KKR has made its first build-to-rent investment in the UK, striking a £1bn platform deal with Moda Living.
The private equity giant is backing Moda’s new Select strategy, which aims to deliver 5,000 rental homes in suburban and city fringe locations over the next three to five years.
The platform’s first scheme will be in Edgbaston, Birmingham, in partnership with local developer Court Collaboration and landowner Calthorpe Estates.
Moda has bought Court Collaboration’s £120m New Garden Square development. Court Collaboration secured consent for the 392-home development in March 2020, having acquired the long leasehold from Calthorpe Estates, and has lined up construction firm Winvic for the build.
KKR will forward-fund the development in a £100m deal, including senior debt from lender BentallGreenOak. The finance comes from KKR’s second dedicated European real estate fund, KKR Real Estate Partners Europe II. It closed the fund in July having raised $2.2bn (£1.6bn) for value-add and opportunistic investments in Western Europe, with a focus on residential and logistics.
KKR has grown its exposure to BTR in the US over the past decade, and US multifamily makes up half of KREF REIT’s portfolio. In the UK’s residential market it has only backed market-sale development, such as its joint venture with Regal London.
Rosa Brand, director at KKR, said BTR “remains a priority sector for us in Europe”.
A new market
Moda will now look to buy further developments that will be forward-funded by KKR. It has a secured pipeline in Leeds, Liverpool, London, Cardiff, Manchester and the Midlands, and aims to deliver 1,000 homes a year.
Expanding from its prime city centre strategy with Apache Capital and its £1bn single-family housing investments with Ares, Moda said the platform will grow the business to more than 18,400 homes with a GDV of more than £6bn.
Oscar Brooks, director at Moda Living, said the platform will sit under the Moda Living brand, but provide differentiation through a “more mainstream, amenity-lite build-to-rent model”.
Lower-rise buildings outside the city centre will see centralised communal spaces around the ground floor supported by the Moda operating platform, including its app and services. This will allow Moda to offer “a more price-accessible rent”.
Brooks said: “It has always been our long-term vision to be able to have different types of product for different types of lifestyle at different price points. A lot of that is starting to come to fruition. This particular platform allows a wider geographical coverage and a wider demographic.”
The platform will be led by Brooks and new investment director Guy Hurwood, who recently joined from CBRE. It follows a period of growth for Moda, which has almost doubled in size to 55 employees since the start of the pandemic. Having established the asset management and operational capabilities, Moda is now looking to expand its portfolio.
“Alternative products allow us to deliver really high-quality accommodation that is branded and well-managed, but to a wider part of the market,” added Brooks.
‘Growth potential’
The deal is the first funding transaction for Court Collaboration, which was established in 2010 and has amassed a portfolio of 2,500 homes in development, including Birmingham’s first residential skyscraper at One Eastside.
The investment adds to increasing BTR activity in Birmingham, with recent commitments from Macquarie-backed Goodstone Living and Sweden’s Heimstaden Bostad.
Alex Neale, managing director at Court Collaboration, said: “London was always a safe haven, but Birmingham has so much growth potential, it is the next natural place for private equity.”
He added that the BTR at Edgbaston will be complemented by the Midlands metro extension and wider mixed-use development, creating “a new village” for Birmingham.
“Edgbaston is the most affluent ward of Birmingham,” he said. “You have Michelin-star restaurants and the 300-year-old Calthorpe Estate.”
To send feedback, e-mail emma.rosser@eg.co.uk or tweet @EmmaARosser or @EGPropertyNews
