The US is seen as a template for the expansion of the burgeoning private rented sector in the UK.
Here we look at three established US players and their bids to bring a taste of North America to the UK private rental market.
Le Frak Organisation
The LeFrak Organisation is one of New York’s biggest family-owned businesses and has been seeking to break into the UK’s private rented sector for a decade, but has struggled to find the right partner.
In the US, LeFrak’s portfolio spans more than 40m sq ft of prime land, most of which is in the residential sector. It owns and manages more than 25,000 homes, mainly in New York state, but also in southern Florida, Washington and Los Angeles.
Most famous among its assets is LeFrak City, a sprawling 5,000-home investment in Queens, New York.
And while the US market is big enough and profitable enough for any major player, the opportunities offered by the UK are undeniably attractive. LeFrak’s 9.5m sq ft New York portfolio is estimated to provide the organisation with an income of around $116m (£75.3m) pa, with LeFrak City alone churning out $35m.
LeFrak has been seeking to invest in the UK since 2005 when it began talking with Malory Clifford about a bid for Elephant & Castle, SE1. That £1.5bn scheme was eventually won by Australian developer Lend Lease, which is now on site with the first phase – the regeneration of the rundown Heygate Estate.
In 2008, LeFrak started to build a small stake in listed developer Minerva, now owned by Jamie Ritblat’s Delancey and Ares, which observers believed was a play to secure several of its sites in London. Then, in 2010, the business, with Aviva and JP Morgan, bid to buy the Athletes’ Village at the Olympic Park in east London for a massive private rented residential scheme. Delancey and Qatari Diar eventually won that race, turning the 1,439 athlete homes on site into a major PRS development.
But with a legacy spanning more than 100 years, LeFrak is not concerned about having to wait for the right opportunity. That opportunity has to be land within the M25, enough space for a minimum of 150 PRS flats, and the kind of deal that requires no cash to be laid down before completion. And it is that which appears to be the sticking point for potential partners. So far.
Greystar Real Estate Partners
South Carolina-headquartered Greystar Real Estate Partners has a portfolio of more than 425,000 residences across the student, private rented and senior living sectors in North America, making it the biggest multifamily housing landlord in the country.
After nipping over the Atlantic two years ago and rapidly building a £2bn student housing portfolio comprising 22,700 beds across the UK, Greystar has now turned its attention to the PRS market.
With an investment management arm with $12bn of capital under management, the firm is not without firepower. Nor without expertise. A track record of more than 20 years of multifamily investment and development in the US, coupled with its size, certainly gives it the clout to move into the UK PRS. And the hiring of Mark Allnutt, founding director of Fizzy Living, in September last year gives Greystar local knowledge and expertise. Fizzy, a subsidiary of Thames Valley Housing, is currently regarded as one of the best PRS operators in the UK.
Greystar’s focus for UK PRS will be on London, with each development built with a particular catchment in mind. The investment strategy will broadly follow the one it implemented for its student accommodation push, with Greystar acting on behalf of a particular investor or group of investors. In the summer, it was rumoured to be making its first move into the sector with the £230m forward purchase of a block of rented flats at 2 Millharbour in Docklands, E14.
The firm says that designing and programming purpose-built rental housing is a unique exercise, but that it is “part of the science in what we do”.
Related Companies
In the UK, Related Companies may be best known for its newly formed relationship with King’s Cross Central developer Argent, but in the US it started out life as a multifamily housing investor.
Set up in the early 1970s by Stephen Ross, it started financing and developing government-assisted multifamily housing as a long-term investment play. In the 1980s it started to move into new asset classes, including offices, retail and luxury residential. By the 2000s it was developing the largest private urban development project in the US, Hudson Yards, and had a $3.5bn-plus residential portfolio of more than 55,000 homes ranging from affordable family units to high-end condos.
The financial clout of the US giant, coupled with its practical experience and a partnership with Argent that has already secured development projects with potential for more than 7,500 homes, means that this US multifamily player will no doubt soon be a major provider of rental homes in the UK.
