Q&A: Five questions for Fiera and Packaged Living on their new single-family fund

Charles Allen and Ed Ellerington discuss the launch of Fiera's first dedicated residential rental fund.

Fiera Real Estate UK-backed rental living business Packaged Living was one of the early movers in the single-family market. The company started investing in the sector in 2021, when it established a joint venture with Aviva Investors.

Five years later, single-family housing has come a long way. With increasing numbers of investors looking to gain exposure to the sector, Fiera and Packaged Living last month launched their first dedicated residential rental fund, Fiera Real Estate Single-Family Housing.

The open-ended, core-plus fund has already held a first close with a group of institutional investors and has ambitions to build a £1bn portfolio.

Green Street News caught up with Packaged Living chief executive Ed Ellerington and Charles Allen, head of European real estate at Fiera Real Estate, to understand the thinking behind the fund and their strategy for the new vehicle.

What was the thinking behind the new fund?

Charles Allen (CA): With Packaged Living and Aviva Investors having built a very successful joint venture, we felt that from a Fiera point of view, there was a lot of investor appetite to enter the space and that creating an open-ended fund would allow us to unlock some of that investor demand.

Packaged Living was among the first movers into the sector. The fund was designed to capitalise on the experience and track record already built by the team.

Who are you targeting as investors?

CA: The fund is open to all investors, but there is particular interest from pension funds, insurance-based money and other institutional capital sources. Initial investors come from diverse backgrounds, and active conversations are taking place with parties across four continents, suggesting strong global appeal.

It is an impact fund, with the UK SDR (Sustainable Disclosure Requirements) level, which has become attractive, certainly to UK investors. We’ve appointed Mike Weston (the former chief executive at LGPS Central) as senior adviser to the fund. LGPS capital is of course a big focus for us, and hopefully Mike’s appointment will help open up some relationships there.

How has the single-family rental market changed since you first entered it?

Ed Ellerington (EE): The market has transformed significantly. The sector traces its origins back to around 2015 and 2016 when Sigma was operating largely alone. Packaged Living entered during the Covid-19 period. Uncertainty around the for-sale market at the time made housebuilders more open to partnerships.

Since then, the sector has grown exponentially, and housebuilders now understand the benefits of the partnership model far more. Ten years ago, perhaps two or three housebuilders would have engaged with an institutional rental partner. Five years ago that had grown to around 10. Today it is unusual for a housebuilder not to be talking to an institution about rental.

Relationships with housebuilders have been central to the business model. A key differentiator with us is that Packaged Living is itself a developer, which means we have an ability to understand the housebuilder’s perspective while also fully understanding where we need to end up as an institution. That’s helped us build up and foster some really good relationships with the housebuilders.

Has your product specification changed with the new fund?

EE: Nothing’s really changed from the Aviva partnership. All schemes are built to a low-carbon, no-gas specification, typically incorporating air source heat pumps and photovoltaic panels on roofs. We were among the first to introduce a zero energy bills proposition for residents, by using battery storage to sell surplus energy back to the grid. It was viewed almost as a novelty initially but has become a significant selling point in the wake of rising energy costs.

If we go back to 2021, trying to convince the housebuilders that they needed to change their spec to put in air source heat pumps was pretty challenging. That now is kind of known and expected, which makes the whole thing more frictionless. Crucially, the fund does not ask housebuilders to build bespoke products. We’ve always chosen product types that they already have, which fundamentally we then think will work for rent. That leaves the interiors and the way we get energy into these properties that is the bit we really focus on.

What is your geographic focus?

EE: The fund operates across England, Wales, and Scotland, but not Northern Ireland. There is no particular regional bias. The impact framework naturally draws the fund towards areas with an undersupply of housing. Key selection criteria include access to local schools and employment, undersupply in the local market, and the strength of the developer’s covenant. The first two assets to come into the fund are located in the East Midlands and the North West.

This article was originally published in Green Street News.