The investors pushing build-to-rent forward
When COVID-19 happened, build-to-rent (BTR) was the most talked-about trend on the residential real estate market in the UK. Even though it occupies only 5% of the private rented market, it has been growing fast and spreading to all parts of the country since its rise almost five years ago.
Since then, many institutional investors–Legal & General, Quintain, Greystar and Goldman Sachs–have shown interest and have become part of the BTR marketplace. The British Property Foundation (BPF) points out that there are 157,512 build-to-rent homes in either planning, construction or built in the UK. Breaking down the number, this comes to 43,236 complete, 33,505 are under construction and 80,771 are in the planning stages.
Naturally, big cities have always been an attractive market and London leads the way in build to rent schemes with 74,892 units, while outside the capital there are 82,620 units either built, planned, or in construction. In addition to London, other hotspots such as Salford and Manchester are forming, as well as the Midlands where the number of build to rent schemes is growing.
Undoubtedly, the coronavirus has postponed the development of some schemes, but the demand for build-to-rent accommodation hasn’t diminished. To adapt to the new reality, developers and managers of BTR schemes have started introducing measures to comply with the pandemic requirements and protect the most endangered aspect of build to rent such as the community aspect.
Today, we look at the players driving the sector forward and pouring the most investment in build-to-rent schemes.
Many parties are involved in bringing a build-to-rent scheme to fruition; investors, developers, building managers and so on. Today we look at some of the biggest institutional investors on the build to rent market in the UK.
Legal & General is among the largest build-to-rent institutional investors in the UK. With a vision to increase the supply of quality rental accommodation in the country, the company has invested £1.7bn since 2016 and has £800m in the pipeline for the next six months.
Legal & General’s portfolio boasts over 4,600 homes across 13 schemes. The company’s build-to-rent strategy operates in the UK’s premier purpose-built rental residential segment and aims to create for investors income that rises more than inflation over the long term.
At the moment, the institutional investor has BTR schemes in Blackhorse Mills, Walthamstow, Boxmakers Yard, Bristol, Slate Yard, Salford and The Whitmore Collection in Birmingham.
The property investment arm of M&G, it is one of the largest property investors with £33.54bn of assets across the world.
M&G put a foot in the build-to-rent market early by establishing the UK Residential Property Fund, created to offer institutional investors easy access to the developing residential sector in the country. From the beginning, the investment fund’s focus has been on generating income from purpose-built rental accommodation.
So far part of the fund’s strategy has been to purchase standing investments or forward-funded developments. M&G’s investments include several build-to-rent schemes in London and around the country. To realize its projects, the company has partnered with housebuilders such as Telford Homes, Crest Nicholson and Redrow Homes.
Goldman Sachs entered the build-to-rent investment scene last year in April when it dedicated £184m for the building of a skyscraper that is expected to be the tallest residential tower in Birmingham.
This happened after the US investment bank agreed on a £118m loan facility with private equity firm Apache Capital, which is developing the tower on Broad Street. The tower will feature 481 private flats for rent, in a joint venture with its long-time build-to-rent partner Moda Living.
What is more, Apache Capital is behind Moda Living on a number of other build to rent schemes; Angel Gardens, a 34-storey tower in Manchester, the 515-flat Soyo development in Leeds and the Lexington, a 35-storey tower in Liverpool.
Also, Goldman Sachs gave in January a £150m loan to property firm Quintain to build new Wembley rental homes.
Invesco, one of the largest investment managers in the UK, penetrated the UK’s build-to-rent market several years ago.
In 2018, the company partnered with the Malaysian developer EcoWorld International and invested £400 million in a 1,000-unit BTR development pipeline.
Earlier this year, in January Invesco funded a new £73.8 million build-to-rent scheme in Milton Keynes. What we know is that the 294-unit building will be developed and operated by Packaged Living and is expected to be delivered in the second quarter of 2022.