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Big Is Best For PRS, Says The Man Behind 5,000 Homes At Wembley Park

Alto at Wembley Park, London, developed by Quintain
Alto at Wembley Park

Private rented sector housing development in London works best if you build big.

So says Angus Dodd, chief executive of Quintain, which is building the U.K.’s largest purpose-built PRS scheme next to the Wembley National Stadium. This week, Quintain begins letting 120 PRS units at the Alto building in the scheme.

Purpose-built PRS has not grown rapidly in London, despite enthusiasm for the concept. According to the Future of London think tank, just 41,900 new units in 303 schemes have been completed, are under construction or have gotten planning permission since 2009. That is a small proportion of the estimate 819,000 private rented households in the capital.

Speaking exclusively to Bisnow, Dodd said the immature London PRS sector needs the safety net of scale if it is to grow successfully.

“Scale is important for PRS because it is easier to be efficient when you’re managing thousands of units, not hundreds. And you learn from the buildings you complete and manage, because PRS is still an immature market and nobody should pretend they’ve got it taped. So we learn lessons from each building as it is completed.”

Future of London said viability is the biggest challenge for PRS — London property prices mean it almost always makes more sense to build for sale. Dodd said cost is an important factor in the decision to build PRS.

"PRS does not work at every price point," Dodd said. "We're lucky that our for-sale pricing is £700-750/SF, and that this is at least the capital value of PRS, so the valuations at Wembley make it higher for PRS than building for sale."

Tipi at Wembley Park
Tipi at Wembley Park

Quintain has already invested £900M in the transformation of Wembley Park and has a further £800M of funding secured. It has planning permission for 6,955 homes at Wembley Park, of which 995 homes have already been completed and occupied. Its goal is to have 3,000 units done or under construction by the end of the year.

These homes will be available through Quintain’s build-to-rent business, Tipi, the lifestyle-focussed rental company which Quintain launched in April 2016. Tipi already manages 141 apartments at Wembley Park. They are fully let.

This week, Quintain revealed Boxpark would operate a 43K SF independent retail 'fan village' next to the stadium, ahead of a U.K. roll-out.

Dodd said Quintain will likely be around long-term, but Lone Star will not.

“When Lone Star bought into this, it took on a huge amount of risk — planning risk, financial risk, construction costs — and those risks are now largely off the table. Lone Star will not own Wembley Park in five years time, but it is a good use of private equity to address the site’s kind of early stage capital needs.”

He believes the project's shareholder ultimately will change, and said the long-term stabilised income streams at Wembley Park would appeal to a wide pool of potential owners.

UPDATE, SEPT. 25, 9:51 A.M. ET: An earlier version of this story cut off the analysis of the exit strategy and how much Quintain has invested to-date and plans to invest. The story has been updated with this information reflected.