you how I Define our in nutshell we are a social house building company okay so we’re land l so we identify a maximum and secure land opportunities mainly Brownfield like this are there’s been some form of development on it previously mainly inside the settlement boundary M we will forward sell to a

Register social housing landlord or a Housing Association or register provider different terminology so at this point you don’t own no the development no most of the time we just takeit contract positions so like I said on this we didn’t buy the site we took a contract position a conditional contract sub so

We will buy this site off the vendor for an agreed price subject to planning consent Housing Association on board Sab approval which is which is surface water drains whatever conditions you can get agreed basically y here’s a nominal deposit and this is how long we have to

Do it so as long as we comply with our terms in there we’re legally able well we legally have to buy buy it on a conditional contract um and yeah whilst we’re doing that we will work simultaneously with the Housing Association dealing with all of their internal approvals while government

Approval legal process and we want to get into the stage where once we’ve got permission and we can legally build we will sell the site to we will trigger to buy it and sell it the same day so the house Association will give us the money

For the sale we’ll use that money for the purchase the sisters will and hopefully there’s a balance that comes back to us in terms of an uplift and then we’ll also the same day enter into a build contract and on when we enter into that build contract we’ll normally

Issue our first valuation as well to get all of our pre-con fees back planning design Etc so it gives us our money back to straight away go into the the next stage of the build which would probably be some form of enabling Works cool

Where we go next it’s up to you we got 10 others so this is Pont Mis Newport Road Risa uh coming with our good site manager Jason hook and uh we’re building 18 Apartments as well like the last s you saw masonry again that’s all you do

18 we do more than that I promise just again just happens to be another Brownfield site where we look to see how we could maximize it’s a very similar setup if you look around it’s just all twostory buildings again and yet we’ve managed everywhere’s to story yet we’ve

Managed to get three stories so we’re going to be the highest building here so what what was this before petol station petol station yeah real Brownfield this is what it looks like on its way up as a masonry structure build in 18 apartments and one block so similar setup again if

You notice the first thing we’ve done is we’ come and we’ve done the remediation work we’ve done the we’ve done the substructure like infrastructure Works duck in and drainage and we put down the base course for the road so again you with machines on here it won’t be

Ripping it all up and making it really muddy so when the building’s finished scaffolding drop and the Finish externals happen the car parking spaces will have Tac finish them as well holes will be pecked in this and perable T be put down yeah yeah lovely so Dorian what’s what’s your pipeline at the

Minute what are you in construction on what you got coming up currently we currently got 10 sites live under the construction now 220 homes we’ve got 18 sites in our pipeline of eight just over 800 homes in the pipeline um and we’ve got quite a number of leads out and

Offers pending our Target is for the region is to be handing over between 250 and 300 homes a year that means we need to be in construction of about 450 approximately so we’re halfway towards our regional goal we want to maintain a 3 to four year land bank so that means

In our pipeline we need anywhere between 1,500 and 2,000 plots in our pipeline so quite quite a sizable Target um un like said we’re about halfway we’re at the halfway point to our regional Target so how long is it going to take to hit Target uh by year in 2026 W expecting to

Be there yeah and then you got West Midlands expansion just launched West Midlands is that Hush Hush or are we no no we’re we’re okay to talk about that yeah we’re still in the research stage so we’ve identified 30 different zones to operate in uh we’ve got I’ve identified 77 different partners

Registered providers to work with and we’re still in that stage of just whittling them down to work out what areas most in demand what’s more Pro planning who’s more Pro development and we just really want to get like in Wales for example we work we work right across

South Wales uh and we work with 12 mainly at the moment housing associations in in West Midlands you know ideally we going to have up to 20 Partners to deliver our regional Target it’ll be the same Target over there 300 handovers a year um and you know we’ll

Probably operate in about 10 out to the 30 different districts that we’ve identified so we’re looking for those low hanging fruit really high demand Pro planning and pro development Partners cuz at the moment it takes on average 21 months for us to get an on offer

Accepted to get on site y we’re building faster than it takes us mons to get on site yeah and then it’s 18 months to build cool so it’s not a getrich quick scheme no easy bit Yeah quick bit so so our average cycle is 40 months for a

Development wow from offer accepted to full complete Handover so if you want to get in development if you’re going to do one site at a time you’re either going to be rich when you’re 80 yeah to enjoy retirement or you you need a big pipeline to do many multiple sites at a

Time so like I said we got 10 at a time we’re actually geared up as a company where we could actually hand deliver simultaneously 15 sites at any one time mhm we’ve got quite a good level of process now there’s still stuff isn’t there that work on still learning but

Yeah you so but it’s quite structured isn’t it everything set up Jay how long have you worked with Dorian uh 14 months now like you a bit yeah not run off yet yeah it’s um yeah it’s developing a new system sort of thing is it you know I mean trying to take the

Best from all the different places yeah I used to have 17 folders and everything was in there wow now it’s in a tablet Jason had to pull up in a van full of books did so on a typical 18mon program simply put what does that 18

Months look like in terms of how much of that is just clearing the site getting it ready how much of that is maybe this kind of first structure how much is then fit out we had a few delays at the start cuz the the remediation was uh difficult

When it yeah on average it takes about 5 months to do the ground Works mhm uh it takes on on a masonry super structure like this it takes another 5 months roughly for this frame for the Su structure to go up in my opinion uh this

Is for with ruon Etc as well uh the internals will take anywhere between 3 and four months there could be a month snagging period yeah and pre pre pre the ground works the enabling works that just depends on the level of enabling Works needed on this one there’s quite a

Lot of enabling works a lot of a lot of remediation we had to do it’s a question for you A lot of people think developers are builders and contractors and a lot of people think builders and contractors are also developers yeah how would you explain the difference between the two

And following on from that why did you decide to do both yeah sure so I actually started out as a developer and a developer in my opinion is somebody who uh can maximize an opportunity with the given constraints and rules out there so for us property development is

Very much there’s a there’s an opportunity at your site that the the rules that govern us are planning policy uh demand in the area etc etc and our job is to maximize that site for those um constraints and and rules to get the best value and ideally the best profit

As well whereas uh but that developer sits in the middle typically has an orchestrator that’s why I and they bring in the finance uh the the the professional team the construction the delivery partner the exit partner so the the right the right agent to help them

Exit or or forward sale etc etc and they’re always working out the best way to maximize value from everyone to get the best result in the middle that’s where developer does but is obviously one part of them is the delivery party are the construction company a a contractor you you this contractors

Specifically for for Railway for infrastructure for civil engineering for and for residential development and Commercial development and lots others but what they what they’re very good at is just actual delivery you know here is here is the plans I want to build this build it developers not necessarily good

At that thing with construction is a highrisk game if you do not do it properly people can people can die their deaths in construction every year and uh and also unless you’re going to do it correctly it’s going to be inefficient it’s going to cost you a lot of money a

Lot of mistakes callbacks etc etc so developers because they all their mindset is is that or they’re bringing in these specialist skill sets who are experts of what they do that’s that’s what they’re strong at Architects planning consultant who’s the best who’s the best who’s the architect with the

Links who’s the who’s the who’s the planning consultant with contacts and the council thinking those steps ahead how can I get the best site you know getting it through the easiest way possible re really like that you know who’s going to fund it for us going to

Can it fored whoy it can it be forward’s my risks how do I eliminate it part of that one of those risks is the delivery so you give it to a specialist contractor who they’re set up specifically to build they know how to build they’ve got the relevant processes

Insurances systems team um they they know they can come on here and like I said there’s a program they’ll follow they know how to do it then time and time again everything’s safe so they’re going to build on time to Quality remaining safe and then in theory the developer can focus on the

Rest of the MH development skill set and other and other sites why we’ve chose to do both is uh one I’m a little bit of a control freak but no but no importantly we’re in the social housing sector so there’s not as strong margins as potentially the private sector say

Potentially because it depends on the market but as a private developer they may be able to lock in a site and and get 25% profit on it whereas in social housing it’s it’s not like that it’s you know people operate on 10 to 15% margins pretty much depend depending on

Depending on the job so you have to be so good at the delivery to not lose money in the delivery because your price is fixed mhm so for us because there’s not that much money it’s difficult for us to get the site and then contract it

To a DE to a contractor CU they’ve got overhead and profit Etc and it makes then your margin quite small mhm not only that though the the the benefit of doing it ourselves is we set up a trading company so we get monthly cash flows guaranteed payments you know the

Likelihood of a house Association not paying you is is is nil really uh you can get that cash flow where a developer is quite lumpy at the end and you can scale a business then uh rapidly you haven’t got the exit risk you haven’t got the finance debt risk so as a very

Very quick example if you was going to do A10 million pound development project as a private developer bringing all that in you would need to raise Circa uh 2 million 2 and a half million of equity and then the rest on debt basically which should have to PG so you take all

That Finance risk and bring in investors and you’re responsible for people money person your house up as that goes down you’re going to go down with it mhm whereas uh and then let’s just say you make that 20% profit so you make 2 million on on that 10 million uh gdv but

Your Equity needed to do that deal was 2 to three million with working capital so you’re making less than 100% return and that might take two years so 50% return on the equity right with this model you could do 10 million development not with 3 million Equity but 500k mhm and even

If you made 15% 1.5 your return on capital is three times higher but your risk level in terms of Finance risk is massively difference down there no PG no debt Finance especially when you take contract positions like like we do so you you that’s the big differences there

And that’s why you can end up scaling quite rapidly does that make sense yeah I love it makes sense so this is a s in s Road Swansea this is a 35 development unit development and believe it or not there’s actually 18 apartments on here again and 17 houses wow there’s no

Reason why there’s 18 apartments on here it’s just again when you put apartments on a scheme you can build up the density versus houses and again we we tried to get 40 homes on this side but uh the planning pushed us back down to 35 whereabouts of the apartment as we look

At the site there’s a whole block of Apartments there and here you see the kind of like porch area coming out y that’s the that’s going to be an entrance to go in stairs going up mhm and then you’ll see the houses uh further on down that don’t have the POR basically

So all the houses are over there and the apartments are here in a natur so what was just quickly what was the what was the first property deal you ever did First Property deal I ever did yeah oh has an interest to and as I um well from a professional point of

View I’ve been involved in property since since quite young especially in my businesses but in terms of my first deal I did was just a standard by refurbish refinance and I’m pretty sure my my I’m pretty sure I was 20 what was like a

Small twoed yeah it was a it was a just a two-bedroom house basically you you go in there and uh remember what you paid for it no I can’t remember I think it was 60,000 something like that yeah and I think did the referb and sold it for

Like 120,000 or something so it was couple of tens of thousands of money in it uh but more importantly it was the first one you know it’s uh you don’t really do it for the money although you try you do it because of uh all the

Lessons and and it just gets you going and then and then I progressed on to doing more uh flips and by refurbish ref finances of individual houses then went on to conver commercial conversions uh conversions and just commercial buildings into apartments and then went into new build private development and

How old are you now 28 28 you were you say 20 19 or 20 when you did must 20 I believe yeah wow yeah and what’s the um the value of the pipeline at the minute was Cass over 200 million wow at the moment the one thing we’ve got at the

Moment is momentum I’m a big believer of momentum takes a snowball it’s like Warren Buffett’s book The Snowball takes so long to get especially in property development like with foure Cycles as we’ve talking about it takes so slow to get that going but then when it starts

Going the machine starts speeding up and we get leads and now good quality leads every week and they’re off Market through introducers or agents so some of the some of the deals we’re involved in that’s not part of our pipeline you know up to 110 units off Market

Negotiating with both the vendors and the Housing Association that excludes them we had one deal that was dead recently lit two dead and now it’s come back to life got off the phone today found out that the deal’s back alive it’s 11.8 million project wow and you

Know last month it was dead there’s only one issue on the site which is the entrance the 278 the entrance road is actually going to come basically come through the middle here and there’s actually another block going here but we can’t start that because we’ve not been

Given permission to move this from here to there okay and but if if we if we kept a design like this we wouldn’t have been able to put in any more Apartments but it’s taken nearly 10 months to to get this permission we’re hopefully starting this now in January so how many

You got on this book uh so there’ll be so these are walk up so that that’s 2 4 6 8 okay uh 2 4 6 8 10 12 and that’s a block of six Apartments three stories there’s 18 Apartments here and then 17 hours is what was here

Before uh so I think years ago this was a like a club cuz there was there was footings in the ground but when we took on this side it was a car park a car sales lot mhm so we took a contract position us again conditional contract

So yeah but you know back to back here with the Housing Association so Road road going in first we said before this as well there was all the infrastructure foundations’s being done as rafts and then slabs going down and those progressing as well scaffolding going up ready for Timber kits and slabs still

Progressing masonry commenced on this one mhm and so plates down here for timber frame and then boom and What’s the total value of this scheme uh this one is 8 million nice cool pays the bills they’re all at stage like I said all the kits are up

And the first fix are done so you see we we even put sprinklers in houses oh yeah uh all the electric first fix is done uh these are 100% electric so there’s no gas in these and this was a um a trial board they did for the client

For uh showing us how the spray plaster is going to work these are going to be spray plastered instead of normal normal skim what’s the benefit of that well in theory it’s in theory it’s faster it dries as a Mis coat so redu increases the speed for

Decorating as well Tyler this is clyve he’s our site manager I just telling them that all the first fixes done and hopefully from next week now I think it’s next week know the dry liners fall back in yeah we’ve got uh a few more bits piece of first fix to

Do we get to building inspector and get that signed off ready to go then great nice and yeah so they’ll come intact and we think how long for the hour again was it they’ll get two they get both the two houres done in a week was it yeah tack

Is two and a half days um and the pl is two and a half days okay cool to get a house a week house a week that’s ramp up the one good thing I like about these type of sites is where there is that continuity so like some of

The sites you’ve been to especially the othera one tight site apartment block I was talking about the critical path only one thing has to go wrong and everything’s on stop on here we got 35 different plots and uh hopefully things don’t go wrong but when it when it’s

When it works right you all of a sudden you have this progress every week if just look at that clipboard massive differences so quickly yeah everything should actually flow so we call it on a program a diagonal line so if you can maintain that diagonal line we’ve got

Continuity all the way through what’s the Landscaping like on a site like this very minimal basic it’s actually quite comprehensive is it yeah yeah yeah this it’s quite a big thing underneath all of that uh welfare setup there we’ve got quite a detailed drainage system tons of

Crates under there uh and the it’s quite deep dra quite deep drainage running through the site to take it out but once once all of this is finished all that’s going to be uh Green Space basically soft Landscaping uh and then but there’s landscape features right throughout the

Site when it when it’s finished obviously all of those will have Gardens and uh and standard boundary treatments uh but there’s quite a big emphasis on um on Greenery W every set we have to do now it’s got to be a biodiversity net gain so you know they luckily on this

Site the well I don’t know you SE what do that mean in simple terms basic obviously construction and development is damaging to habitats and environment so what they’re saying is if you’re going to go onto a development site and rip it up and build on it you’ve got to

Leave it better you have a net gain uh for for habitats and ecology than than it was before and you could do that through planting different types of uh plants trees so like on one side we’re doing uh we’ve got to take down some trees but we got to plant three new ones

In place of those trees uh on S we put bird and back boxes on we got hedge put hedge RS we’ve got a Le for fencing as well we got a Le space for hedgehogs uh we’ve got a landscape ARS got to think quite carefully about the different mix

Of flowers and different mix of uh other landscape features we’ve got some dry ponds uh we got SES it’s just quite a lot of different stuff yeah it really is flying now say that continuity is there and everyone knows exactly what they’re doing first house is always a template

But once you’ve done that where you go yeah you so um yeah it’s going well nice then yeah yours will be like this within all time yeah it’s the fun bit this is now