EXCLUSIVE: Cortland Partners CIO Explains Firm’s £4B U.K. Push

Cortland Partners Chief Investment Officer Mike Altman gives a stat that drives home just how fertile an opportunity the U.K. build-to-rent sector is for his firm and other North American investors and developers.

“If you look at Dallas-Fort Worth, that’s an area with a population a bit smaller than London, and that has around 500,000 professionally managed multifamily units,” he said, speaking at Bisnow’s Build-To-Rent Annual Conference at Wembley Park, attended by more than 350 delegates. “In the whole of the U.K. at the moment, there are only about 20,000 professionally managed units. But you have the same affordability issues and move towards renting as in the U.S. For us, that really makes it a green pasture.”

In September, Atlanta-based Cortland made its first move into the U.K. with the purchase of developer Orion Land and its 485-unit scheme in Watford. In the U.S., it owns around 45,000 apartments across 18 cities with a value of about £6B, and in the U.K. it is planning to build up a portfolio of around 10,000 apartments, which could see its investment in the market rise to around £4B.

It currently has sites totalling around 2,000 units under offer, and has appointed CBRE to help it find more sites and a development partner. Its focus is on London and the surrounding area.

Orion founder Richard Olsen became Cortland’s U.K. head, and the current team of 10 could grow to around 50 eventually.

As well as the size of the overall opportunity for Cortland, Altman explained that the metrics on individual schemes offered a good return compared to the U.S.

“In this market you can develop at a cap rate [yield] of 6% and sell at a cap rate of 3.5-4% because of the weight of capital looking at the market," he said. "That looks like a pretty good arbitrage for us.”

He said the increase in political instability caused by Brexit had not been a deterrent, rather it has meant quite the opposite.

“We first came to look at the U.K. in August 2016, straight after Brexit, so it is safe to say it hasn’t put us off, it excited us,” he said. “We like the idea of countries taking control of their sovereign status.”

In terms of the type of schemes Cortland will build, Altman’s views ran somewhat counter to a conference where much of the discussion was about the kind of amenities tenants want.

“I am a simple guy and we are simple people, and we tend to think that people don’t want a lot of bells and whistles, they don’t want to control everything through an app on their phone, they just want you to get the basics right.”