Modular housing developer ilke Homes is eyeing a pipeline of 10,000 factory-built homes over the next five years after securing £60m in new funding from Homes England and several other investors.
The developer said that regulatory pressures and ESG criteria have pushed the industry to scale up its modular construction strategies.
Modular developers like ilke have ambitious green agendas. This year, for example, ilke launched ZERO, its initiative to build thousands of zero carbon homes.
Having already delivered five such sites, ilke is aiming to deliver nothing but zero carbon homes by the end of the decade at no extra cost to investors or housing associations.
As part of the £60m fundraise, Homes England, the government’s housing accelerator, provided £30m of debt to ilke Homes, having previously invested £30m in 2019.
Homes England’s backing reflects the government’s explicit support for factory-built homes in combating the country’s housing shortages.
The remaining £30m came from a number of other investors, including The Guinness Partnership, Middleton Enterprises, Sun Capital and TDR Capital.
High (initial) cost of modular
ilke said the new investment will be “transformational”, allowing it to scale up production and accelerate capacity, quadrupling delivery from two to eight homes a day – which would also bring down manufacturing costs.
The company plans to invest heavily in automating more of its manufacturing processes to drive efficiencies, secure more sites and expand its “package deal” strategy, which offers full development service of site, infrastructure and homes.
Being able to deliver that many homes will be crucial for ilke, which reported an operating loss of £34.6m in the year to March 2020 – the latest figures available.
In its annual report, the company said it “continued to be very much in its development phase” and, as a startup business, expected to incur further liabilities over the following year.
As a result, its housebuilding delivery has yet to offset the costs of setting up and expanding its production capacity.
Given growing support from the industry and from the government, ilke – which wants to become one of the 10 largest housebuilders in the UK – has remained optimistic about its potential. Being able to deliver zero carbon homes at no extra cost will become a reality by 2030, the company recently said at the Chartered Institute of Housing annual conference.
Gearing up for the green revolution
Stephen Stone, board member at ilke Homes, said: “This announcement proves that there is a shared ambition among the public and private sectors to find innovative solutions to structural issues that have dogged the construction and housebuilding industries for decades.”
Stone joined ilke Homes earlier this year after 13 years at FTSE 250-listed housebuilder Crest Nicholson where he was CEO and, later, chairman.
He added: “This new funding will help us create hundreds more highly skilled, green jobs for an economy that is gearing up for a green industrial revolution. The fact that our own clients continue to either invest or increase their stakes in the company is testament to the dynamic approach ilke Homes has taken to housebuilding in the past three years.
“Faced with regulatory pressures and a requirement to meet ESG criteria, we are finding that investors are increasingly scaling up their MMC strategies.”
Harry Swales, chief investment officer at Homes England, said: “Manufacturers like ilke Homes are vital if developers are to build new sustainable homes at the pace and scale the country needs.
“This debt facility from the Home Building Fund shows our commitment in increasing productivity and efficiency in construction to meet government’s housing delivery ambitions.”