New Investors, A Suburban Push And Dealing With Rent Control: What A BTR Giant Did Next

Walking around a huge development site in Elephant and Castle on a bitingly cold and windy January morning, Get Living CEO Rick de Blaby mused on a market and company that both find themselves at an interesting crossroads.

“I think 2022 will turn out to have been one of our best years ever in terms of income growth,” de Blaby told Bisnow on a tour of the build-to-rent specialist’s latest mega-scheme. “Rental growth in 2023 will be more modest because of cost-of-living issues and affordability issues. But we’re beginning to reap the benefits of scale and the operational efficiency that brings.”

Change is on the cards in the form of the exit of one of Get Living’s first investors. Qatari Diar, controlled by the Qatari government, is in talks to sell its 22% stake in the company to Australian fund Aware Super for between £400M-£500M, React News reported, highlighting the continued interest of global investors in UK rented residential. 

And to supplement its large urban developments, Get Living is set to embark on a series of smaller, suburban schemes around the UK capital, aided by the uncertainty in capital markets.  

But the company is also wrestling with the impact of rent control proposals that have already put its proposed £200M, 1,500-unit scheme in Glasgow on ice.

Its scale and strategy makes Get Living a microcosm for the UK BTR sector, and de Blaby gave Bisnow an insight into where the company and the market is headed. 

2023 marks a decade since Get Living opened its first scheme, the former London Olympic athletes village since renamed East Village, to the public. With more than 2,500 homes operational and another 1,500 to come, it essentially owns a small town’s worth of rental homes in Stratford in east London.

It is looking to do the same again at Elephant and Castle on a slightly smaller scale. The company counts 650 homes up and running, with another 1,000 to come.

East Village essentially launched rented residential as an asset class in the UK — investors were wary of the sector before Delancey client funds and Qatari Diar set up Get Living and proved the concept. That scheme was the springboard to set up a company that now has 4,000 operational homes in London and Manchester, and 6,500 more in the pipeline in London, Leeds and (maybe) Glasgow, making it one of the top five BTR owners and developers in the UK.

Its portfolio was valued at £2.4B at the end of 2021, the last year for which data is publicly available. 

Get Living’s story highlights how large-scale BTR is not a short-term, quick-profit game. Only after a decade does de Blaby feel the company is fully benefitting from economies of scale in an industry where it can take up to three years for revenue to exceed costs at a new scheme.

The pandemic period has been a strange one for BTR, which has outperformed other sectors in terms of income resilience, though its path has been far from linear.

The first year of the pandemic saw occupancy and income suffer, while 2021 was about “being sensitive on price to get occupancy back up,” de Blaby said. That said, like-for-like rents still rose 11% in 2021.

Last year was also a year of strong rental growth, with first half rental income growing 30% to £38.4M on the back of like-for-like rises but mostly new homes becoming operational. The company’s occupancy is now back above 95% after dropping 8% in 2020, de Blaby said. 

“In 2022 rental growth was strong, partly because of the recovery from earlier years and partly because during Covid, our proposition of creating big neighbourhoods with large amounts of really good public realm was validated,” he said. “That model and the service and amenities we provide, enabled us to steal market share.”

While the deal for Aware Super to buy a stake in Get Living shows international investors are not put off by the prospect of more modest rental growth, de Blaby said regulation being pursued in one part of the UK is giving global capital pause.

Last year, Scotland brought in a temporary freeze on private sector rents. That is currently due to expire on 31 March, but it could be extended beyond that date. While there are no plans from either the current Conservative government or opposition Labour Party to implement rent control in England, London’s Labour Mayor Sadiq Khan has been a vocal proponent for the policy, albeit with no power to limit rent rises.

The policy has created uncertainty about Get Living’s plans to build up to 1,500 new apartments, some of them for students, near the High Street in central Glasgow. 

“It’s not breaching any secrets to say asking our shareholders to give us £200M when the potential revenue is controlled by the government is problematic,” de Blaby said.

Get Living’s investors include Qatari Diar — soon to be exchanged for Aware Super — as well as Dutch APG and DOOR, a vehicle whose investors include Canadian Oxford Properties, German Allianz and the UK Local Pensions Partnership. Any one of those could put their money in any sector of the economy, many of them in any country in the world.

The UK BTR sector has the chance to play a role in increasing the country’s housing supply, with de Blaby estimating it has the potential to grow from its current 1.6% of the UK’s rented housing stock to closer to 10% — but only if it can offer stable risks and returns.

Rent control upsets that stability. 

On top of that, rent control limits new supply of homes, thus pushing up rental levels, de Blaby said.

“You can see the political attraction of rent control, of protecting the renter, but it suffocates supply, and that just protects affluent tenants,” he said.

Multiple academic studies have found that rent control protects existing tenants from egregious rent rises, but does hinder the development of new supply.

His preferred solution is to reduce rents by increasing new supply. The best way to do that is by speeding up the planning process, he said, describing the current process as underfunded, inefficient and too beholden to the interests of vocal minorities against new development.

De Blaby pushed back on the assertion that BTR schemes don’t really help make UK housing more affordable, as they are typically targeted at affluent younger professionals and come with high rents. 

“I think you have to differentiate between cost and value,” he said, pointing to the high level of service and amenities the company’s schemes offer, heating bills that are lower because homes are sustainable and more energy-efficient, and security deposits not being required in many cases.

“The second-largest employer among our residents is the NHS,” he said.

Though that might be unsurprising given the health system is the UK’s largest employer, de Blaby said: “It does show that people on the median NHS salary can afford to live in our neighbourhoods.”

At Elephant and Castle, an area with a long history of fractious relations between developers and existing residents, the company has faced pushback about its plans. Lendlease’s multidecade redevelopment of the nearby Heygate estate is one of the most controversial in recent London history.

Get Living has faced protests from former traders at the Elephant and Castle shopping centre, which the company bought in 2013 to unlock the redevelopment. Points of contention included whether the traders had been adequately rehoused, and it took four years and a trip to the Court of Appeal to win planning for that phase of its scheme, called Elephant Park, which is now on-site. 

The first phase of the scheme, now operational, comprised 374 homes for rent, 278 student homes and a new facility for market traders. The next phase of the project will complete in 2026, delivering 485 homes plus shops, restaurants and leisure facilities, an upgraded tube station and a new campus for London College of Communication, in part funded by a £365M construction loan from Starwood. 

The final phase includes another 498 homes. It might not be completed until 2030, making the creation of Elephant Park a nearly two-decade process. 

“Every neighbourhood has its own character, and you have to produce a scheme that deals with that accordingly, and your proposals have to take into the account the views of residents,” de Blaby said. “We spent a lot of time talking to council officers and other stakeholders, and we think we’ve got it right.”

De Blaby said that Get Living would continue to look for large-scale sites in big cities like London, Manchester, Birmingham and Leeds.

It will also continue to expand a strategy it embarked on in 2021 and 2022 of forward funding schemes being brought forward by other developers in the suburbs around London and in the south east. In 2021, it agreed to forward fund a £155M, 400-apartment scheme being built in Maidenhead, Berkshire, and in 2022 it agreed a £71M deal to fund 214 units in Leatherhead, Surrey. 

“We want to have a necklace of six to eight of these schemes around the circumference of London,” he said.

De Blaby said the company’s track record and scale, combined with wider uncertainty in the investment market, meant that attractive deals were starting to emerge. 

“The current issues in the market might give rise to opportunities for us to secure things that wouldn’t have been available in 2020,” he said. “We’re just beginning to see the first signs of that.”