What investors look for in build to rent developments

Investor capital for build to rent has become more selective. In this BREEAM webinar, Brendan Geraghty, CEO of The Association for Rental Living, and Ivan Rodriguez, Sustainability Director at Bridges Fund Management, discussed what separates a scheme that gets funded from one that stalls. Dan Asquith, Business Development Team Leader at BRE, hosted.

Build to rent homes are built to be rented long term by a single owner. The panel covered how developers and operators can show investors that a building will hold its value, and where certification under BREEAM UK New Construction: Residential (link: https://breeam.com/breeam-uk-new-construction-residential) fits in.
 

Three takeaways

1. Investors value build to rent on operating income. The owner keeps the building, so the rent has to hold up year after year. Brendan said: "After capex, net operating income is king."
    
2. Valuations do not yet reward a well-run building. Valuers typically assume running costs take 25% of gross rent, whatever the building. Brendan called that benchmark "a fantasy", because a well-run building can bring its costs below 25% over time.
    
3. Investors read certification as audited evidence. Ivan said: "BREEAM is not a badge." Some lenders now offer sustainability-linked loans to developments with high levels of certification.
    

Watch the full webinar

BRE runs a regular programme of BREEAM webinars. See upcoming events