RESIcast: Patrizia, Barclays and Apache discuss micro-market targeting and build to rent

Understanding markets at their granular level will be crucial for the UK build-to-rent sector if it is to attract more investment as the asset class matures, an expert panel tells Property Week in a RESIcast.

Patrizia’s Living Cities Fund provides a good example of how a data-driven approach can improve this understanding. The fund is taking a blended approach to the pan-European residential market through a mix of income-producing investments in mature markets and pursuing opportunities in core cities where Patrizia sees growth potential.

However, being able to invest in this way requires deep knowledge of the fundamental factors driving value.

Allen Chilten, head of funds, capital markets at Patrizia, which has been investing in residential property across Europe for 35 years, says it is crucial to understand markets at a granular level.

“It’s not just understanding the city you’re in, it’s the micro-location of that city and also what property strategy fits that city, as well as that specific location,” says Chilten. “Depending on the strategy and location, different investors will require different risks and returns.”

Having large reservoirs of data is vital for this approach.

“Data is the starting point,” says Chilten. “You need scale and a number of data points, which we have with our 35-year track record across these different cities and countries.” He adds that companies have to use technology to make the best use of data. “We’re very passionate about this - our founder is leading tech innovation and pushing us towards the forefront of the real estate industry.”

Chilten says that to complement this, it is vital for companies to have boots on the ground.

“There’s no point in having a research prediction of 2% growth in line with inflation in Germany, because in reality, rents are never going to go like that. You might get some winners and losers. When you get winners, you’re going to be way above inflation, and that’s how you drive value and differentiate performance compared with others.”

Richard Jackson, managing director of Apache Capital, says taking these insights and allying them to demographic shifts such as changing attitudes to renting can help with the selection of locations that will future-proof BTR assets. Apache Capital has a pipeline of over 6,500 UK BTR homes, in partnership with Moda Living.

“Our sites are all part of wider masterplanned areas,” Jackson says. “They are not cool places to live yet, but they’re a five- to ten-minute walk from where you work, shop and play. We’re getting into areas where there is growth and sector potential, but are still close to the city centre. This is where we have got a reputation for being able to deliver, operate and plan buildings to be part of master regenerations, and where we can be a critical part of accelerating that development.”

Given that the UK’s BTR sector is still in its nascent stages, a lack of data is a hurdle for some potential lenders. However, residential sector experience can prove vital in overcoming this hurdle, says Jess Tomlinson, Barclays’ head of real estate, London.

“Yes, the fact that we don’t have years of stabilised rental data on this sector can make analysis more challenging. But at Barclays, with the depth of knowledge that we have in the resi sector, we’re comfortable that we can undertake that analysis on an asset-by-asset basis,” she says.

You can listen to this podcast via iTunes or Spotify or SoundCloud or listen to it through the player above. This podcast was produced by Blackstock Consulting [www.blackstock.co.uk] founder Andrew Teacher and you can Tweet your views @andrewjteacher and @RESIevent