Monthly Archives: October 2014

Aviva prepares for private rented investment push

Insurance company Aviva Investors is planning a major commitment into Britain’s private rented housing stock, and is likely to start buying its first homes during 2015. The company looks to remain a hands-off investor, using third party management rather than leveraging its own brand; and it remains unclear whether Aviva will invest in properties built specifically for rent, or buy ready-finished homes from housing developers.

Speaking at the RESI 2014 event in September, Andrew Appleyard, head of European specialist funds at Aviva Investors, commented: “We’re looking for a resilient income return and a resilient total income. We’re wanting around 7% total return year on year.” He said he expected the return would be more yield than capital growth, and would be looking over an eight to ten year time horizon.

Also at the event, he added: “We are looking seriously at the build to rent model. We see that very much as a forward commitment.” However, that appears to be contradicted in subsequent comments interpreted from an interview with Inside Housing,  who suggest Aviva will be buying into tranches of 50 to 200 homes on development sites, once the planning and construction risk is eliminated.

“UK institutions used to invest heavily in residential,” noted Appleyard, but had been driven out for reasons of regulation in the past, and “because the owner occupier market has boomed.”

But times have changed, he added. “The dynamics are right, there’s much greater demand for the rental model.” He also noted it is increasingly becoming part of the developer model in larger projects: “With an institutional partner, you can feel confident about building. The rental model is part of the solution – I think there’s an awful lot of opportunity.”

“I see the rental sector as being very attractive to not just UK institutions, but overseas investors too. There’s a lot of product coming through in the next couple of years, that institutions such as ourselves will be looking to acquire.”

Appleyard has subsequently suggested Aviva’s initial investment will be via its diversified funds, with the potential to build a dedicated PRS fund in future. The company will be looking at acquiring rental properties in the mid market, and expects to link up with a third party manager, potentially a housing association, to manage the properties.

Inland Homes signs US investor to boost its PRS programme

Housebuilder Inland Homes has agreed terms with a US investor to back its recently launched foray into the private rented sector. The signing of heads of terms suggests a boost to its activities, which launched with an April announcement that it would build to rent at its Drayton Garden Village development near Heathrow.

The unnamed investor will back Inland’s initial PRS project, which is set to increase the scale of the rental element at West Drayton from an earlier 123 unit commitment, up to more than 200 homes.

Inland chief executive Stephen Wicks suggested the deal would lend scale. “We hope this will be the first of quite a few such developments,” he told Property Week. “We’ve got land in the right locations across the south to play a significant role in the sector.”

In April, Inland secured one of the government’s Build to Rent loans for its West Drayton project. The £8.7 million of financing means work is already under way on a phase of 123 one and two bedroom apartments, which are destined for long term rental. The rental apartments will sit within a larger 773 home development at Drayton Garden Village, where the remainder are being sold as they are developed.

Inland, which was established in 2005 and is listed, recently reported a 66% improvement in profits for the year to June 2014. It has a land bank of 3,743 plots with a potential developed value of £1.1 billion. Among the sites with potential for PRS development are Woolwich, where Inland has permission for 152 flats, Ashford Plaza, also with permission for 152 units, and an infill site in Acton.

US investor Greystar plans push into UK market

US investor Greystar has big plans for its involvement in the UK private rented sector. The company has staffed up with a major London team, growing in a year from one to 175. It is ready to look for investment and development opportunities, drawing on its long and successful experience in the US market.

Speaking at the recent RESI 2014 conference, Greystar International’s senior managing director Mark Hafner noted: “I think the UK PRS opportunity is huge, and it’s obvious, right?” He said that when first arriving in the UK, he had two questions: how could the opportunity exist, and why had nobody taken advantage to date.

“The reason PRS hasn’t succeeded is that the for sale market is so strong,” he answered his own question. “But we only do rental housing – and that’s very attractive on a risk adjusted basis.” He pointed out that one of the attractions, compared with developing and selling, is that there’s no need to recycle capital quickly.

“The product doesn’t exist right now,” and so as a result, he is taking Greystar into development, he said – and that would not be done alone. “Partnerships are a more important part of our business.”

Hafner noted that the UK market is substantially less transparent than the US. There, competitors share detailed data on the market, pricing and yields. “As transparency increases, you will see the risk premium come down,” he predicted. He would expect the PRS to have ultimately the lowest debt costs in the UK.

Also different across the pond is the perception of the buy to let and small scale residential investor. These smaller players are not included in market data, and as a result are referred to as the “shadow market” – and as a result, tenants can have greater confidence in the professional players. With the distinction between the two types of landlord, tenants have a clearer understanding of the value of renting from a professional landlord.

St Modwen eyes PRS opportunities, seeks investor

Regeneration developer St Modwen is running the rule over private rented homes as part of a range of major developments planned at RAF sites in the south east of England.

The developer, which is working on major projects around the UK, including a new university campus in Swansea, has a number of major pipeline projects with substantial residential elements. These include RAF bases at Uxbridge and Mill Hill in outer London, and sites at Wembley, Leegate and Edmonton Green.

“PRS is a growth area and offers opportunities for groups such as ours on sites we already own,” the company’s finance director Mike Dunn told Property Week. “It’s certainly something we are considering, especially on those sites we have around London and in the south east.”

St Modwen has the capability to deliver substantial units on its holdings, if a suitable PRS partner is found. Its RAF Uxbridge site could deliver more than 1,400 homes, and is part of the Project MoDEL, which will see Defence Estates exploit its excess land holdings around the capital.

The company is performing strongly, and has upgraded its profit outlook on the back of strong trading. An interim management statement revealed the company has sold 617 homes so far this year, through its own St Modwen Homes division and a joint venture with housebuilder Persimmon. Since May, it has also agreed the sale of around £80 million of land it owned to housebuilders, for residential development. “The residential market continues to gather momentum, with strong sales rates being achieved across all our housing sites,” said chief executive Bill Oliver.

East Village signs thousandth renting resident

Get Living London has welcomed the thousandth resident to its East Village development in Stratford, east London. Digital marketer Christin Ender is the new arrival marking the milestone.

“Our thousandth resident is a fantastic milestone for East Village and we remain as dedicated as ever to ensuring we provide high quality accommodation through an honest, open and responsive service,” said Get Living London’s chief executive Derek Gorman.

East Village, continuing to grow

East Village, continuing to grow

East Village is continuing to grow, as Get Living London takes on more new apartments for rental, as they are converted from the accommodation used by athletes at the 2012 Olympics. Get Living London was established by investor Qatari Diar and developer and landlord Delancey, with the aim of being one of a new breed of professional landlords in Britain’s newborn professional private rented sector.

For tenants, Get Living London promises no hidden fees or extras, inclusive rentals with flexible contracts, and excellent customer service and support.