Adina David discusses the next trends in build-to-rent as she creates a multifamily and single-family platform.
It’s fair to call Adina David one of the stalwarts of the UK’s build-to-rent sector. From working with Greystar Real Estate in 2016 when the market was still in its infancy, to a vice presidency at the Collective before a return to Greystar as head of urban living, David has kept close to the growth of what is now one of the most favoured asset classes for investment.
After amassing a £1.4bn residential portfolio, MGT Investment Management has now brought David on board as a shareholder and member of the executive team to build out a rental living strategy across multifamily and single-family housing.
MGT has previously had backing from private family offices as well as investors such as Baupost Group and Oaktree, and has now secured initial equity from a mix of domestic and international investors to support the new initiative.
David spoke to React News about refining the strategy for the £1bn GDV platform, her priority areas and the next wave of themes which will define build-to-rent development.
What is MGT’s current position in the residential market, and how is it different to the strategy you’ve been brought in to lead?
To date MGT has done a mix of multifamily development and mixed-use development within Station Hill in Reading. That was the first focus and original focus, and its intention is very much to continue working on rental strategies. But there was also a separate strategy acquiring apartments in prime central London, such as our Battersea acquisition, and there are potentially a few others coming through that strategy. There, the intention is to put those up for rent, but the exit could be both as a for sale product or a bulk rental portfolio.
That’s a very niche strategy for central London, while our wider strategy – and why I was brought in – is to focus on our rental living strategy across southern UK. We are focused around the thesis of people wanting to be near and around knowledge centres. So that’s not just big cities like London or the regions, though they do include those, but also smaller towns that are easily accessible through good transport links – essentially employment centres people want to be near, education centres, great schools.
Within that strategy, we want to look at both a more urban focus on multifamily housing, and a suburban focus on single family. There will also be apartments or garden-style apartments, not just individual homes, in the single family strategy.
And your plan is to grow it to £1bn GDV?
That’s the initial goal. Of course we hope to keep going after that initial target, but first the intention is to deploy around that amount. So that’s roughly 3,000 units in the pipeline.
There are many build-to-rent platforms emerging in the market – what’s your USP?
I’m spending a lot of time refining that strategy and thinking around how these will actually operate – what design changes we might want to make to some of the existing models. Our primary focus is to address the needs of more middle-income earners, so not going for the fully amenitised product that we see as premium multifamily, but something a bit more mid-market. We’re not going to play in the low-income regulated space, but will provide something that strips down some of the amenities while still providing really great services to our residents. I just call it “stress free-living”.
What we provide on site will really depend on the location. In your more urban environments, you might have great local amenities already there – things like great co-working space and a nice gym, lots of f&b options, retail and entertainment in your neighbourhood. So do you really need it in the building?
“We want to provide something that strips down some of the amenities while still providing really great services to our residents. I just call it ‘stress free-living”
I’ve spent a lot of time in the last few years, with my time at the Collective and my recent stint at Greystar, thinking about how we drive affordability in new development. And we don’t really want to get into student accommodation, but addressing the needs of single renters will be important, and that has been my focus over several years. You have a lot of single-person households in large cities, so you do have to think about their needs as well.
How will you access the market: through direct development or forward funding?
What we’re looking for primarily will be forward funding opportunities, but coming in as early as possible so that we can work with our delivery partners to think carefully about what’s in the area, what makes most sense to our future residents to deliver the right type of housing. We probably won’t be the development manager and most likely we won’t do pure development. We don’t have aspirations to become an operator ourselves, but because we have that knowledge, we want to be really thoughtful about each individual investment that we make in the space.
Are you happy to do that on a case-by-case basis or would you look at a multisite partnership with a developer?
It’d be great to find that partner. We do have a few of those relationships that we’re leaning into and hoping to grow as we also define our strategy. Ideally you find a couple of good partners to do several sites with. I’m very focused on that right now, but equally, we’re happy to look at all sorts of opportunities that come across to us across the spectrum. We have identified scale, and that has been really important to me in the past because you do achieve some economies of scale and then that drives affordability as well.
What scale of site would be ideal for you?
For our more suburban product we are looking at 100 units and up, and for our urban multifamily product 200 units and up. That gives a really good scale to the projects and creates that sense of community, which is really important to our residents, and will continue to be important. You’re not going to find 500 units in a single family community. It’s going to be a lot harder to do.
What are your views on access into the single-family market – would you buy sites from housebuilders as others have done?
Of course housebuilders do have a lot of great sites and they have done the work to bring planning forward. But ideally we would look to tweak some of the schemes that are early enough in the planning process that we know what we’re getting, but we’re still able to go in and finalise the detailed planning with our design and specification tweaks. We do have certain things that we want to make sure are incorporated into these developments as well, and would prefer not to just buy standard housebuilder stock.
Talk about the importance of ESG and technology is now impossible to ignore in the residential market – how are you incorporating these?
We have quite a big focus on ESG and we are seeing certain things that we would like to see less of, like dependency on fossil fuels. So if you could change gas hob to electric, or gas heating to electric, that is our preference. We do turn down projects that do not meet those requirements. That’s an example of things that we’re carefully screening for because it’s important to our overall strategy and we know it’s important to our future residents.
Similarly with smart building technology. There’s a lot of innovation happening in that space and that is also tied to the ESG point. The latest smart building technology does help you measure consumption in your units, does help your resident know what they’re consuming, and more sustainability-minded consumers, for instance the Millennials and Gen Zs, are really focused on this. It’s a great feature to have, but it’s also something you want to put in before you finish the building, not go back in and retrofit. We’re keeping a close eye on those types of elements and we do want to make sure we incorporate them before we make the decision to invest.
How are you building communities in build-to-rent, as part of satisfying the S in ESG?
There are lots of different ways to do that. Having studied the problem for a few years now, I try to work with what’s in and around the development. For example, a lot of London developments require ample cycle parking but without a lot of other infrastructure tied to it. I’m a really keen cyclist, so if I see a cycle parking option, I’m going to say: “Are people actually going to cycle if you don’t help them clean, maintain their bike, teach them how to ride a bike or have a little group that goes out for bike rides?” Creating a natural cycle hub and community can happen just from having something that you need to deliver, complemented with something that actually enhances that experience.
Similarly, more and more residents are valuing the ability to work flexibly and remotely longer term. I don’t think that trend is going to go away. So co-working spaces or some sort of workspace environment is important. Again, that might depend on the local area. If you already have great co-working space across the street, I probably won’t put one in my building. But if I’m putting in a lot of smaller units, I think our residents would value being able to leave the unit to work in a different space.
“We turn down projects that do not meet ESG requirements. That’s an example of something we’re carefully screening for because it’s important to our overall strategy and we know it’s important to our future residents”
What are the trends that you’re incorporating for this new multifamily strategy? What does the next era of build-to-rent look like?
It does come back to the affordability point and looking to stay attainable and attractive for more middle-income earners. I think that is a big part of our thesis that is driving our product. Single-family homes will be more price sensitive than multifamily, so there’s already a differential there and we do start with the demographics analysis first. I’ve looked at a ton of customer insight data, and price sensitivity is a big starting point for a lot “We turn down projects that do not meet ESG requirements. That’s an example of something we’re carefully screening for because it’s important to our overall strategy and we know it’s important to our future residents” of residents, especially as you move out of very urban locations. So then you lean into the amenities that are already there, and focus on providing a great-quality living space, but with a reduced offering.
There is also a focus on two categories in terms of the common areas. You have “operational needs” spaces, so more utilitarian items like cycle parking, or a pet spot. A place to clean your pet or clean your bike. It’s important, it’s part of the structure of the building, but it doesn’t have to be very jazzy, over the top or overly designed. Then you have your community areas. Places where you want your residents to come together and get the support and service they need from someone on site. Even that might change through the use of technology.
I think generally across the multifamily, build-to-rent space, the whole industry is looking at how can we better incorporate technology to improve the customer experience, but without a person there necessarily in every development.
How can you avoid passing cost challenges on to the customer?
I come back to the point around finding good partners to deliver with. That will also help drive down costs of delivery. If you can have a set design and standardise your process a bit more, can de-risk that procurement and drive value even further. I have worked on MMC projects, at one stage the tallest modular residential building in the world. So I’m a big fan of modular construction and looking at new ways and systems to deliver buildings. Of course, as we focus on rental living strategies, getting units quickly is part of driving value as well.
When might we hear your first funding announcement?
We are getting offers out every week, we’re very active. The team knew what they wanted before I joined, I’m just helping refine and bring the strategy together. But they already had a good direction of travel, and I joined because I also believed in the thesis that they had set out. We’re very actively pursuing deals, and I hope we’ll be able to announce some very soon. But we’re constantly looking for deals, so that shouldn’t discourage anyone from reaching out with opportunities in this space
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