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Is the build-to-rent sector about to come down to earth with a bump after three years in which the living has been easy? Or will it ride the current crisis?
Investors are putting their money on the latter, as David Thame reports.
This might have been an extinction moment for build-to-rent. The nascent sector, still providing barely six figures-worth of housing units in the UK, might have suffered badly from the flight from the cities and the discomfort of working from home. Being stuck in a rented flat is, so the logic went, nobody’s ideal of lockdown living.
As it happens, BTR seems to be okay. And far from languishing on its death-bed, developers and investors are talking up its prospects. Their argument runs like this: renting is ever more popular, and often inevitable, for young mobile professionals. And if you have to rent, surely better to rent a top quality flat from a super-reputable landlord? The hope is that, far from suffocating demand for BTR, COVID-19 has spurred it to new heights.
Letting data is, as yet, providing some grounds for hope and the big money investors, without whom BTR is genuinely dead in the water, seem convinced. London, where an additional 260,000 private rented units are expected to be delivered in 2021, is (unsurprisingly) the focus of much of the interest.
Among the biggest is Investec, whose structured property finance team has agreed to provide Comer Homes with a £36 million, five-year senior debt facility. This will fund the development of the final phase of Mast Quay, a 204-unit riverside residential scheme in Woolwich, London.
Due for completion in December 2022, construction is already underway, with the majority of apartments benefitting from balconies offering panoramic views of the River Thames and vistas of the capital. This amounts to BTR gold-dust, as does proximity to the new Crossrail station.
It is part of a sequence of Investec bets on BTR including a separate £45 million loan to fund the development of Royal Winchester House in Bracknell into 338 units for rent (the scheme has just finished construction).
Investec’s activities are matched by HUB and specialist investor, Bridges Fund Management, who have agreed a deal with Canadian real estate investment company, Realstar, and global investors, operators and developers, QuadReal, to forward-fund their £100m Wembley Link development in North London.
Designed by Glenn Howells Architects, Wembley Link will deliver 256 high quality one- to three-bedroom homes for private rent in two 17- and 19-storey brick buildings. The deal is the second this partnership has attempted, following their first Wembley scheme – the 239-unit Chesterfield House – which completed in May 2020 and is now open and operating.
HUB has 4,100 homes completed, under construction or submitted for planning, including new homes in Croydon, Greenwich, Wembley and White City, and mixed-use schemes in Maidenhead and Birmingham. HUB’s completed developments include one of London’s first institutionally-backed Build-to-Rent schemes – The Rehearsal Rooms in North Acton – as well as The Boiler House and Material Store in Hayes and Hoola London at the Royal Victoria Dock.
If overseas money is growing in significance in London’s BTR scene, UK institutional funds are making the running in the UK regions. Legal & General IM Real Assets, on behalf of its BTR Fund, has agreed the forward funding of an £81.5m mixed-use regeneration scheme in Candleriggs Square, Glasgow. The project will deliver 346 BTR homes, 17 parking spaces and 12,800 sq ft of commercial space.
LGIM Real Assets were among the first big UK names to step into BTR. Entering the sector in 2016, they currently own and operate 15 schemes in 11 UK cities, amounting to over 5,000 homes. Candleriggs Square will mark the fund’s second investment in Glasgow, last year having committed to the forward funding of a 324-home BTR scheme at neighbouring Buchanan Wharf, another scheme promoted by local developer, Drum Property Group.
Legal & General is increasingly opting for its own favoured style of amenity provision. The latest Glasgow property will include a dining space, gym, business lounge and games room, and boast strong environmental credentials including a BREEAM ‘Excellent’ rating. The fund is setting out its stall as the high quality option, a wise move if the BTR sector’s survival depends on offering the best of everything.Their projects include a 1,000-home scheme in Wandsworth, London, and a 200-home scheme in Brighton.
‘Through our BTR Fund, we want to create the best possible experience for renters, providing high-speed digital connectivity, dedicated workspace and exercise facilities, all of which are essential in a post-COVID world,’ LGBIM Real Assets Head of BTR, Dan Batterton, says.
As the fraught world of 2020 BTR moves into a recovery phase in 2021, there will be plenty of other BTR operators who share the same ambition.
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