UK: Housebuilder Berkeley Group has revealed plans to enter the London rentals market by establishing its own BTR platform.
In its year-end results, the company said it was adopting a strategic approach to maximising returns from its long-term regeneration sites.
Berkeley chief executive Rob Perrins said: “In the year, we have delivered 3,500 new private and affordable homes, of which 87 per cent are on regenerated brownfield land, and provided over £370 million in subsidies to deliver affordable housing and commitments to wider community and infrastructure benefits. Recognising the strong occupational and institutional investment demand for high quality, well-managed rental homes in London and the south-east, Berkeley is establishing its own Build to Rent (BTR) platform to maximise returns in today’s market conditions.”
He added that Berkeley had identified around 4,000 homes across 17 of its brownfield regeneration sites as an initial portfolio for the new platform.
Berkeley said its move into the BTR market is a “natural extension” of its past activity, which has seen it forward sell 1,000 homes to institutional investors across five sites over the past three years.
“We now believe that adopting a more strategic route to this market will drive best value for these assets by creating a portfolio of scale, professionally managed, with proven income levels stabilised prior to disposal,” the company said.
The establishment of the portfolio will be financed by internally generated funds, debt secured against the rental properties once income generating, and third-party capital.
“We will be locking in build costs early in the investment cycle and with yields linked to long-term interest rates, there is strong potential to drive value accretion over the next ten years, as well as incremental income while the properties in the portfolio remain owned by Berkeley.”
Berkeley said the sales market “remains subdued” with the value of underlying private reservations around a third lower than the previous year, reflecting the “ongoing macroeconomic and geopolitical uncertainty and, in particular, the prolonged period of elevated interest rates”.
