The following housing companies have been selected as a model of what’s possible when large corporate bodies adopt the approach of institutional commercial property investors, each of these companies owns and rents out 1000s of units covering many acres of land, many buildings of theirs are in the value range of hundreds of millions of pounds price bracket each. And collectively the combined values would constitute enormous financial power capable if channelled correctly in correcting single handily the UK housing crisis.
They represent a new differing model that traditionally these sorts of companies have shied away from, and instead opted for the more immediate profits of build to sell.or required the long term rental income of long term commercial leases to blue chip companies, to justify the outlays involved of these scale of investments.
Essential living is UK based company that specializes in the construction of large scale multi storey apartment blocks for rent only. The company has around 12 buildings as described on their website, and estimates of their rental units are that they are in excess of 2500 rental units, they have future plans for continued aggressive growth, by acquisition of new sites and construction of their own sites.
Due to their high level of liquidity, theyhave recently announced their own internal development arm, they have done this to mitigate risk factors, and are aiming to reduce as much as possible on site trades and labour, this allows them to have a level of certainty in the outcome of their investments as opposed to projects potentially stalling or overrunning on costs due to these factors.
A further advance by the EL group is the announcement that are to produce as much as possible of their construction off site, employing the efficiency of factory produced components.
An important consideration in Essential Living is that they are redefining the rules, previously all attempts at a project of this size almost relied exclusively on external contractors, via almost exclusively external procurement processes, but EL must be seen to writing their own outcomes, the location of these buildings is surprising as the rental income is lower than a commercial property of the same size would produce. But this clearly demonstrates that build to rent models are scalable even in the toughest environments, and correctly funded and managed produce the desired investment returns, and most importantly the required units for rented accommodation.
They must therefore be seen to be engaging with local planning authorities and that local planning authorities are cooperating with operators of this nature.
ESSENTIAL LIVING infinity towers above, in canary wharf, offering 395 apartments to rent
M AND G
M and G were bought in part by the prudential group in 1997, and still operate under their own brand, by in largethey operate a plethora of funds,that range in most categories horizontally across the capital markets and have various funds vertically within each category,by quantum they are valued in the billions and must therefore be seen as a step up from the Essential Living group.
What is of interest to this paper is the M and G property funds, these are aimed almost exclusively at the commercial property of all types, a closer analysis of their balance sheets shows they are invested in accommodation providers like Travel lodge, which although are not residential renters, it does show that funds of this magnitude are not investing in residential property, but are investing in almost all other classes except residential property! A closer look at their balance sheet shows that in 2015 their trades detail hundreds of millions of Pounds in property acquisitions and disposals, all of the commercial type.
Pertinent questions need to be asked why these funds are not deploying their funding to the residential markets.
At this scale even a small percentage invested into residential schemes,(and it is proposed that these would be developed for onward sale –and not retained to rent out),would result in thousands of additional units per project, this must be multiplied by the large amount of companies of this size each capitalizing on sizable opportunities.
Grey star are an American based provider of rental accommodation,they are market leaders in their various fields and offer specialised rental accommodation for over 55s, students, regular families and other sectors.
They offer 10s of thousands of apartments all over the United States, and in foreign countries to, their recent entry into the UK market has primarily focused on the student markets where they provide smart, upscale accommodation and modern hi tech facilities to include gyms, cinemas, conference facilities, restaurants etc.
The pre-existence of the rental models by Grey Star would make progression to capture market in the UK a relatively easy move for them, and obviously provide a solution to a real demand. Companies of this nature are able to undertake many projects simultaneously and as they have done to date.
A view from one of Grey stars student accommodations in London
REITS –Are an investment vehicle that allow members of the public to buy shares in UK listed property companies that collectively manage many billions of pounds.
Much legislation exists around REITS and residential property investment, but currently residential investments are single digits percentages of Reits funds, thus much potential exists to increase Reits participation the UK.