SFV’s Investment in Bricklane
In November 2022, SFV co-led Bricklane’s Series B investment round alongside Latitude, LocalGlobe’s breakout fund. Bricklane is Europe’s leading single-family residential investment platform for institutional investors. We are thrilled to join them on their journey to revolutionise the tenant experience and transition the UK’s rental stock into high-quality, energy-efficient homes.
By Conan Lauterpacht and Cal Stock
The state of private rental stock
The UK’s private rental stock faces significant challenges in terms of energy efficiency and housing quality, largely driven by a perception of housing as a ‘passive income’ investment by the UK’s 2.5 million landlords (accounting for £1.7tn of investment).
Compared to owner-occupied and social housing stock, the private rental sector has a higher proportion of homes that fail the UK Decent Homes Standard — with nearly a quarter of homes falling short of the Standard.
The private rental stock also performs poorly in energy efficiency, with the median non-flat homes (i.e., 57% of rental housing stock) earning a rating of D.
This situation means that tenants in the private rental sector are more likely to live in uncomfortable or unsafe homes and face higher energy bills. Addressing these issues is essential for promoting energy efficiency, reducing fuel poverty (estimated to affect up to 7.5 million households in the UK), and improving the overall quality of housing in the UK’s private rental sector.
The opportunity to renovate existing housing stock
The most significant opportunity for decarbonisation and efficiency improvements in housing lies in the existing housing stock.
1. The median existing dwelling emits nearly three times more than new dwellings per annum
2. The median rating for houses built before 1982 is a D — representing 71% of the total housing stock
3. In England, 90% of homes were constructed before the introduction of Energy Performance Certificates (EPCs) in 2007 and well before the Minimum Energy Efficiency Standards (MEES) for privately rented properties were introduced in 2018.
Nevertheless, this transition comes with substantial costs. Estimates indicate that upgrading private rental stock to an EPC C rating will require over £19 billion in investments. Securing adequate financing remains a crucial challenge to overcome in the pursuit of a more energy-efficient rental housing stock.
Introducing Bricklane
Single-family residences (SFRs) offer attractive investment returns, but traditional real estate investment business models make acquiring and managing SFRs uneconomical due to the high volume of small asset value transactions. Sourcing and managing SFRs requires a fundamentally different approach — a systematic, data-driven, and digitised method for sourcing, underwriting, and managing a fragmented portfolio of assets.
Bricklane, led by CEO and co-founder Simon Heawood, is an SFR investment management platform. It has developed an end-to-end platform to source, underwrite, acquire, and manage SFR portfolios on behalf of institutional investors at scale and has already partnered with some of the world’s leading real estate investors.
We believe that Bricklane will deliver superior returns for its real estate investment partners by providing access to the European SFR asset class while simultaneously improving tenant experience and enhancing the quality and energy efficiency of its homes.
Importantly, this strategy aligns the interests of tenants, Bricklane, and its real estate partners:
1. An improved renting experience leads to happier tenants, reducing tenant turnover and vacancy periods for investors.
2. Enhancing the quality and energy efficiency of homes saves tenants money by lowering their energy bills and increasing demand for the homes — reducing letting times and boosting yields for investors.
Future acquirers of these assets will also value high-quality, energy-efficient real estate portfolios. Many potential acquirers have already committed to net-zero targets, such as those set out in the Net-Zero Asset Owner Alliance (which includes 84 institutional investors with a collective $11 trillion in assets).
Bricklane’s journey to provide a superior and fair tenant experience is well underway. The company was shortlisted for Landlord of the Year at the 2023 RESI Awards, and a survey found that 75% of its tenants believe it offers the best rental experience they have ever had.
We are excited to work with Bricklane as it continues to develop a scalable process to renovate homes at scale, enhancing their quality and energy efficiency. The company has set ambitious goals for increasing energy efficiency targets by up to 60% — a challenging feat given the complexity of renovations and UK planning regulations.
Building on its success with existing properties, the business has recently expanded into buying new build properties across the UK using its proven tech-driven underwriting and ability to transact quickly, which is valued by the major and SME housebuilders. Acquiring properties from these builders at scale gives them more certainty and faster recycling of cash, allowing them to bring forward future developments, ultimately supporting more housing being built in the areas in most acute need.
Our investment into Bricklane
We are delighted to have co-led Bricklane’s Series B investment round. Simon and his team have been pioneers in the PropTech industry since founding Bricklane in 2016. We are eager to join them on their journey as they establish a new asset category in real estate investment across Europe, while modernising the renting experience and rental stock to meet the needs of today and anticipate those of the future.
