Club flats, combining the residential sense of community with the great service of a hotel

Unknown Speaker 0:00 London Property – home of super prime, where you can find informative educational and entertaining content, covering all aspects of property. Naomi Heaton 0:11 Hello, and welcome to the London Property Podcast. I’m your host Farnaz. And today we’re in conversation with Naomi Heaton of The other house. Welcome, Naomi. Hi there. So we’re very excited to be speaking to you again, Naomi. And we’d like to tell our listeners a little bit more about you. So could you tell us about yourself, and how you got into the investment market in prime central London? Well, it’s quite a long story. I actually started in advertising, when I graduated from Oxford, attracted the bright lights of central London and also liking that element of marketing and affecting consumer behaviour and so forth. But whilst I was in advertising, I bought my first flat at a very young age, I literally begged stole and borrowed, because I couldn’t understand why people would rent if they could buy. And that’s what I did, and for the garden flat in Camden Town, and that was my first step on the on the property ladder, and I got the bug, I really love doing up, renovating, adding value, making it a more special place to live in. And what I could see with the fact that foreign investors needed exactly that kind of help, finding the best opportunity doing it up and in fact, letting and managing. So whilst I was not trying to disrupt the market, I really thought there was an opportunity to set up my own business as always entrepreneurial, and actually set up a company that helped investors invest in the market and invest profitably. And that was the beginning of London Central Portfolio, which is a full service asset management company. And from there, it became the first company to really look at the residential market from an an investment stance, it was the first company to act for the buyer, rather than for the seller, which the estate agent does. And then we started property funds so that people could invest collectively in the central London market, but it was always, how do you maximise your profit opportunity in prime central London. And so LCP has been a long standing successful company, helping investors worldwide make the best of their opportunities in central London. And that was really how I got into the property market and was in that private rented sector, that rental sector very long time. And it was then that I actually recognised an opportunity to develop another business, which has led to The Other House. Right. And also, not only did you have a knack for design, but you also have a sense for where the market is going and how to navigate that so with with LCP, it would have been grouping together and taking advantage of the tax incentives that were available for institutional type investors, which was something that we all saw changing in 2013 onwards. And then after that, I guess you spotted the opportunity of where the investment market is going further mixing this sort of residential lifestyle opportunity. That’s exactly right. So during the years that we were acquiring, and, and doing offer managing, letting rental investment property in central London, I could see how the market was changing. And one of the first things I saw was how people were renting smaller units, we always targeted what I call the mainstream sector, the mainstream sector being about 75% of all the properties let in prime central London, who are renting under one or two bedroom units. And I could see that units are getting smaller, because if people wanted to remain Central, a lot of the tenants were international, they wanted to enjoy the sights and sounds of central London, and corporate budgets are getting squeezed. So they would sacrifice space for location. And that haven’t particularly in 9/11, after 9/11, lots of Americans didn’t come over, units got smaller. So I could see over time that the market was renting smaller units, but they really wanted to be right in the centre. And I’m talking when I talk about prime central London, I’m talking about the city of Westminster or the Royal Borough of Kensington, Chelsea, right in the heart of London. As anybody who lives abroad goes to another city, they want to be where it’s all at. So that was a first move that I saw. And then I could see how people want to do and it’s be more and more interior designed, so that they wanted to feel aspirational, that we were actually dressing the properties so that we’ve put the photographs and put the pictures on the walls, and pillows on the bed. And that need for an aspirational feel became more and more important. And then more recently, what I could see is that we were entering a digital age that we had a kind of different generation we were targeting and they wanted everything 24/7, that they wanted everything at the click of fingers. And I used to think well actually, really what we’re now producing is a hotel offering, hotel rooms where they look great. They feel great. But now these people want everything immediately. So why don’t we think about providing a hotel for long stay guests. And once we started looking at that market, we saw that on the residential side, you have a great sense of place, you feel like a local, you can enjoy all the experiences of the community. But you don’t get that much service. But at the hotel end of the spectrum, you get great service, but you tend to be in a rather impersonal, rather boxlike room. And you tend to feel very itinerant very much in a kind of revolving door. So I thought, Well, why don’t we smash it all together? Why don’t we disrupt the sector again, not deliberately, again, to be a disrupter. But just seeing that times have changed, the generation changed, they were looking for something new. And if we could bring the best of hotels and residential living together to create something which we’ve called a residence club, where people really felt it was their other house, and hence the birth, the name The Other House, where people could stay for a day, a week, a month or a year. So you could come for your holiday, or you could come for a year, as a long stay tenant being relocated, you could enjoy either. And what we wanted to create was a sense of what I call living experience. So we have club flat. So every, every offering that we have has a separate sitting room and kitchen, a sleeping area, so that you really feel that you’re in your own place. And that you can live your own life, and you can feel like a resident, but you can always get the service that you would expect from a hotel. And we’re very tech-based. So we have The Other House app, which is for people who want tech is not for people who don’t. And you can literally get your room clean, check how busy the restaurant is, how busy the gym is, you can check in you can use your your mobile to open your room, you can do your room controls, whatever you want, for the digitally native generation, you can do it on in tech, you don’t have to interact with people. But equally, that means that all our team at The Other House have much better quality interactions, because you’re not necessarily having to do the mundane. So we have that whole hotel aspect to it. But we also wanted to make people feel that they had their own space. So we’ve also developed this wonderful club, this members club so that if you want to have friends or colleagues or you want to have a quiet drink, we have this wonderful club with two bars, with a gym, with a whole wellness area. And then we have some fantastic public areas. So if you want the street vibe, we have a Street Cafe or The Other Kitchen. And we have a really cool destination cocktail bar, of which there is a massive shortage round here. So that what we can do is give people that that 360 degree experience, which brings the best of the different sectors in the market, and just say, Okay, we’re going to look at this in a different way, we’re going to look at it from a residential lens, not the hotel lens, but combine the best of everything. And that was really the origin of The Other House. And it’s something completely new and innovative. And what I hope is that we will have residents clubs, all over the world, which are certainly other houses all over the world, but creating this new sector of residence Club, where people really feel that they can work, rest, play, which is what people want all in in one environment. It’s very inspirational listening to you because if you actually look at what’s been going on in the in the in the real estate market globally, you’ve had hotels that have tapped into the residences, like The Four Seasons and the Mandarin Residences. And then you’ve had service departments that have tried to do, but the way that you’ve combined them together, also touches on the fact that, you know, I always feel that if you look at the States, they’re always about five years ahead of us. But you know, lots of rental investors in America look at the fact that they make actually a certain percentage of their income from the ancillary services. So is that something that comes as part and parcel of a person’s experience? And they just pay for the bar and the restaurant separately? Or is there different levels of service when you are at other house? No. So you made lots of really good, good points there. And funnily enough, I feel that that this has been quite an old concept that that we’re in the old days, people who lived in their clubs and had this kind of life and that’s kind of disappeared, and is now where people want to be, the hotel star services are all part of the package. And the club, if you’re a resident, you have access to. So there’s absolutely nothing to pay for being a part of this member’s club. There will be private members from the local community because we’re really keen on bringing the local community in, as well as our guests began to go out into local community and feeling part of local community say the members club is going to be absolutely gorgeous, and really, really stylish. And as long as you’re here, you can join that that Club. So that is absolutely through a free ancillary service, because actually, it’s kind of fundamental to what we’re doing. We always saw a concept as an onion. So in the middle of the onion, you have a circle, which is your personal space, which is your club flat, where you can just chill and enjoy. And then you have the private space, which is a member’s club. And then you have the public space, which is our Bar and Bistro. So that you have all these different elements, and they’re all accessible to everyone. But clearly, if you go to the bar or the bistro, you’re going to be you will buy your food and your your drink in a normal kind of way, and the other kitchen and The Monkey although that that’s the name of our bar. Although they are within The Other House, I want them very much to be stand alone. And just to touch on other other kind of elements of what we’re doing. Sustainability is absolutely at the core of what we’re what we are, taking these old buildings which are derelict are not fit for purpose, making them fit for purpose, but using all the building techniques we can to minimise our impact or our carbon impact. We will be with with with both Covent Garden and South Kensington, we will be achieving what’s called BREEAM excellent, which is the most respected and well known measure of sustainability, which is an extremely hard task when you’re refurbishing a building, rather than doing a new build. We look at local producers, local manufacturers, we look at seasonal food, we look at only using electricity, no gas, everything that we use is recyclable and not single use. So the whole area of sustainability is really important. And we know it’s really important to our guests, we know that our guests want to make a positive social and environmental impact. Same with a social impact, we want to do things for the neighbourhood and we want to do things that can bring them in. So for example, with our other kitchen, our Street Cafe, we will have breakfast, and we will have lunch and our lunches are constantly revolving menu because it’s a low waste kitchen and it’s seasonal. But in the evening, we will have pop up restaurants and chefs locally coming in so that we can bring in the neighbourhood we can do exciting things. So sustainability is a really important plank of what our guests want. They want to feel at home, they want to feel in control to tech, they’re really into sustainability. But they also want experiences, and that the whole of the way that we were designing The Other House is to be very dramatic, full of textures full of colours, that as you go into different spaces they look different. It’s a really, really exciting and avant garde environment, but still has that kind of cluby feel. And that is really important. And what I feel about our guests is that these are people who are aspirational, they know what they want. They’re all on a very journey, and they know exactly where they want to go. But they also are socially and environmentally aware. So the reason we called our bar The Other Monkey is we feel that for our guests – Why is like an owl, and curious is a monkey. And that’s a really important element of what we do. And you’ll see monkeys on our China ware, you’ll see we’ve got some lovely graphics of owls and monkeys on our website, plus other wonderful graphics too, because that’s the kind of character of the people that we’re looking for. And we’re looking for a type of person rather than a specific demographic. So you mentioned that people could use the residences or the club club rooms for short term, long term. So I’m assuming that there is the price differentiation. So if somebody comes here and says, right, I don’t want to have to deal with getting a housekeeper and sorting out my Wi Fi. And I’m just going to rent this for a year, there’ll be looking at different price brackets compared to… Absolutely right, so you pay for the shorter stay, you will be paying more for up to 14 days, then for the equivalent of a service department stay, which is up three months, it’s a certain rate. And then after three months, it’s a longer rate. The beauty though, for our guests is that they’re not tied in. So if you’re going to be staying here for a year, but you haven’t want to go home during the summer or the winter, you can leave your room and not pay and we will rent it out while you’re away. And then you can pick it up when you come back. If you’re coming as a peer detail user, we will, well for everyone of course we will store their kit. So they may come in and be be coming in for a few days, a week or a month. And then we could store their kit and then we can bring it back out again. So that again they really feel their belonging and rather than going to an empty flat their news a few days a month and having to heat it up and open it up and do all these things, get the shopping. It’s all here. And we make life really easy. So we recognise that more and more hotels suffer from the problem of people wanting takeaways and Deliveroo, their deliveries and moped drivers coming through the lobby. So we have a completely separate access for those deliveries because you know people are wanted. Equally, they can go to our other kitchen, and to click and collect. So they don’t have to do, but we recognise they will. We have smart lockers where deliveries are made from Amazon and then they’re texted and then go pick them up to all the things that someone a modern day contemporary person will want or would expect in their home, we will provide, and we want it to feel very much their place, their house, their their rules, their home for as long as they’re in town, except that it’s a kind of more sophisticated, more interior designed, more exciting environment, you probably get at home. It still is your house, your rules. And I think that’s really important in how we’re trying to approach it. So finger on the pulse again, you know, they say the biggest taxi company in the world doesn’t have a single car. And, you know, soon to be the biggest rental investment company in the world where the residents they don’t need to own anything. Exactly. And what is absolutely, yes, and that is where we’re different from branded residences. Now branded residents is have have been enormously successful in forging their own path. And you have this residences link mainly to very high end hotels, and indeed, linking to other high end brands now, but actually, you buy them. And they’re separate from the hotel, or they get hotels services. So you’re right here, you don’t buy you don’t own, you just use and pick and drop, use and drop as you want to, rather than having that, that that ownership element. And more and more people don’t necessarily want that ownership element. Certainly we’ve seen that with Generation Rent, where they choose to rent rather than to buy. But it gives you so much more flexibility. And if you’ve got homes around the world, why do you necessarily want to in probably a becoming a slightly more tax aggressive environment, it’s a it’s another way of doing it. And of course, what we’re really capitalising on and being the disrupter, having been prescient, in many kinds of ways, fortuitously, is the fact that we’re seeing this advent of slow travel that with COVID, clearly, trends which were in play have, accelerated. So the idea of being able to work from anywhere in the world, therefore be able to combine vacation with your work, being able to bring your family over when you’re finishing your work assignment. The fact that people have moved into the country during COVID, because they want more space, but needing now to come in a few days a week, all these things are accentuating the need for flexible living, we’re seeing corporates being more socially responsible in terms of their travel arrangements. And indeed, for their people say that they will have less trips, but longer trips better for everyone. So this need to be able to be in an environment where you can really feel at home, when you’re in it is becoming increasingly important. The acceleration of the use of tech, the adoption of tech during COVID was enormous. If we’d launched The Other House with the tech platform that we’ve got a few years ago, we probably would have had a lot of barriers to fight. But the number of people used to know ordering their food from QR codes, the number of people that lessen their interaction, because of COVID and therefore used to their mobiles more. And of course, the whole digital generation who wants to do everything by mobile phone anyway, is all here now. So this idea of a tech based flexible stay environment but which offers great experiences is really where it’s at. And people wanting experience too, the value of experience rather than just rushing here and there and not noticing what’s happening in your environment, I think has become so important. So although we started thinking about this 10 years ago, and then developing the concept, and then talking to different people whom we would partner with, and of course, we’ve been so fortunate to partner with APG, who are one of the biggest pension funds in the world, who have come in and have a lot of hospitality expertise, they’ve come in to partner us with The Other House because they say fundamentally believe in the growth and importance of flexible stay living has been a fantastic opportunity for us. And that means that alongside our South Kensington and Covent Garden assets, we will look to fill in, in fill with in other villages within central London whether it be Fitzrovia or Mayfair or Marylebone or Notting Hill, and then that will be the launchpad to go overseas so that we will have our residents clubs everywhere, and you can stay in any of our clubs anywhere in the world whenever it suits was it it’s it really is a fantastic concept because also, I’m sure that you know you have you’ve heard and notice that the rental stock is really diminishing and probably not a coincidence, because most of the buy-to-let landlords, Mom and Pop landlords have been taxed out of the market, and rents are going through the sky. And when you’ve got these large investment portfolios, you know, whereas in other countries in other regions, people will say, oh, I want minimum 220 units otherwise, you know, an institutional investors are not going to be interested, you’re actually creating that opportunity in prime locations where traditionally the only people who held stock that didn’t actually affect the tenure of the residents were the estates, because actually, there are not that many massive portfolios in prime central London unless they’ve been historically. Absolutely right. And in fact, it’s interesting in Covent Garden, that Capco are trying to become an institutional landlord by acquiring all the different buildings within Covent Garden. But of course, there are very few large landlords that have have big estates. And the beauty about The Other House is the fact that it is completely flexible. And we’re not using any of the traditional tenures, we’re not renting flats out on short shorthold tenancies. It’s all done on the normal hotel basis, and it is completely flexible. And I think people want that flexibility too. Fantastic. So you’ve got two sites on the go at the moment. And you’re we’re sitting in the South Kensington site, which is going to be ready this summer. And what about the Covent Garden one? Covent Garden we’ve just got planning permission on which is really, really exciting, 489 Club flats, and we will be starting work this summer, but it will be nearly a two year project. And for our listeners to find out more about how to get membership, how to use the club rooms, then they can head over to your website? Yes, absolutely. The website is about the otherhouse.com. And it talks all about our brand pillars, all about our club flats, all about our members club and and how you can be part of it, and how you can book so it will be great if everyone that listens to this podcast takes a look. It’s a fabulous site. And it tells you all about what we’re offering and what we’re doing which is so different and exciting within the marketplace. And I hope everyone will be able to really enjoy being part of The Other House. Well, fantastic. We’re looking forward to the launch party, where you will be invited. That’s a promise. Thank you Naomi for taking the time to talk to us today. It’s been really exciting talking to you and we can’t wait to see the final product. Thank you for nice, it’s been lovely talking to you and catching up and you will be here on launch party day. Unknown Speaker 22:35 Thanks for listening to the London property podcast, head over to www.londonproperty.co.uk And subscribe to our newsletter to receive latest updates.