In Conversation With … Jonathon Ivory, Managing Director at Packaged Living
Jonathon Ivory is an experienced real estate investment professional with a successful track record and specialisation in the Build to Rent (BTR) sector including Single-Family Rental (SFR) and Multi-Family Housing (MFH). Active in the BTR space for the past decade, Jonathon is Managing Director of Packaged Living and leads the Single-Family Rental strategy. Packaged Living is a specialist investor, developer, and operator of multi-family & single-family homes for rent throughout the UK. A founding board member and former President of the UKAA from 2016 through to 2018, Jonathon is passionate about bettering the BTR offering by utilising best practices and knowledge sharing.
In this edition of UKAA In Conversation With… we speak with Jonathon about the rise of single-family housing, its position within the wider BTR offering and what the future holds.
Tell us a bit about yourself and how you got into the Build to Rent arena?
After the Global Financial Crisis, I was a bit of a real estate refugee and found myself working for a real estate brokerage which had its headquarters in New York but offices around the world.
One of their clients was a US multi-family owner-occupier which owned and occupied 70,000 units, mostly in the ‘sunshine states’ of Florida, the Carolinas and Texas.
They had aspirations to bring their business to the UK and I ended up spearheading that charge. I set up the UK office, began looking for investment opportunities and raising capital to execute them.
I spent a lot of time in the US soaking up all the information I could around the capital markets, how deals were financed and how the multi-family industry controls cost, drives revenue and engages in the ruthless pursuit of NOI (Net Operating Income).
It was hard work getting the UK business off the ground because this was around 2012 when the UK multi-family sector didn’t really exist and there were a lot of naysayers who felt it never would. That acted as a drag before we eventually obtained lift-off, but when we finally did, I felt we had a massive advantage because of the experience we had in the US.
That experience meant I thought I knew what ‘good’ looked like – we were able to leverage a lot of best practice and learnings, and that put us in an advantageous position.
What differences are there between the BTR sectors in the US and UK?
There are fewer differences now than there were. The UK has made fantastic strides considering the sector didn’t exist a decade ago.
However, BTR is still a fraction of the residential market, less than 2% in the UK compared to around 20% in Germany and close to 35% in the US.
There is also a much deeper awareness of the value of ‘operations’ than there was 10 years ago. However, those working in property management are not compensated or valued as they are in the States, and that needs to change here if the sector is to fully mature.
What’s the attraction of Single-Family Housing (SFH), as opposed to Multi-Family Housing (MFH), for an investor/developer/operator?
At Packaged Living we see ourselves as ‘living’ specialists. Build to Rent is a very broad church incorporating co-living, student living, later life living and, of course, multi-family housing and single-family housing.
AS BTR specialists, our job is to unlock value across the whole ‘living’ lifecycle.
UK Build to Rent was birthed in multi-family housing. As a management team we’ve developed around 6,000 units, valued between £1.6-1.7 billion, so once that was established it was logical for us to expand into the other ‘living’ sectors.
Single-family housing caters to the next ‘life-stage’ in the rental demographic. If the multi-family demographic skews towards 25-35 years, then single-family housing skews towards 35-plus. This cohort are typically married, with children and with a stakeholder mentality in their local area.
The nature of the single-family rental demographics mean that the residents stay longer (than their multi-family cousins) so there is less churn; less churn means the asset is less expensive to run, ergo there are lower operating costs. Basically, there are fewer moving parts – no complicated lift cores, no reams of expensive amenity space which costs a lot to maintain … and, thankfully, no cladding issues.
Construction is simpler – four walls and a roof are far less risky than 30 storeys – and there’s a demand for it.
It’s also very scalable. there are myriad locations throughout the UK where it is entirely appropriate to deliver 100-250 single-family homes for rent.
So, do you feel single-family housing can add social value?
Packaged Living invests, develops, and operates Build to Rent. If your business stops at the development stage, then your ability to influence the ‘S’ in ESG is very limited.
You can only improve communities, develop better relations with residents and generally improve life experiences if you are operationally geared.
Adding social value to single-family rental is different to multi-family. There isn’t necessarily a hub, a club lounge, or a gym, so there are fewer obvious opportunities to create community.
We are looking at ways to create those opportunities, starting with technology. Our residents’ app can help residents instigate things like dog walking clubs or babysitting services; we’re looking at providing creche facilities, and generally delivering first class ‘outside’ spaces in which residents can be encouraged to dwell.
We also intend to offer homes to key workers under a concession arrangement. It’s not an obligation under planning rules but it’s an opportunity for us to promote a social agenda.
Our homes are also energy efficient – gas boilers are replaced with air source heat pumps, there are EV charging points, we recycle grey water and capture rainwater. Our tech and software records energy use so we can better develop homes in the future and advise residents how they could save on their utility bills.
We are committed to sustainability.
How has the volatile economic situation in the UK affected your plans?
The market has been shifting over the last six-to-nine months and it has had an impact. As ever, there have been winners and losers.
If you’re a homeowner or first-time buyer, the 2% interest rate mortgage you could have got last year no longer exists and the Help to Buy scheme you were hoping to take advantage of now ends in March 2023. It’s harder and more expensive to buy a home.
It also means housebuilders will sell fewer houses, at least in the short to medium term.
On the investment side, it’s an opportunity. We want to deliver more rental homes – not necessarily at the expense of home ownership – but in addition to. For the first time in over a decade, due to increased mortgage costs, renting is now cheaper than home ownership on a monthly basis.
It’s a nuanced picture but there’s more demand from consumers and we’re excited about building more in the BTR asset class because our residents are enjoying living in them and voting with their feet. The schemes are let up very quickly, often at a premium rent.
How does the UK Apartment Association fit in with the SFH model?
Ha! Yes, obviously the name comes from the National Apartment Association in America, but we might have to redefine the terminology!
It’s a sector brought to life in the US through apartments but the term Build to Rent is a good one because, as I’ve mentioned, it’s a broad church under which sit multiple living options.