There Are A Ton Of Ways To Make Money In U.K. Build To Rent Right Now
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The U.K. build-to-rent sector has exploded.
The build-to-rent pipeline grew 30% in the year ending 31 March, according to the British Property Federation. The sector is evolving from its infancy, with close to 120,000 units complete, under construction or in planning.
This evolution is highlighted by the plethora of companies now active in the market, all with slightly different businesses models, capital sources and return targets. The fact that they all feel they can make money in the sector shows it is becoming a mature and diverse part of the commercial real estate world.
Bisnow looked at the range of different ways of making money in U.K. build to rent, and the companies active, all of whom are speaking at the first Bisnow Build-To-Rent Annual Conference this month.
Quintain — Private Equity Goes Big
Quintain is an example of how private equity thinks there is money to be made in build to rent, especially if it is done at scale. Lone Star took the London developer private for around £700M in 2015, and decided to allocate 5,000 of the 6,000 apartments at its Wembley Park scheme for rented residential. Having started building the scheme, it is now exploring the sale of Quintain for £3B.
Cheyne Capital — Private Equity With Social Impact
Cheyne Capital is another private equity firm involved in the U.K. build-to-rent sector, but it is doing things differently than Lone Star. It has set up a perpetual life fund with a social impact mandate to build social housing or housing for people with specific care needs, such as learning difficulties. At some point it will likely try to float the fund as a REIT.
ICG Longbow — Lender-Turned-Investor
As a lender, debt fund manager ICG Longbow has backed the development of more than 650 rented residential units since 2014, and in March it created a £250M joint venture with developer SDL, called Wise Living, to build single-family homes across the U.K.
M&G — Blurring The Boundaries
M&G has provided both equity and debt to build-to-rent schemes in the U.K. It has the ability to invest across the capital stack given it runs both equity and debt funds. Last year it provided an £85M, 35-year loan to One Housing that will allow the company to build 1,050 houses across social and affordable rent, shared-ownership and market sale.
Lloyds Bank — The Traditional Lender
Lloyds is one of the U.K. banks active in the build-to-rent sector. It dipped its toe by providing development finance to big developers like Canary Wharf and Quintain for mixed-use schemes that had an element of build to rent. Last year it also provided an £18M loan to Regal Property and Aprirose to build a 22-storey, 200-unit rented residential scheme in Birmingham.
Greystar — The U.S. Pioneer
Greystar is one of the U.S. multifamily giants which helped to kick-start the build-to-rent sector in earnest in the U.K. It has bought multiple sites in and around London, including the former Royal Mail depot in Nine Elms, and its pipeline now extends to more than 10,000 units to be delivered in the next three to four years. It is in talks to buy Inhabit’s £1B portfolio of 3,300 units across the U.K.
Cortland — The Next Wave
With firms like Greystar having proved the concept, other U.S. investors are now coming to the U.K. and investing at scale. Cortland Partners is planning to invest up to £4B in the market and build up a portfolio of 10,000 units. It has teamed up with local developer Orion Land.
ADIA and Fizzy Living — Global Money Backing Developers
Global institutional investors are now highly active in U.K. build to rent due to the long-term, stable income the sector provides. One of the first to make the move was the Abu Dhabi Investment Authority. It provided an initial £200M of equity to Fizzy Living, the build-to-rent development brand set up by housing association Thames Valley Housing, and has since reupped several times for new schemes.
APG and Oxford Properties — Buying Into Established Brands
While ADIA was willing to back a developer from the first day, other institutions have looked for stabilised platforms in which to invest, seeking lower but less risky returns. Dutch giant APG formed a £349M rented residential joint venture with Grainger in 2013, and was one of the second wave of investors to back Delancey’s Get Living build-to-rent business in 2016. The business owns schemes at the former Olympic Village, Elephant & Castle and across the U.K. This year Oxford Properties took a stake in the business to get a piece of the action and fund future growth.
Grainger — The Old Hand
Grainger was in the build-to-rent sector before the term was invented. The U.K.’s largest listed residential landlord is involved in almost every element of the residential sector, but as build to rent has grown it has increased its focus on the property type under the leadership of Helen Gordon.
Canary Wharf — The Need To Evolve
In its first iteration, Canary Wharf Group just did offices, with a big shopping centre underneath. But its new development, the 5M SF Wood Wharf, will comprise about 1M SF rented residential with about 3,600 homes, as it looks to create a modern, mixed-use district.
Grosvenor — Transferrable Skills
The most august of U.K. developers, the Duke of Westminster’s Grosvenor, is looking to take the placemaking skills it has built up from owning a big chunk of Mayfair and Belgravia for 500 years and apply them to Bermondsey in South East London. It is building a £500M mixed-use scheme there which will include more than 1,350 rental homes.
Moda — Shaping Cities
As well as big names like Grosvenor and Canary Wharf, many smaller U.K. developers have got into build to rent in a big and innovative way. One of them is Moda. Not only is the scale of the company impressive — 6,750 units across the U.K. with a value of £2B — it has also instituted tie ups with companies like Uber to try and reduce the reliance of its tenants on cars.
The Collective — Co-Living
Co-living could be seen as a sub-genre of build to rent aimed at those willing to share space so they can afford to live in an expensive city like London. The firm that has made the concept work in the U.K. so far is The Collective, which is in the process of selling its stabilised scheme at Old Oak Common for more than £100M and is developing two new schemes in Canary Wharf and Stratford.
Manhattan Loft Corp. — Luxury Living
Manhattan Loft Corp. has combined luxury hotels and rented apartments at its Manhattan Loft Gardens scheme in East London, aiming at the top end of the market.
To hear from all of the above companies and many more, join the Bisnow Build To Rent Annual Conference at Wembley Park on 22 May. While you are here, why not vote on which U.K. rented residential scheme you think has the best amenities?