Head of US property group Greystar shrugs off UK economy worries

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The chief executive of US developer Greystar has shrugged off worries about Britain’s economy after signing one of the biggest property deals in the UK since the start of the coronavirus pandemic.

Bob Faith has predicted the company will expand further in the UK after last week’s £3.3bn deal to buy student housing business Student Roost with Singaporean sovereign wealth fund GIC.

Further investment in the UK, where the group already has a substantial portfolio of rental housing, was justified by “supply and demand imbalances [for rental property],” he said “When you’re a long-term investor, those kind of overpower [other] things.”

Being a student in Britain was “the premier educational experience in the world,” he added.

Other prospective buyers for Student Roost, which manages more than 23,000 student beds across the UK, were deterred because of the uncertain economic outlook — particularly rising borrowing costs — according to people with knowledge of the process.

Other factors affecting the market include the cost of development, which has spiralled during the pandemic, while the war in Ukraine has hit supply chains and pushed up the price of materials.

In addition, the UK’s housing secretary Michael Gove has adopted a more combative stance towards developers, which he has taken to task over building safety in recent months.

Faith said building costs had increased faster than general inflation in the markets where Greystar operates and were up “10 per cent-plus easily”.

Those additional costs would “come out in rents” for the more than 750,000 rental properties and student beds the company manages around the world, he added.

However, Faith insists now was a good time to buy because demand from students and institutional investors was only likely to strengthen.

The Universities and Colleges Admission Service, which co-ordinates offers and applications, forecasts that the number of international undergraduate applicants to the UK will increase by almost 50 per cent to 208,500 by 2026.

“The income levels of the students — well, the parents of the students — are still quite good, which underpins their ability to pay rent,” said Faith.

Rental properties are viewed by investors as a relatively secure investment in difficult economic times because they are thought of as essential consumer spending, and generally rents are revalued to keep up with inflation.

“At the moment, institutional capital is there for residential for rent,” said Greg Kane, head of European investment research at PGIM Real Estate.

Kane’s firm cooled on UK student housing in 2020 because “the flow of overseas students wasn’t clear; the university sector was in flux, [but] we’re confident going forward. We can predict [student housing] better than we can predict offices,” he said.

Faith is also unfazed by the extra government scrutiny of developers. “Politicians come and politicians go . . . Are there things you have to be aware of? Sure. Does it introduce more risk? Maybe. Does it make you want to leave the market? No,” he said.

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