PRS: The Rise of the Asset Manager.
..and the realisation that they hold the key to unlock the PRS management conundrum.
Most of our clients are consummate asset managers. Their skills are honed in the block management business where they have the unenviable task of working a relatively dry asset for a freeholder, whilst ensuring that the tenants are also kept happy and compliant.
Of course, I don’t mean compliant in the ‘Stepford Wives’ sense, of the phrase, but more to ensure the smooth running of a block or estate where everyone pays on time, sticks to the terms of their lease and the general environment is one of an attractive, pleasurable place to live. It’s a balancing act, and one that Blondin would have been proud of.
Assets run by block managers tend to be quite big things. Not only in mass, but in the nature of the work required to keep them in good condition. Unless you’re ‘in the business’ it’s hard to appreciate quite how much work goes into keeping that mansion block pristine.
Now here’s the thing….. Since 2012 when the Montague Report heralded the re-introduction of the institutional residential investor, the world of PRS has been turned upside down by a fast moving, fast evolving sector, where we, in the UK , look enviously at the ‘Multi Family’ sector in the US. They’ve had 40 odd years of experience over there, there have been a few bumps along the road, but they’ve pretty much nailed it.
The Urban Land Institute (ULI) were in Boston last week on a working party tour of Multi Family, and with them a number of UK institutions, operators and managers of PRS, keen to see at first hand the real deal. I’ve seen some of the videos that have been taken of the buildings out there and, I can tell you, it would blow you mind to see how incredible the offer to residents is out there. Way beyond anything we have in the UK.
But back to the ‘thing’. A lot of focus has been on the ‘front end ‘ of the PRS. The hospitality side of the business, the ‘customers’ not tenants ethos where nothing is too much trouble, tech is everywhere and everything, convenience is the watchword and the millennial occupiers barely have to lift a finger to receive their hearts desire…. But, lets remember our institutional investors in the PRS. It’s taken them a while to get back to residential, 50 years in fact, and in that time it don’t look like it used to.
Whilst the institutions, all household names, are now committed to the PRS, we have to remember that they are fundamentally a conservative bunch. Yes, they can be innovative, embrace new ideas, invest in modular construction and hold up the new customer management platforms as stellar paradigms. But they also want to know their asset is in safe hands.
So, they rely heavily on the tried and trusted, long crafted skills of the block asset manager to look after their building. So it should come as no surprise that the two leading lights in PRS management have their roots as block managers or that global real estate agents are hastily buying block management companies to add that crucial discipline to their PRS armoury. Because that’s what institutional investors want. Fundamentally, they want to know not just that a whizzy brand is attracting the right tenants and that the income is just dandy, but that their asset is being properly cared for by real experts in the field.
We recognised this a while back. At SLC, we’re very much like the asset managers. As you would expect; we occupy the same space in the same sector. We have a critical, niche expertise that our clients have much need for. But to the outside world, just like our clients, we look to be a million miles away from PRS.
Nothing could be further from the truth. Just as we at SLC have developed specific PRS debt recovery models and that our offer is integral and fundamental to the PRS, the asset managers are realising that their skills are just as relevant in the PRS as they are in the block management business. Perhaps more so as institutions look for a truly holistic management model, part of which must be asset management.
So, using a motoring analogy: before you think the PRS management model is the Ferrari of property management; all shiny, slick, well appointed, trendy and beautifully designed; and asset management is an old Volvo estate, think again. Asset management might well be more akin to a Volvo estate, but have you seen the new ones? Full of tech, efficient, also beautifully designed; but practical, reliable and will look after your assets, big and small, like nothing else.