Member Article

Shoosmiths' Judy Fawcett reflects on a roundtable the firm hosted in November 2023 - examining the partnerships model and the role it plays as part of the UK's living sector.

“That’s the way we look at doing business. It is creating that partnership, relationship, that trust. And, hopefully that works both ways,” said Gwynn Thomson, investment director at Sigma Capital Group, during a roundtable Shoosmiths hosted in November 2023.

The discussion, centred around the growth of the partnership model in the living sector, took place against the backdrop of persistent inflation and elevated interest rates.

The roundtable coincided with the Bank of England’s November meeting, during which it maintained interest rates at 5.25% - a decision that many in the UK’s real estate sector will have welcomed, at least compared to the prospect of further hikes.

However, current operating conditions remain challenging, with a tight borrowing environment impacting the entire UK economy. The residential market, in particular, is being acutely affected with funders, developers and individuals contending with higher borrowing costs.

It is not surprising then that we're witnessing some consolidation in the living sector.

Embracing partnership working should not be seen as a short-term fix though. Instead, the model is a key way to drive the sector forward, delivering value during periods of uncertainty, but also in the long-term - a message echoed by those taking part in our roundtable discussion.

 

Evolving model

One of the key developments surrounding partnership working in the living sector came in September 2023, with Vistry committing to merge its housebuilding operations with its partnerships business to support delivering over 25,000 homes a year.

Barratt Developments also recently announced its latest deal with Citra Living, after forming a strategic partnership in 2021.

“We’re doing a lot with Citra in terms of the private rented sector model,” said Georgina Butler, group partnerships director at Barratt Developments, during the roundtable. “For us, it’s about going into those relationships with your eyes open about what everyone wants to achieve.”

Butler added: “It’s understanding that, having that trust and relationship. One size doesn’t fit all.”

While these partnership agreements are enabling homes to be brought forward at a time when the for-sale market is facing challenges, the potential of the partnership model is much greater, with those taking part in the roundtable highlighting its role in delivering multi-tenure schemes.

“There’s a huge amount of housing need,” said Rachael Williamson, head of policy and external affairs at the Chartered Institute of Housing. “We need to work in partnership to make that case, so that housing is seen in the same way as the NHS, as something that needs to be invested in.”

“What we try and do is work with all of our partners - housebuilding partners, Homes England, local authorities and the community - to deliver the tenures that people need,” commented Sam Stone, director of land and planning at Abri Group.

Stone added: “Typically housebuilders that wouldn’t look to do partnerships are now approaching us at earlier stages and saying, ‘do you want to look at this scheme together – do you want to do it as a full package deal?’ So, essentially, we work together. We buy the site on behalf of the contractor or housebuilder, so we’re putting our cash in, and then they are doing the planning, but we’re involved as well - we get planning and they build it for us.”

On build to rent (BTR), Jonathon Ivory, chief investment officer at Packaged Living, said: “We come at the partnerships model through an interesting lens because we are a developer in our DNA…When we expanded into single family housing, we realised quickly that we couldn’t buy land as competitively as housebuilders and we couldn’t build as efficiently. So, we alighted on partnerships, because we believe it’s the most efficient way of allocating our capital.”

While analysing the intersection of housebuilding and BTR, Theo Plowman, assistant director at the British Property Federation, stated that the current rate of delivery through partnerships may change as operating conditions improve, but single family will cultivate a “stronger sector”.

“The market that BTR single family providers will corner is that middle ground. That’s an important message to deliver to the government,” he said. “It’s around that in-between – not quite the affordable area, but not the higher-end, for-sale model.”

Long-term view

Another point raised during the discussion, showing the diverse types of partnerships, was schemes involving developers and commercial businesses operating outside the living sector.

For instance, Transport for London appointed Barratt London as a joint venture partner to deliver a scheme in Acton, creating up to 900 homes – 50% of which are designated affordable.

Astir Living is also delivering a BTR scheme in Lewisham with Tesco. On partnership arrangements, Nic Simpkin, founder of Astir, said: “You’ve got a whole range or spectrum of where you go to in partnerships. One end is transactional…and then what you’re talking about is a relationship type sector where you’re bringing parties together who have a mutual interest.”

While partnership working in the living sector is not a new invention, the model is changing. The last few years have seen this change accelerate, with different types of businesses increasingly looking to partner on schemes, but also establish long-term commitments to work together.

“It’s a relationship and you’ve got to work at it,” explained Andrew Pattinson, real estate partner at Shoosmiths. “The longer the relationship and the more you do, the better it gets.”

Judy Fawcett is a real estate partner and co-head of Shoosmiths’ living sector

Taking part in the roundtable:

• Theo Plowman, assistant director (real estate) at the British Property Federation
• Rachael Williamson, head of policy, external affairs at Chartered Institute of Housing
• Georgina Butler, group partnerships director at Barratt Developments
• Jonathon Ivory, chief investment officer at Packaged Living
• Nic Simpkin, founder of Astir Living
• Gwynn Thomson, investment director at Sigma Capital Group
• Sam Stone, director of land and planning at Abri Group
• Lisa Tye, planning partner and co-head of Shoosmiths’ living sector
• Andrew Pattinson, partner and head of real estate North at Shoosmiths
• Chair: Judy Fawcett, real estate partner and co-head of Shoosmiths’ living sector

 

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