Sometimes, the right partnership creates a new entity which is greater than the sum of its parts.
Jessica Hardman, former head of European portfolio management and UK CEO of investment manager DWS, and Bay Downing, executive director of UK living sector developer and operator Downing, are certainly hoping for this effect with their new business venture, Aboria Capital.
Aboria is all about capturing opportunities in the UK living sector, with plans to eventually expand to Continental Europe. But the new business starts with a significant advantage, namely Downing’s £1 bn+ (€1.2 bn) development pipeline, which includes seven new projects planned to start on site at locations across the UK in 2025 and 2026, combined with Hardman’s 20+ years of experience in global real estate investment management.
Hardman was also recently appointed president of the British Property Federation (BPF), which she says gives her unique insights into the marketplace.
Says Downing: ‘We have developed and operated purpose-built student accommodation (PBSA) in the UK for the last 35 years and grown that into a vertically integrated developer-operator. With Aboria, we see an opportunity to take Downing’s projects forward and put an institutional wrapper on the Downing business.’
Adds Hardman: ‘I had a long career in portfolio management at DWS, doing a lot in the living space, including build-to-rent (BTR) and PBSA. I saw the opportunity for an investment manager to be a lot closer to the operational data.’ Hardman explains that while a lot of the number crunching is outsourced in institutions, she saw value in keeping in-house ‘the information that you can get from operational outcomes to drive operations and stock picking’.
Combining this with a commitment from Downing, Hardman has a chance to fast-track the vehicle’s growth, while offering investors in the living space ‘more transparency, more innovation, and better management of the data coming out of the sector’.
For Downing, one of the advantages of being a developer as well as an operator is that they can build-in data capture and analysis. Hardman sees her role in the partnership as ‘taking those learnings and delivering returns to investors’. She suggests that the timing is right for targeting living sector growth, in the wake of recent market corrections and with the prospect of interest rates coming down further. To this, the duo will add occupational efficiencies through a vertically integrated business.
It's an interesting time to be focusing on residential, Hardman says, analysing the outcomes of the recent UK budget. ‘There is a lot of energy around delivering more housing, and improving both the built environment and town centres,’ she notes. ‘Within a couple of weeks of the election period, the government announced the consultation around the national policy framework. Reducing friction in the planning process was a necessary step, and we are heading in the right direction.’
After the UK, the business plans to develop opportunities in Continental Europe, but where and how will depend on macroeconomic markers at a later date.
For Bay Downing, aspects of planning law in the UK still present one of the biggest challenges the business faces, but he notes that their ‘experienced team’ should stand them in good stead as this environment evolves. Hardman says that health and safety legislation, as well as demanding sustainability requirements can be taxing from a small business perspective, but that she is ‘calling in her contacts’ to ensure these areas are covered off ‘to cater for derisking assets’.
The business has a lot to do in the immediate future. Hardman estimates it will take some £500 mln to fund out the Downing pipeline, before it can look to developing a further slate of projects.
One interesting niche is the co-living sector. Downing Living's flagship co-living scheme, Square Gardens in Manchester, is already in operation with 1,187 units, while another 707 are set to be delivered in the spring. On completion, it will house 1,894 young adults, providing the ideal transition out of student accommodation and into their working lives. ‘The wider market has been really encouraged by Square Gardens so far, and wants to see more co-living,’ Downing says.
Hardman suggests that flagship schemes like Square Gardens represent ‘a great springboard for an investor-manager’ that is focusing on diversification. She notes that investors can take reassurance from the fact that Aboria also contributes its own capital ‘from the balance sheet’, ‘co-investing meaningful amounts’ to all of its projects in a clear commitment to the sector.
