Welcome back to the UK Build to Rent Q&A series. We’re into our fifth week now & hope you’ve enjoyed all of the insights gained so far. If you’ve missed any of the previous Q&A’s you can find them all here. This Monday, we return for another look at investment. Please enjoy this interview with Meiko Schmidt from Telford Homes.
Telford Homes is one of London’s largest residential and mixed use property developers. As a Trammell Crow Company developer, they specialise in creating, designing and building landmark developments across the capital. Telford Homes’ focus is on delivering the homes and creating the places that London needs – and as such, its developments are bespoke designs consisting of various housing tenures, alongside commercial properties and community buildings. The business acts as a value partner to landowners, housing associations, local authorities and build to rent investors across its supply chain, contributing to its strong reputation across the industry. Most recently, the business has made a strategic move into the build to rent sector – believing its ability to offer both acquisition and project delivery services provide a unique position in the market from which to capitalise on the growing appetite for build to rent within the capital and beyond.
About
Meiko Schmidt is Investment Director at Telford Homes where he is leading on the underwriting and capitalisation of build to rent deals and is responsible for the integration of institutional BTR investment processes to Telford.
He gained extensive experience in institutional investment of UK BTR deals through his 5 year tenure at Greystar where he oversaw the investment function for UK BTR development deals. As one of the earliest members of Greystar’s first international venture outside the US, he gained valuable experience particularly in the adoption of US multifamily expertise to the emerging UK BTR market. His experience covers more than 4,000 BTR units in development deals executed in the UK, spanning from smaller scale BTR deals to large scale regeneration schemes, through his involvement as investment lead of Greystar’s two largest and most complex BTR regeneration projects of 900 units in Nine Elms and more than 2,000 units in Greenford.
Q: Is Telford still looking for BTR investment/ Funding and if so what kind of investment opportunities are you looking for in the current climate?
A: Telford are actively looking for new BTR investment opportunities and have a substantial pipeline of deals for which we will seek funding partners.
With the expertise and firepower of Trammell Crow Company behind us, we have exchanged contracts on 2 BTR land deals in the UK during the period of lockdown, and are targeting to acquire land to deliver a total of 3,000 BTR units by 2021.
In terms of funding, Telford are looking both at partners to forward fund projects as well as equity co-invest structures with hold periods through the operational stabilisation of the asset.
Q: What is currently key criteria a company should know about Telford Homes investment strategy before approaching for possible BTR opportunities?
A: We are focussing on development sites either with planning consent or subject to planning that are suitable for BTR product – in close proximity to transport, with minimum 150 units and located in Greater London and surrounding commuter towns.
Telford’s unique advantage in the market is that we are a partner not just to acquire a site and structure the funding, but we also have significant inhouse planning and development expertise.
We will typically deliver the project through our experienced inhouse development team and are therefore able to significantly de-risk the project for our investors.
Q: What do you believe is the single biggest threat to the growth of the UK BTR sector?
A: We are confident the UK BTR sector will continue to grow and outperform other real estate asset classes.
The immature state of the sector in the UK does present some challenges such as data availability, valuation approaches that are for-sale driven and access to competitively priced debt, as well as a lack of understanding of the BTR product in affordable housing policy.
However, we are confident these issues will disappear over time as the sector matures and liquidity improves.
Q: Other than yield and IRR, what are the key financial metrics you view as vital to the success of a BTR development?
A: Operational efficiencies to achieve reasonable NOI margins – a well-designed purpose built BTR asset at scale achieves lower stabilised operating costs and at the same time provides a better tenant experience driving premium rents.
Q: Where do you see the UK BTR sector in 2030?
A: We believe the UK BTR sector will continue to grow and mature significantly over the next decade and will approach a state similar to the US market where multifamily is a well established and highly liquid asset class.
Thank you kindly to Meiko & Telford for taking the time to respond. We hope you’re enjoying the Q&A series & welcome any feedback you might have. In the mean time, have a good week and we will see you back here next Monday for our next Management Q&A with Grainger.
UK Build to Rent Team
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