UK Development

Curious what development looks like in the UK and the career path one would follow. In the US property development is highly entrepreneurial with probably a few dozen firms representing the bulk of completions, depending on region and development type. There's also a plethora of small shops with family or country club money that go out and try to develop an apartment complex not to mention the thousands of small time home builders.


A lot of the conversations surrounding the UK/EU seem to be hyper focused on the financing side (ie Megafund REPE, etc). Curious if anyone works in development on the other side of the pond and can share more on the environment, career paths, major players, etc. Is it possible to work your way up and one day run your own shop/deals or is that a unique feature of the American economy?

 
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I work in logistics development but know a lot of the players outside of my industry as well. I would say the landscape is a lot like the US in the UK but on a much smaller scale. You have the same "top" developers which a vast are US-originated shops, such as Panattoni, mixed with big UK dev shops, SEGRO, British Land, LANDSEC. These players all fight for the big developments and use their own money. Other names I see in the top are Greystar, Hines, TCC, Tishman Speyer. Then you have the MF who have development platforms. These platforms tend to be specific to developing a sector, such as Mirastar for KKR or Citivale for Partner's Group in logistics. These are operating companies usually given an allocation of a fund to fulfill. Then you have mid sized dev shops such as Brockton Everlast and Henry Boot PLC which will pick your small to mid size range, and every once in a while go into the larger development stuff if the project is right. These are your classic GP developers who will look for capital on a deal by deal basis. And then followed are your small time developers.

IMO, we have a much smaller pool of small time developers because in the UK, the land is very expensive and is difficult to change planning permission. This weeds out people who are cash-strapped because you need a pool of capital to land bank. Of course you see small developers doing single family units or the odd apartment complex but the UK is geographically limited. So to answer your question, the UK still has the tiers of developers in the US, but it is very top heavy with a smaller percentage of developers making up the small time homebuilders. It is very much possible to run your own shop and the GP/LP developer is strong and alive in the UK economy. The biggest hurdle is development is an old-man's game so the more time you sit with a company, the better your reputation before starting your own thing. That being said, I have seen a few blocks that could be apartment conversions which I would quit my job to do (<30) but dont have the capital or network to do it. Example of a successful company, Bloom Developments was started by two friends in their late 20s (graduated masters in 2015), and started Ultra Urban warehouse developments and got backing from TPG Angelo Gordon. Their first development was a wash, just to prove it is a functioning concept and thereafter they have scaled to about 5 developments which are bangers. See my comments regarding masters and segro below as the two founders fit this.

As for career path, the UK LOVES certifications. Unless you are a foreigner, I'd say 90% of developers have a masters in real estate and are MRICS accredited. Most people recognise that the masters is not about learning and is all about networking, which is why Reading is the top masters for real estate. Most developers either start out as a Finance Analyst (promotion into development) or as a Development Surveyor (analyst equivalent) at a development shop. Both of these should be grad programs that take 3 years to complete and will get you your MRICS certification. Another common route is to start out in a brokerage, CBRE, JLL, Savills etc and to do their grad program which also gives you the MRICS. A big difference between the US and UK job markets is that the UK froths over grad programs. It is not like the US where you normally apply for a standalone job. The third route is for everyone else which is going to a development shop and learning on the job where you are not on a grad program and your title may not be a developer until you are fully fledged. This basically becomes a mentor program where you learn directly from one person without any exposure elsewhere. It can either be the best or the worst experience. Personally, there seemed to be a golden age of developers coming from Segro's grad program about 5-10 years ago; these guys are everywhere but Segro now which I find funny. If you want to be a developer, I would do an undergrad at the best university possible, do a summer internship at a major developer, then do a masters at Reading and then the grad program. Some companies will actually pay for your masters, such as Knight Frank, because the network is such an asset. 

 

Typing the below on a phone so forgive the grammar / formatting 

Lots of good info above but a few things to add - focused on London commercial development as this is my sector.   

The key players fall into three big categories in my view:

  1. UK Instiutional: Landsec, British Land, Lendlease, Canary Wharf Group, Argent, Derwent, GPE,
  2. International Institutional: Greystar, Hines, Tishman, Brookfield Properties  
  3. UK Local: tons in this category but key ones are Almcor, Seafourth, General Projects,  LBS, Fabrix, Castleforge (Sort of developer), Brockton (pretty instutional now, not much development anymore), Brunswick (part of Feldberg now). Resolution (fund that used to develop a ton), Bloom (mentioned above), Yoo capital, Delancy. I am sure I am missing a ton but this is start. 

The role, comp and culture is hugely different across these categories - generally speaking the UK instutional shops are good to get on the resume but don't pay very well. The International and UK Local developers will often offer higher all in comp with the instutional shops offering higher cash and the local shops offering upside. I would say best path is start at international instituional and move to UK local at an associate level. Roughly speaking analyst / associate comp looks like this:

  • Analyst:
    • £40k - £60k UK instutional - small bonus of 20 - 30%
    • £50 - £60k UK Local - bonus of 20% - 30% with some deal upside if lucky   
    • £60 - £70k at international institutional - bonus of 20% - 50% 
  • Associate:
    • £60 - £80k at UK institutional - similar 20 - 30% bonus as above 
    • £70 - £90k at UK Local - 20 - 30% bonus + 2-3% promote in a few deals OR higher bonus of 30% - 50% with no upside 
    • £80 - 100k at international instutional - 20 - 50% bonus, likely no promote until directly / senior assc 

A few more observations below (somewhat random): 

  • JV terms tend to be better for the GP in the UK vs. the US - personal guarantees are very, very rare - in the US, developers without a track record often need to provide these to get their first deal done but it's much less common here, which helps with starting a developer.  
  • The development scene in the UK is generally less institutional than the US, there are fewer players and I would say that broadly speaking there is less talent going into the industry here. I am lucky to have lots of upside in my deals but I'd say my overall comps is still behind what you'd get in the US at my level. 
  • Development is much slower and more difficult here than in the US - getting planning permission takes time (1-2 years in some cases), costs lots of money and is never guaranteed. 
  • There are huge affordable housing contributions / requirements to build any resi deals, which makes resi much less profitable here
  • Re. the point on qualifications above, I would say that the certifications are only really important for DM roles / for old school UK developers. We have hired people in the past and didn't even realise they had a qualification until after they joined (that said we are super international and have less then half our team from the UK). 
  • Something to think about down the road: the golden scenario as a developer is to get lots of promote, which is paid as a capital gain if you structure things correctly. Historically capital gains have been taxed at a much lower rate in the UK but this is 99% chance going to change in the next election. You will end up paying your normal incremental tax rate on your promote moving fowards so this limits the take home upside of development 
 

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