'We've Taken Control Of Our Destiny': QuadReal Unveils Plan For BTR Growth

Canadian real estate giant QuadReal Property Group has doubled down on its commitment to the UK market after buying long-term partner Realstar last year, and it has set out ambitious plans to expand its rental and purpose-built student accommodation portfolios.

Despite soaring development costs and a challenging economic backdrop, the company believes the UK and Ireland offer major opportunities across both living sectors, leaning on its experience in the more mature Canadian market and global portfolio of around 93,000 units across build-to-rent and PBSA.

“The business had grown to a size and scale where it felt as if it made sense to take control of our destiny,” QuadReal Managing Director, Residential Europe Kristian Branum-Burns told Bisnow in an interview, laying out the company's strategy for growth following its purchase of the 6,000-unit Realstar platform. 

The acquisition was a major vote of confidence in UK BTR when the market was on the floor, with new development starts at record lows. QuadReal has followed it up with a £120M forward-funding deal announced this week, a rarity in the current market.

Boots on the ground, a focus on operational control and a laser vision on small opportunities are key to growth, Branum-Burns said.

QuadReal, the real estate division of Canadian pension fund British Columbia Investment Management Corporation, is one of the 20 biggest real estate owners in the world, with just over $52.3B under management, including a $7.5B debt book.

Following a strategic shift, 80% of that is now directly managed by the company, rather than external managers.

Its key investment themes are residential, logistics and alternatives, Branum-Burns said, with alternatives encompassing data centres, self-storage and movie studios in the U.S.

But the main pillar is residential, which makes up about a third of its portfolio, and in the UK, the business has grown to more than 7,000 BTR homes and just over 4,000 PBSA beds.

Realstar was QuadReal's UK operating partner in joint ventures from 2017, but it acquired the operating company as well as Uncle, the resident-facing brand Realstar owns. Buying the lot meant it now has a vertically integrated residential business in Europe.

“For simplicity, we think operations are at the heart of this asset class, and by having direct control, it ensures that we have full control over pretty much everything,” Branum-Burns said.

“It's processes, it's risk management, it's return generation. But I think most importantly, it drives our ability to control the service offering and the messaging to our residents,” he added.

The 6,000 beds associated with Realstar are spread primarily around London Zones 2 to 5, and Branum-Burns said this differentiates the company from other large BTR operators in London, which he said tend to have a high concentration of holdings in specific London submarkets.

Historically, it operated via programmatic joint ventures, forward funding and undertaking developments over time. On the back of the pandemic, it saw an increase in inflation, construction costs, associated costs and borrowing going through the roof, and it saw repricing in real estate as well, he said.

At that point, it pivoted to doing more acquisitions of operational real estate.

“Where we're at now is to do development where we're able to make the numbers work and to buy operational schemes where we can be a source of liquidity to sellers,” Branum-Burns said.

Despite the volatility caused by the Middle East conflict, he said QuadReal remains convinced about the fundamentals and is taking a long-term view, pointing to acute undersupply and the institutionalisation of BTR as an asset class.

“We absolutely want to keep growing, but we'll do so very selectively,” he said. “Our aim is to price risk carefully, protect ourselves on the downside and make sure that investment decisions are made carefully.”

As well as London, QuadReal has assets in Manchester, Leeds, Birmingham and Dublin. 

“Do we think there is more liquidity in London? Hands down, yes,” Branum-Burns said. “But do we think there are markets where, within microlocations, it still makes sense to be delivering and developing or buying stable assets? Yes.”

QuadReal has just completed a forward-funding deal in the UK, one of just a handful in the past couple of years, after signing a partnership with London Square to deliver 241 BTR units at the developer’s Woolwich scheme in south-east London.

Through the agreement, QuadReal will forward-fund the £120M development, which will be managed by its Uncle brand.

London Square’s Woolwich development will create 700 homes, including 337, or 48%, affordable properties, to be managed by The Hyde Group. Construction will begin this spring, with completion expected in 2029.

QuadReal has also recently stabilised a 500-unit scheme in Leeds, and in Dublin, it has just under 1,000 units across three schemes — and it is contemplating doing more in the Irish capital.

“We developed those assets, and they have been stabilised for a couple of years now. They're performing really well, and clearly the change in the rental framework has, frankly, opened our eyes to wanting to do more,” Branum-Burns said.

“We're seeing the reversion take place. It's acutely undersupplied, and the fundamentals are strong. We have a team on the ground in Dublin continuing to look for more.”

QuadReal is also expanding its PBSA portfolio, where it sees a lot of similarities across the two asset classes, especially in terms of demand and the need for operational excellence.

“In the PBSA space, a lot of investors are still solely focused on London or Russell Group universities,” he said. “When you research, you can identify markets where you have good universities that need students, those students need beds, they need beds of quality, and so we're focusing more on micromarkets where there is a need for the product.”

And despite the economic challenges, he remains convinced of the BTR opportunity in the UK, which he said is growing off a low base and will follow Canada's development path, with mass scale. 

“The low base in the UK provides room for growth and improvement in operations, which ultimately benefits us, the owner-operator, as well as the residents,” he said.

“The market has now grown to about 200,000 homes in the UK over the last 12 or so years, and delivery is slowing. What we think is really important now is the next phase of this opportunity, so it's selective developments, driving operational improvements, which ultimately comes back to why we bought Realstar: to continue growth and continue delivering homes into a supply-constrained market.”