Henley and Viventi make their first forays into UK BTR market

By February 25, 2019 October 17th, 2019 Build to Rent, Henley Multi-family, PRS & BtR, Property Week
BTR & Supported Housing Henley Healthcare

The build-to-rent (BTR) market received a further boost last week as two new firms announced they were looking to enter the sector in the UK.

First, residential-focused investor and developer Viventi Capital Management announced that it wanted to invest £100m in a ‘first tranche’ of BTR projects and that it had appointed property management company FirstPort as its partner.

Then, private equity investment manager Henley Investments announced that it had hired BTR big gun Jonathan Ivory from Atlas Residential to spearhead its move into the UK BTR sector.

So what attracted them to the BTR market and what do their investments tell us about the wider appetite for BTR?

Despite growing interest and investment in BTR in the UK in recent years, both firms believe that ample room remains for expansion.

We are still scratching at the surface in the UK,” contends Jeremy Ogborne, business development manager at FirstPort. “There are still lots of opportunities out there.

Viventi plans to focus on schemes of between 250 and 400 units in key regional cities, of which it hopes to acquire six to eight with this initial investment.

Henley, meanwhile, says it wants to invest £300m in “high-quality rental accommodation of varying price points throughout the UK” and will draw on its experience of the BTR sector in the US and of the student accommodation and social housing sectors in the UK.

Big ambitions

While Viventi’s and Henley’s investments are relatively small for now, they could signal the start of something much bigger, experts believe.

These aren’t life-changing sums of money at the moment, but utopia for a BTR investor is to eventually become an asset manager for big pension fund money,” says Chris Lacey, founder of BTR specialist agency Lacey Capital Partners. “Once they have got up and running in the UK and established some credibility, they will be hoping to attract new business.”

Viventi’s chief executive Charles Flynn believes that there is still not enough stock available for such investors.

There is tremendous institutional investment appetite for operating BTR assets,” he says. “However, a significant lack of investable supply exists or is in the national pipeline.

The continuing growth potential of the sector is underlined by the latest research from the British Property Federation and Savills, which found that the number of BTR homes either complete, under construction or in planning had increased by 22% in 2018 to 139,508.

Neither Viventi nor Henley have revealed much about the cities they will be targeting or type of product they will be bringing forward.

One area of opportunity could be affordable BTR, says Lacey, who believes that the BTR market is currently too “homogenous”and that developers are too focused on higher-end apartments.

He adds that Henley, in particular, could be well placed to improve the diversity of BTR housing in the market and that it “might look to housing as well as flats” because of its experience in social housing.

Ian Rickwood, chief executive of Henley, suggests the firm would be amenable to affordable BTR. He says it is keen to “service the increased demand for high-quality rental accommodation of varying price points throughout the UK” and adds that investing in BTR is a “natural extension of our firm’s capabilities”, which also include areas such as student housing and healthcare.

Meanwhile, creating houses as well as flats could be on the cards for Viventi. “We are seeing a lot of enquiries about large sites of more than 200 units, where you can create a more village-like set-up that is not just based on apartments,” says Ogborne. “That was an attraction for Viventi, which is planning to create whole communities.

‘Design-led communities’

Flynn adds: “As principal investor-developer, this allows us to design, plan, capitalise, develop and operate ‘design-led’ residential BTR communities at scale.

Viventi has considerable experience of large, mixed-use projects with residential at their heart. Its other current developments include Lincolnshire Lakes, which will include up to 3,000 residential units, and Northstow in Cambridgeshire, which will have up to 3,500.

While Henley has not divulged where it wants to invest, Viventi has said it will focus on the regions rather than London, and Flynn says it wants to target “locations of acute need and identified demographic growth”.

There is also ample opportunity in these areas, says James Mannix, joint head of residential developments at Knight Frank.

Outside Birmingham, Manchester and now Leeds, there has been very little development over the past 10 years, and there is an undersupply of accommodation to rent,” he notes.

Ogborne adds that there are other reasons to seriously consider the regions. “Land values mean that the returns in the regions are completely disproportionate to what you would get in London,” he says. “Our clients in general are not focused on inner London.”

Less competition

This could mean they will see less competition from housebuilders when looking to pick up development sites.

As Mannix says: “There is still going to be competition from for-sale developers, but there will be a moment in time when they will find it easier to pick up sites, particularly in secondary locations.

Although they were founded in the UK, both companies have experience of the US multifamily market. Flynn is American, although he set up Viventi in the UK, and Henley has invested in multifamily in the US previously, in New York, Las Vegas and Phoenix.

Other competition for development sites could well come from their compatriots across the pond.

The UK is particularly attractive to investors from the US, Canada and Asia at the moment, because they have a favourable exchange rate,” says Lacey. “We know that they want to come and invest here, but some of them have been holding back for [a better-value] market. European investors, meanwhile, have been holding back because they are a bit too close to Brexit.

And therein lies the potential rub. While there appears to be plenty of demand for the type of assets Viventi and Henley intend to bring forward, both from investors and tenants, Brexit looms large on the horizon. The market will be watching closely to see how these BTR developers’ UK ambitions pan out given the challenges ahead.

21st February 2019 | Original Article by Helen Crane | Property Week

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