Maven targets private rental sector

The private equity house, whose property division has invested in student accommodation and hotels, has identified the build to rent sector as a big opportunity for its 200-strong co-investor base.

Ramsay Duff, property investment director at the Glasgow-based firm, said the PRS development market is still at a nascent stage in Scotland, but he views it very much as a growth area.

He revealed the company is “actively appraising a number of sites” for PRS projects.

Mr Duff said: “We’re working up three specific site opportunities at the moment, and looking at others. Each of these has its different characteristics, but the demand is certainly there to do all three of them, if we are fortunate enough to secure the sites.

“There is absolutely undoubtedly a market for the kind of young people who come through student accommodation, who are no longer students but need somewhere to live.”

Noting that Maven’s property arm typically invests in deals valued between £5 million and £15m, he added: “There is a lot of chat around PRS but there have really only a couple of deals done in Scotland so far, and none yet in Glasgow. But if you look at places down south where PRS deals have been done, Glasgow is certainly a much more attractive market for it.”

Mr Duff said such properties are in demand for young professionals, so-called “generation rent”, who want to live in high-specification apartments but are not yet ready to commit to mortgages.

These buildings are often equipped with facilities such as media rooms, where friends can gather to watch major sporting events, and kitchen and dining areas kitted out to a high specification. Some also include outdoor areas for barbecues and a concierge service.

Unlike other residential developments, these projects are not built to be marketed to home buyers, but rented out and retained as an asset by investors.

Mr Duff, who said Maven would like to have an “institutional purchaser lined up in advance” of such developments being completed, said: “It’s a bit of a cliché but not one likes to be at the bleeding edge. Leading edge is fine.

“We wouldn’t fund the first PRS development in Glasgow in the hope that we might find a buyer.

“What we would look to do would be to line up a buyer and pre-sell the development.”

Yet the PRS is not without challenges on the horizon. Mr Duff flagged two potential snags in the new Private (Housing) Tenancies Bill, currently before the Scottish Parliament.

He said its proposed introduction of rent controls could lead institutional investors to view opportunities differently in Scotland compared with down south, where no such controls are in place.

He added that the Bill in its current shape does not give protection to developers or owners of purpose built student accommodation in situations where a student walks out of a property just weeks into term time.

“If it’s not satisfactorily dealt with, it could have a fairly decimating effect on the appetite of developers to build purpose-built student accommodation in Scotland, and institutions to come and buy them,” Mr Duff said.

He added: “It’s not just my perspective as a guy who is looking to make money for Maven and our clients out of building student accommodation.

“If it means people aren’t attracted to come to Scotland to study, and pay significant fees to do so because there is nowhere suitable to stay because of some anomaly in the legislation, that doesn’t seem to me like the dots are really being joined up.”

Having invested in several student accommodation projects, including most recently near the King’s Theatre on Glasgow’s Bath Street, it is Mr Duff’s view that the city has been “done to death” in terms of this kind of development. He said there remain projects spanning several thousand beds of student accommodation in the pipeline yet “there aren’t enough students for them all.”

But Maven continues to look at student accommodation opportunities elsewhere in Scotland, including in Edinburgh, Aberdeen and Dundee, where one redevelopment project is now underway.

Mr Duff said: “You can over-play a sector. Eventually the music stops and you don’t want to be the guy who doesn’t have a chair.

“We sold Bath Street early. We kind of felt as though we were selling the family jewels when we did do, because it’s an absolutely knock-out development, but we could see this happening in the market.

“We were offered a very full price and we took the view that we would take it. It was absolutely the right thing we could have done because there is so much new stock potentially coming into the market.”

Maven, however, continues to regard hotels as a big opportunity for its investors.

It recently developed at Ibis Styles Hotel in Glasgow’s Merchant City, and before that lined up in investment in the city’s Hotel Indigo.

Maven took advantage of the BPRA (business premises renovation allowance) scheme, which offers a tax incentive to bring derelict of unused buildings back to life, to encourage investment in both hotels.

Similarly, the scheme has been harnessed to develop a Hampton by Hilton hotel in Bath Street, and a Premier Inn in Sauchiehall Street.

Mr Duff remains on the board of Hotel Indigo, which was part of the hotel management company run by Maurice Taylor before its sale to Interstate Hotels and Resorts of the US.

“We are looking at a number of potential new hotel development opportunities in Glasgow and in other qualifying areas [for BPRA],” he said. “The Glasgow hotel market is performing very, very strongly.”