OpCo-PropCo: The continued growth of this Real Estate Investment trend

The OpCo-PropCo model, where the operating business (OpCo) and the real estate holding company (PropCo) are structured as separate legal entities, is gaining significant traction across the UK real estate market. Once seen mainly among large institutional investors, this model is now being adopted more widely across sectors that combine operational and property elements such as healthcare hubs, logistics centres and dark kitchens, a sector forecast to grow by 12.9% annually over the next decade. It is also becoming more prevalent in residential markets including purpose-built student accommodation (PBSA), co-living, apart-hotels, serviced accommodation and care homes.

What is the OpCo-PropCo model?

By separating the operating company from the property company, investors can gain greater flexibility in how they capitalise, manage risk and grow. The structure often allows for multiple investment strategies within one group, diversifying risk at a time when property investment is more complex and returns or appreciation are less certain than in previous cycles.

In short, the PropCo captures real estate value (appreciation, rental yield, capital stability) while the OpCo captures operational upside (business cash flow, brand value, scaling potential). For long-term investors it can also open up multiple exit routes.

Building Long-term value with OpCo-PropCo structures

At Karis Capital, we are seeing growing interest in this approach from both SME and regional housebuilders and portfolio investors diversifying into alternative markets. These are clients building platforms rather than simply acquiring assets – creating value both within the business and the real estate. While not immune to the external pressures facing the industry the model can help keep both funding and exit strategies more open.

Investor appetite is being driven partly by pressure on traditional yields particularly in the residential market. Higher financing costs coupled with legislative uncertainty from measures such as the Renters’ Rights Bill are making traditional buy-to-let or straightforward residential rental investments less appealing. In contrast, OpCo-PropCo structures provide diversified returns and richer data on occupancy and tenancy via the operational business – information that can in turn drive up PropCo valuations.

Why Investor demand for OpCo-PropCo structures is growing

Investor appetite is being driven partly by pressure on traditional yields particularly in the residential market. Higher financing costs coupled with legislative uncertainty from measures such as the Renters’ Rights Bill are making traditional buy-to-let or straightforward residential rental investments less appealing.

In contrast, OpCo-PropCo structures provide diversified returns and richer data on occupancy and tenancy via the operational business – information that can, in turn drive up PropCo valuations.

Alternative Residential Investment sectors that are driving growth

The growth of alternative residential asset classes underlines the trend. According to Knight Frank, more than £1.1 billion was invested in the UK Build to Rent (BTR) market in the first three months of 2025 marking the seventh consecutive year that Q1 investment has exceeded this figure. The firm also reports that annual PBSA investment reached £3.87 billion in 2024, representing 14% year-on-year growth. These sectors, along with care homes and social housing, benefit from strong supply-demand fundamentals that align well with the OpCo-PropCo model.

How the OpCo PropCo Model attracts diverse capital sources

The appeal also lies in the ability to attract different pools of capital. Institutions, REITs and debt funds are typically more comfortable backing PropCo assets, while private equity-style capital often favours OpCo growth. The model can also open up specialist structured finance options such as sale-and-leasebacks or forward funding.

From a lending perspective, there is liquidity in the market for the right opportunities. Lenders are undertaking more thorough due diligence, with a strong focus on Gross Development Values (GDVs) and robust exit strategies to ensure Loan-to-Values (LTVs) align with risk appetite. The varied revenue streams and clearer risk allocation inherent in the OpCo-PropCo model can strengthen the funding case but structuring and presenting the opportunity correctly is key.

As always, the long game matters. The most successful investors in this space are those continuously assessing performance, adapting strategy and actively managing both sides of the structure to optimise value.

How we can help

At Karis Capital, our role is to guide clients through this process by not only identifying the best rates but also structuring the funds with the most suitable lenders based on deliverability and alignment with long-term objectives. We also introduce specialist valuers, lawyers and other professionals with deep expertise in these asset classes. Working with parties who truly understand the OpCo-PropCo model, ensuring transactions are structured and executed in a way that supports both the operational business and the property assets.