The elephants in the build to rent room
An Englishman’s home is his castle…or is it?
Multifamily background and key metrics – 5 insights in 3 minutes.
Good morning David – thanks for joining us here today, we're at one of the Tipi apartments at Wembley Park, a fabulous example of emerging Build to Rent industry in practice.
Glad to be here and we're talking about my favourite subject, Build to Rent apartments.
We're looking at the lessons from the US market. How did the US market develop?
That industry has been around for several decades and it really started as much less professionally managed kind of less institutional grade of ownership and investment. In my career in the US which has spanned about 25 years, it's turned into one of the most popular investment sectors for institutional investors.
How are you going to educate people in the UK about what the Build to Rent and Multifamily markets have to offer?
The sector really hasn't existed, and so we're going have to educate the customers as to how it works and certainly tenancy is one of the important factors. Here in the UK historically you're renting from a private owner and you may get asked to move out because that owner wants his apartment back or wants to move his nephew in, or what have you. But Multifamily in the US is basically long term rental - you can stay as long as you'd like to.
Presumably operators want to find ways of ensuring they stay as long as possible?
Absolutely, I mean one of the most important metrics that we measure is resident turnover. So the longer that we can keep people happy and keep them in place and keep them renting and hopefully perhaps absorbing small rent increases as their leases roll over, that makes for a very, very stable investment.
On the subject of education, what about the developers that you're dealing with around the country? What can they learn from the US?
In the Build for Rent world you're building the product, you're leasing up those apartments and your company is staying in and operating that that building what could be four ten or more years, and so it really changes the mind-set of the developer to be thinking much more long-term in nature. I think in terms of valuation and people's approach to the valuation of assets, the availability of more and better information is making a huge difference. The valuers are so accustomed to thinking about apartments as built for sale, so BTS instead of BTR, and some of the valuers that I've met with you know from very good firms they'll walk you through their analysis and their income projections and their cap rate analysis and whatnot. And literally at the end of the conversation they'll say “but at the end of the day we figure out what it would sell for is a bill for sale unit and that helps us you know indicate what the value would be”, which is really not the intent of built for rent. It's meant to be long-term ownership income producing property, just like an office building or a retail centre or something like that.
“An Englishman’s home is his castle”… or is it? The biggest elephant in the Build to Rent room is arguably whether or not Brits can accept renting as a lifestyle choice.
However, instead of letting this elephant get in the way of successful schemes – we want to talk about it.
Andrew Yates asks David Woodward, President at Global Apartment Advisors for his top 5 insights on US Multifamily background & key metrics – and the lessons that can be applied to UK Build to Rent.