It has been a difficult year for many commercial property sectors, but with people confined to their homes much more than usual, the living sectors have never been more key.
Property Week caught up with Apache Capital Partners’ co-founder and managing director, Richard Jackson, to find out how the company has fared during the pandemic and what he expects from the next 12 months.
How has the business been during Covid-19?
The assets are performing very well. We are very fortunate to be in the living sectors, which has been a strategic focus from the outset, from our social infrastructure platform where we focused on student accommodation and senior living, then leading into the multifamily housing sector and our joint venture with Moda.
We have launched Angel Gardens in Manchester, which is the first fully operational scheme in that JV, and Covid-19 has proven the appeal of our model.
We have also benefited from looking to and learning from the US market and adopting what they call class-A multifamily housing. Thanks to the high-quality design and service at Angel Gardens, feedback from our residents has been hugely positive and our buildings need no reconfiguration to adapt.
On the operational side, we are performing ahead of all expectations
Fundamentally, our residents like having the ability to work within the privacy of their own apartment but do not want to be in there all the time, so they enjoyed having the ability to work in new spaces and a more vibrant community. Covid has really given them the ability to take advantage of what we believe is going to be the new normal way of living.
So, on the operational side, we are performing ahead of all expectations. We have not seen any dip in our rental levels or occupancy – in fact, that is rising on a weekly basis, and the versatility of our designs and services of our buildings mean we are positioned to take advantage of this new norm.
What is investor appetite like?
Institutional capital was already looking at the living sectors with greater interest before the pandemic thanks to crystal-clear, long-term demographic growth drivers and a structural imbalance between supply and demand. Now that Covid has demonstrated their resilience, we believe we will see more institutional investors looking to reallocate away from traditional commercial property sectors and into the living sectors.
Our existing platform with Moda is funded with backing from Harrison Street and NFU Mutual. We have been acquiring more sites and are looking to raise some further capital for the next batch of sites next year. We have an active acquisition pipeline and are looking to continue building that portfolio, which we intend to own and operate over the long term.
Which areas are you prioritising?
We are very comfortable working as a national platform with Moda. We are looking to expand further into the South East. There are also a number of cities where we are certainly considering having another scheme. We want to continue to buy prime sites on the edge of city-centre locations, which are a five- to 10-minute walk to where people work, shop and play.
What challenges are Apache Capital and the wider sector facing?
We have been affected, as everyone else has, by geopolitical economic events and now the pandemic.
I think those uncertainties are going to prevail for some time. In times like this, investors tend to take longer to make a decision, so we anticipate our fundraising will be slower despite strong demand.
We do not yet know how we are going to pay for all the bailouts the government has had to provide and we are now in another national lockdown. Government debt now exceeds £2tn for the first time and we await the government’s monetary and fiscal response. So, there is still a lot of uncertainty in the marketplace but hopefully, when we see a Brexit deal and vaccine in sight, the markets will start to recover.
That said, our investors and banking partners are committed to continue funding Apache and our multifamily housing platform with Moda, and we have secured the capital necessary to fund the next stage of our development.
What are your priorities for the next 12 months?
The main priorities are to continue developing out our existing pipeline; 2,800 of which are under construction, and we are going to have three schemes becoming operational in the next 12 months. We are already heavily into our operational ramp-up phase for those assets.
We have also just announced that we have hired a managing director for our operating platform Moda Life Management Ltd, which is a jointly owned company between Moda and Apache Capital that we have established to operate all the assets in our portfolio.
The culture and quality of our operations and service to our residents is absolutely critical to the performance of our assets and continuing to build the Moda brand, which will differentiate us from our competition in years to come.
We are building our operational capabilities, we are going to be launching our buildings and we are continuing to build our pipeline. We have a very busy 12 months ahead of us.
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