A £1bn private rented sector partnership has been created to target the UK regions with four sites already in the pipeline for bespoke build-to-rent schemes.

Generate Land and Caddick Developments have quietly built up a portfolio that is expected to yield more than 2,750 units worth £580m on completion. Their JV, Moda Living, is targeting more than 5,000 units.

With the economic recovery returning to cities outside London, the pair has recently agreed a slew of deals, snapping up sites in Manchester, Leeds and now Liverpool, targeting the young professional city renter.

“We’ve been working hard in the past 18 months to bring Moda Living to life, “ Johnny Caddick, director of Caddick Developments and joint MD of Moda Living, tells Property Week. “We’ve brought together a business to present to the wider property market rather than a concept.”

Investors and developers seem to be constantly manoeuvring into the private rented sector but with limited success. Bespoke build-to-rent institutional deals are still few and far between, particularly outside London. Yet these two developers have secured a significant regional pipeline.

Moda’s latest deal is in Liverpool, where it has agreed terms with Peel Group at Liverpool Waters to build a £65m 40 storey PRS tower with more than 325 units. The scheme will be the first new build residential element on the 60 hectare development site. As well as Liverpool Waters there are two sites in Leeds; City One and Quarry Hill and one in Manchester – Angel Gardens, already under Moda’s control.

Manchester movement

Angel Gardens, on the Co-op Groups NOMA masterplan, is poised to go in for planning. The £115m scheme will include 48 studio, one, two and three bed apartments in 36 storey tower.

“There’s not been any stock built in Manchester for a number of years. This is one of the first new products coming out so the quantity will be particularly high” says Caddick. “We’re building this for institutional landlords who will be owning this product, so it is built with longevity in mind.”

To attract tenants, the building will boast a sports court seven stories up, barbecues, meeting rooms, communal gardens, coffee lounges, a gym and a cinema room. A one bed apartment is set to attract rents of £800pcm while a two bed will hit £1,200pcm.

“We’ve taken a range of comparable market rents in Manchester and pitched ourselves between halfway and the top quartile of that – so these are going to be market comparable. But the big difference is you get to use all of these facilities.” Says Tony brooks, Chief Executive of Generate Land and joint MD of Moda Living, adding that there will even be a mobile app.

The other sites which will be subject to the same specifications include City one in Leeds, the residential part of which will be worth £250m. They bought the former Montpellier Estates’ site in Holbeck, south of the city, out of administration for £10m this week and the 9.5acre site has planning consent for 1m sqft of offices, 25 storey residential tower, 230 bed hotel and a 100,000sqft casino. Moda Living will seek a revised consent that replaces the leisure space with private rented flats, creating 1,200 units.

Caddick already owns the final site, Quarry Hill in Leeds. Again, it has an existing residential consent but Moda will seek planning for 700+ units.

Broader Ambitions

These four sites are not the end of the two men’s ambitions. “When we embarked on our business plan we set ourselves a target of 5,000 units and after 12 months we’ve passed the halfway mark” says Brooks. “We’re active in Edinburgh, Glasgow and Birmingham.”

Moda regards Bristol, Cardiff, Birmingham, Liverpool, Manchester, Leeds, Glasgow and Edinburgh as primary targets, he says, and is also eyeing locations such as Sheffield and a big site in Newcastle.

There are only a couple of comparable PRS models being spun into the regions, such as Countrywide’s tie-up with Hermes and Sigma Capitals joint venture with Gatehouse Bank. But Countrywide and Hermes are eyeing smaller stock, while Sigma and Gatehouse are focussing on family homes on the outskirts of cities.

There is one major piece of the puzzle missing for Brooks and Caddick: the institutional investor. So far Moda has bought sites using its own cash and is undertaking planning applications with its own resources. Brooks says the partnership has enough firepower to buy five more sites without an investor – but will need a backer to build them.

Chris Lacey, executive director of CBRE, who has been appointed as retained advisor to Moda, says the platform will give institutions an access point into the PRS – where they have been clamouring for scale.

Moda will keep an equity stake in the schemes and is eyeing an initial yield of 5% and an ungeared running return of 7-8%. Lacey argues that the prospect of a pipeline under the control of two companies with such strong track records is likely to be attractive to the institutions, particularly the big American and Canadian pension funds.

The omens seem to be good for the partnership. In Manchester, for instance, 11% of the population is aged between 20 and 25, versus the national average of 6%. As the economy picks up, these renters are expected to pay more for accommodation, adding to rental growth prospects.

But what if there were another slowdown? The regions are only just starting to recover from the last one. Caddick, Brooks and Lacey contend that rented flats would be better able to withstand another crash because of the weight of demand that still exists even in a downturn. “We will be the biggest player in PRS in the regions,” says Caddick bullishly. “We know we will be. We’re fully committed to that.”

There’s certainly not much to challenge them at the moment.