Welcome back to the UK Build to Rent Q&A series. For the past 12 weeks, we have been sharing insights from the leading Build To Rent industry experts. The series is not over yet – for the next (and final) four weeks of the series, we are turning to Moda. They will be answering our questions across each of the four subjects featured in the series. Kicking us off with investment, is Johnny Caddick, founder of Moda.
Moda is the UK’s fastest growing housing brand pioneering positive change in the residential space and setting a precedence in the Build to Rent (“BTR”) sector with its Next Generation Neighbourhoods.
We are making a meaningful and sustained contribution to addressing the UK’s housing crisis with the provision of high quality professionally managed rental homes which are becoming increasingly popular as people adapt to a new Covid-19 way of living. Our Next Generation Neighbourhoods are innovative, pioneering and technology-enabled residential neighbourhoods focused on creating supportive, inclusive, and intergenerational communities. We provide exceptional new places via adaptive building design, extraordinary public realm and the provision of amenity rich facilities which are accessible to all the residents of our new homes with health and well-being at the heart of our approach.
About
In 2013, Johnny co-founded Moda, the first regional high amenity build-to-rent platform in the UK. Since its inception, Moda has secured a pipeline of over 8,000 apartments across the UK with a development value of 2.5bn. Moda’s flagship, 36-story scheme, Angel Gardens, officially opened last October. Johnny also runs the Caddick Group with his father Paul Caddick. Founded in 1979 it has grown to become one of the largest and most successful property companies in the UK. Johnny has been responsible for some of the group’s most high-profile schemes including the development of Trinity Leeds, the 1m sq. ft. shopping centre in the heart of the city, and more recently, SOYO Leeds – a 6-acre mixed-use site that Caddick is investing £300 million to redevelop. In 2009 Johnny established Caddick Group’s urban residential team with the commencement of Vauxhall Sky Gardens, a 36-story residential development in London.
Q: What kind of investment opportunities are you looking for in the current climate?
A: With a huge depth of market for BTR and the living sector more broadly, there is an unparalleled opportunity in the current climate as BTR currently represents less than 1% of the current rental stock in the UK, compared with the US which is 61%. Despite being 7 years old as a business, Moda is still at the beginning of its journey – the sector is still in its infancy in the UK. There are major opportunities for projects across the living sector throughout the UK in both regional cities, commuter belt towns and suburbs and of course in London.
Q: What are a few things a company should know about Moda before approaching you for an investment opportunity?
A: Moda is focused on being the voice of authority in improving the perception of the BTR sector as well as setting a precedence for best practice. We are confident in the defensibility of the sector and the strength of our business model and brand.
We want investors to view us as best in class, a company with a great track record, integrity and of course huge passion for what we do.
We understand the importance of the Moda brand and see the opportunity in leveraging this more moving forward with our existing network. We have a truly engaged and captivated audience, and this has helped us to become a market leader in the space.
Investors should know that one of our core values is to only work with like-minded companies (with the same vision and values) across the property lifecycle and our supply chain. Recognising the importance of ESG, integrating into local communities and having a long-term vision.
We pride ourselves in being so much more than a developer and operator – we are a vertically integrated custodian of our next generation neighbourhoods with a vested interest in every aspect of the communities we are regenerating.
More broadly we want to be perceived as a landlord that cares – residents wellbeing is vital.
We are tech-driven – we fully understand the importance of tech innovation and that Smart buildings will help us to become more sustainable over time.
Lastly that we are future thinking – we are always innovating and evolving. Being dynamic and flexible in this climate is key to long term success and we use data to ensure we remain ahead of the curve when creating our Next Generation Neighbourhoods.
Q: What do you believe is the single biggest threat to the growth of the UK BTR sector over the coming years and why?
The biggest threat is probably the sector not reaching its full potential, due to a wider lack of collaboration and education on the benefits we bring to local communities as well as supporting the government’s 300,000 new homes initiative.
It’s important not to get complacent, we need to keep evolving, keep moving forward and adapting to our residents’ long-term needs. The second wave for BTR will be when prospective residents truly understands what BTR is. This will only be achieved when there is more unity between other operators to collaboratively educate the masses as well as stakeholders.
Q: Other than yield and IRR, what are the key financial metrics you view as vital to the success of a BTR development?
A: As a long term developer/operator/investor we look at the depth of the market within a given location and the growth potential of a location to look at long term viability.
We also understand that building sustainable neighbourhoods will ultimately drive the performance of a building, and that will help bottom line, by delivering cost-efficient operations and passing on the cost savings directly to the resident and the investor, whilst at the same time having a major positive impact on the environment.
Q: Where do you see the UK BTR sector in 2030?
A: From an operational perspective this lies firmly in the aggregation stage. As has happened in the PDSA sector, we see sector consolidation in the longer term, with a handful of large-scale operators with portfolios nationwide – these will be across the living sectors (from co-living, BTR, student accommodation etc).
From a development perspective, there will be lot more activity in regional cities and towns, including suburban BTR and a mixture of product from mid-market family housing through to the more highly ammenitised product. In short, more choices at every price point creating a truly accessible product that a customer can use across their entire property lifecycle.
Q: We’ve seen the saturation of a location start to affect a BTR development success due to oversupply – where do you feel are the areas, if any, that will suffer from oversupply in the coming years and how can they remain competitive to achieve underwriting targets?
A: This is not an issue right now. As I said, I firmly believe we are still at start of the journey. Nowhere has reached saturation point. In 2014 we were told there was too much BTR development in Manchester. There has been a big push for urbanisation which has coincided with the way regional cities and zones of London have become a lot more desirable places to live. There is certainly a large appetite for regional cities, and we saw this happening with big corps opening HQ’s in regional hubs, then came the pandemic which has been even more of a catalyst for relocation.
It’s our belief that a scheme will stand or fall on its individual merits and it is the responsibility of funder and developer to decide whether a location is viable. Ultimately it is driven by supply and demand. What is key is to find your USP – consumers need a differentiated product – this means varying price points, different level of amenity and provision etc with one aim – the fulfil residents evolving needs.
Q: Where are the cities in the UK that you believe have the most exciting investment potential for BTR developments?
A: The whole of the UK to be honest. We are a big believer in the regions, but we also know there is a big opportunity for the right product in the right location in London. That being said, there has been a big shift towards people’s desire to live in the regional cities in contrast to 10yrs ago. Catalysts like student retention rates thanks to more quality jobs outside of London. So many regional hubs have all the fundamentals in place and their own merits – be that corporate HQs, tech hubs, great transport links, better quality of living, ultimately quality jobs require quality homes, and our role is to fulfil that need.
Thank you kindly to Johnny & Moda for their time and involvement in the series.
For now, have a good week & please join us next Monday when we’ll be discussing BTR design with Tony Brooks, Co-Founder of Moda.
UK Build to Rent Team
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