Build to Rent schemes are long-term profit-oriented investments. To ensure the investments survive until the targeted period; a management structure is non-negotiable. It is a vital aspect of the investment as a factor that determines revenue generation and overall success.
The creation of a BTR management structure is no easy endeavour. It consists of several areas that require perfect synergy to produce the best results. Areas of Build to Rent management include the leasing, maintenance, corporate office, concierge, customer service, facilities and more.
Currently, in the UK, there are four popular BTR management structure strategies. In choosing a strategy, it is vital that owners consider their brand strengths, operating costs and tenant service.
Top Four Build to Rent Management Strategies
Keep in mind that there is no one size fits all strategy. Consider the pros and cons of each and employ which is more suitable to your brand at different stages in the life of the development.
All Function In-House
This a strategy that conducts all the running of a BTR with a BTR’s employees and assets. Rather than outsourcing to provide the services needed. The owners create a stand-alone in-house property management arm of the company. They provide all the services i.e. leasing, maintenance, corporate office, concierge, customer service, facilities management, and other functions. This is similar to the US management model used in their Multifamily schemes with all functions present in the new arm of the company.
The all function in-house structure is a big undertaking that can only be achieved with proper plan and investment. This option is most suitable for those looking to invest and also stay actively involved. It gives investors control over the development. However, it’s cost and time-intensive and requires expertise in all functions.
For instance, the Canary Wharf Group has a property management arm, Vertus, that manages its schemes. Vertus is in charge of operating all functions of the Group’s three Build to Rent developments located in Canary Wharf.
Outsource All Functions
This strategy is the direct opposite of all function in-house. All the areas are handed over to a third-party company that makes use of its assets to conduct the running of the development. The outsourcing option is one usually undertaken by BTR owners as a cost-cutting measure. The owners can outsource to readily available property management providers.
Most BTR owners outsource in the early stages of the investment, then change strategy when the development has grown. With outsourcing, owners can choose more than one management provider. A mix of two or three providers working various aspects is also possible.
Whilst outsourcing all functions may cut costs and bring in expertise, it requires owners to take a backseat. Which, could bring about a misrepresentation of the owner’s ideals for the BTR.
Hybrid Model
As the name suggests, this structure is a combo of all in-house and outsourcing function. So, instead of creating all the aspects of in-house management, owners can build a part of the management structure and outsource the remainder. For example, a BTR owner could be in charge of leasing, corporate office and customer service functions. While other aspects like maintenance, facilities & concierge are outsourced. This is the most popular in the UK, with firms like Quintain Living & Get Living using this method.
With the hybrid model, BTR owners can always switch to an all functions in-house at a later date. Also, it allows the owners to take control over areas that are most important to them. Leaving areas of less expertise to be outsourced to the experts in that field.
A drawback of this option is potential confusion between third-party providers and the in-house team around whose responsible for what.
Partnership with Experienced Team and Build Together
The final option on this list is a partnership. A form of joint venture between a BTR owner and a property management provider. In this structure, the experienced management provider builds a team from its pool of employees or recruits as needed. Catering for all areas like leasing, corporate office, customer service aspects of the business, including the maintenance, facilities management, concierge and other functions.
Depending on the agreement between both parties, the property management provider can transfer ownership or control over to the Build to Rent owners, when specified goals and conditions, are achieved. This type of management strategy is illustrated, in the partnership between Apache Capital and Moda Living. Apache Capital is in charge of funding in the joint venture, while Moda Living handles the operations of their developments.
Conclusion
There is no right perfect management structure in the UK right now. We are still waiting for the first companies to separate themselves as industry leaders, by identifying and mastering the best option for a development brand goal. Management is of vital importance and it would be one of the unique selling propositions any Build to Rent development has to boast.
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