UK: Real estate investment manager Moorfield Group is extending its presence in the UK BTR sector by launching a Real Estate Investment Trust (REIT) to buy rental homes.
The new investment vehicle, called MREIT, will initially target acquiring existing and newly-built homes in two residential-for-rent sub-sectors: single-family homes (SFH) and student HMOs.
MREIT has raised £100 million of capital to date and is targeting more than £500 million of investment capacity. The REIT is aimed at institutional investors such as pension funds and insurers.
MREIT is looking to take advantage of the market opportunity presented by buy-to-let investors exiting the rental market due to increased taxation, mortgage costs and regulation.
According to property consultants Hamptons International nearly half-a-million landlords are expected to sell their rental homes in the next five years , with 140,000 leaving the market last year. MREIT is looking to take advantage of the market opportunity this presents.
Charles Ferguson Davie, chief investment officer at Moorfield Group, said: “We believe that MREIT’s acquisition strategy will offer an attractive exit option for buy-to-let investors looking to sell, as well as house-builders that are increasingly considering bulk sales in the face of a weakening ‘for-sale’ market. We are targeting locations with strong underlying demand, identified for our core demographics – long-term renters and domestic students – but where new supply is limited to ensure that MREIT benefits from sustainable rental growth. The success of US single-family REITs demonstrate a way forward for institutional investment into UK residential-for-rent and we are confident that MREIT will help unlock this asset class, which has been difficult for institutions to access due to the granularity and fragmented ownership of existing stock.”
MREIT also sees opportunity in volume housebuilders looking to reduce their stock through bulk sales and focusing on delivering rental units due to a decrease in first-time buyers and lessening demand from existing homeowners. Data from the Bank of England shows the number of mortgage approvals fell to its lowest level in the five months to July, which has been attributed to rising interest rates and a weaker economy by industry commentators.
Marc Gilbard, CEO of Moorfield Group, said: “Through MREIT, we are pleased to offer institutional investors another route to access a necessity-driven asset class with sustainable rental growth that has typically tracked inflation. UK residential has been one of our longest – and strongest – conviction themes, with demographic tailwinds and a stark demand-supply imbalance continuing to underpin values and support resilient rental growth over the long-term.”
