BTR update – Goldman Sachs grows, L&G expands, new scheme in Brum

13 January 2021 | Investment

Gatehouse Bank has announced the sale of its Thistle BTR property portfolio to Goldman Sachs Merchant Banking Division and Pitmore for a total consideration of around £150 million.

The deal, the largest transaction of its nature in the UK to date, includes a portfolio of 918 units which are primarily two-and-three-bedroom homes across North West England.

“Thistle has not only been a highly performing investment throughout, it has also proved resilient during the Covid-19 pandemic, which is a key consideration in this market,” Charles Haresnape, Gatehouse Bank’s chief executive, said.

“As such, a strategic decision was made to exit Thistle and crystalise returns for the investors. The marketing process generated a high level of world-class institutional investor interest and we are pleased to announce a deal has been finalised with Goldman Sachs.”

PwC and CBRE acted as advisers to Gatehouse on the deal, with Dentons providing legal representation. Meanwhile, Goldman Sachs and Pitmore were advised by Savills, with Herbert Smith Freehills and Jones Day providing legal representation.

Thistle, described as a Single-Family Home (SFH) Private Rental Sector (PRS) Fund, was launched in 2014, and is a joint venture between challenger bank Gatehouse and Sigma Capital Group plc, with a total investment in the region of £110 million.

It spans 15 sites across the North West, predominantly focused on the Greater Manchester and Liverpool areas, with developments strategically located in areas of high demand from families ‘seeking to rent quality property with access to schooling, transport networks and ample amenities’.

Under the current economic pressures caused by the pandemic, this type of real estate investment has proved to be one of the most robust, with Thistle’s occupancy currently at 99.8% and rental collection rates of around 98%.

Paul Stockwell, Gatehouse Bank’s chief commercial officer, added: “The UK private rented sector has experienced consistent growth over the past five years underpinned by strong supply/demand dynamics. We are now looking to further develop our expertise in this sector with the creation of another fund in 2021.”

Peter Burns, residential capital markets leader at CBRE, said of the deal: “The unique nature of this portfolio meant that it was a highly competitive process, further demonstrating the significant weight of capital looking to enter the single family BTR sector. We are very proud to have drawn upon our national teams and networks to support Gatehouse on this landmark transaction.”

Simon Hampton, real estate corporate finance partner at PwC, added: “The attractive rental price point and resilient nature of this portfolio is demonstrated by an average occupancy in excess of 99% and rent collection in excess of 98%, even during the Covid-19 pandemic. We certainly anticipate that the weight of domestic and international capital entering the single family BTR sector will continue to increase, especially as investors seek to further diversify in an attempt to drive returns.”

Barclays will be providing loan finance to Goldman Sachs to support the purchase. Graham Chilver, relationship director at Barclays Corporate Real Estate, said: “We are pleased to have been able to support Goldman Sachs in the purchase of this strongly-performing portfolio. Having funded these assets since development, the decision to extend our involvement was an obvious fit with our ongoing commitment to the real estate sector in the UK.”

Gatehouse is now working with PwC and CBRE to source a new capital partner to maintain the ‘same investment composition’. It’s also seeking to grow its single-family PRS portfolio to more than 3,000 units over the next five years through forward-funding direct from developers.

Legal & General expands resi portfolio

One of the UK’s biggest BTR players is continuing to step up its investment into the sector, starting work on 6,000 residential units in the past year, most of which are in the BTR category.

Since March last year, and in spite of Covid-19, Legal & General (L&G) has secured planning permission for around 6,000 homes through its later living, BTR, modular housing and ‘build to sell’ businesses. 

Nigel Wilson, the company’s chief executive, said: “With UK unemployment likely to rise significantly over the next 12 months, it’s essential that financial institutions continue to invest in the real economy, recycling pensions funds and savings into projects that help to create jobs, housing and vital infrastructure. 

“We are looking at how investment capital can not only create stable, long-term returns for our customers, but also to help to re-build regional economies in the wake of Covid-19 and limit the impacts of climate change. Our triangle of strategic challenges – climate, ageing and infrastructure – have all taken on a new urgency. We need to build back better, decarbonising our economies, creating a new intergenerational contract and sharing the benefits of a sustainable economy more fairly.”

L&G has invested approximately £1.5 billion in what it calls ‘levelling up the UK’s towns and cities’ since the March 2020 lockdown, in turn creating over 30,000 jobs over the long-term and helping, it says, to support a regional economic recovery.

Developer secures planning for latest BTR scheme

Court Collaboration, a specialist residential developer, has been given the green light to deliver its latest 48-storey BTR development at the site of the former Irish Centre in Deritend, following approval by Birmingham City Council.

Bounded by Stone Yard, Chapel House Street and fronting the busy B4100 (High Street Deritend), the scheme will be made up of 454 one and two-bed city apartments with over 10,000 sq ft of amenity space.

The development will also boast a gym, a cinema, a sky lounge and bar, as well as flexible co-working space and cycle parking. What’s more, the scheme says it’s committed to providing 3% on-site affordable housing.

In line with Birmingham’s greener aspirations and to demonstrate the firm’s commitment to future-proofing its developments, the scheme will not feature any car parking and will instead be fully accessible via the city’s growing public transport network, including the latest Metro extension along the High Street.

High-quality public realm to complement that being provided as part of the Metro extension will also be delivered as part of the scheme. It’s expected that construction work will start on site later this year.

Alex Neale, chief executive at Court Collaboration, said: “This development will provide high-quality, contemporary city living in a prime location, complementing the surrounding area and numerous high-rise developments coming forward in Digbeth, including Connaught Square, Lunar Rise and our own, Stone Yard.

He added: “With a high level of ongoing investment and regeneration in this area, as well as the wider city centre, we are thrilled to have received planning permission from Birmingham City Council and look forward to starting works on-site in due course.”

Established in 2010, Birmingham-based Court Collaboration owns and manages more than £1 billion of residential real estate developments across the West Midlands and throughout the UK.

As of October 2019, the company had 15 active developments across Birmingham, Leeds, Sutton Coldfield and Wolverhampton, with around 7,000 residential units on site or at planning stages.

Leading BTR players join forces to drive sector forward

A new national communications steering committee featuring some of the leading names in the BTR sector has been launched through the UKAA, the sector’s main trade body, and supported by the British Property Federation (BPF).

Founding members include the BPF, Moda Living, Quintain, Greystar, L&G, Grainger, Get Living, PLATFORM_, urbanbubble, JLL, Homeviews, Love to Rent, SAY PC, The Oracle Group, and RoomService by CORT. Investors, agents and portals are also on board, while the group will extend to the other sub-groups within BTR including architects, contractors, lawyers, regulators and other suppliers.  

The BTR sector is predicted to be worth more than £550 billion by 2030 and the goal, through sharing experience and having a cohesive voice, is for the committee to help enhance how BTR is positioned with investors, policymakers and residents, as well as offering a voice to smaller businesses in the sector who are driving positive change.   

The committee will collate real-life case studies from residents living in UK BTR accommodation to ‘paint an accurate picture and remove the stigma still attached to homes for rent’, by showing that renting in 2021 is frequently a lifestyle choice, not a necessity versus homeownership.  

Perhaps most significantly, members will also explore the term BTR, its connotations and consumer understanding of the phrase, with consideration given to how the sector can re-position its brand and communications strategy so that it better resonates with the public. 

The committee will also hope to normalise best practices when it comes to sustainability and promoting a green agenda, including moving towards a zero-carbon future.   

Harriet Pask, head of corporate communications at Quintain, said: “BTR is coming of age in the UK. A far less mature market than others but, together with the UKAA, we have collected voices and expertise from across the industry; representing firms that design, build and successfully manage large and growing portfolios and specifically to this group, manage the reputations of those firms and represent the BTR industry as a whole.”  

This post has originally been featured in Property Investor Today.