A new report by City analysts Peel Hunt says that the private rented sector has become one of the “hottest UK property niches”.
It also says that the “race for scale” in the sector has only just begun.
The report, ‘Real Estate: A game of two halves’, looks only at listed property companies and gives a ‘buy’ rating for Grainger, the UK’s largest landlord.
The report says there is “huge interest” in the private rented sector from both UK and North American funds, and yet the PRS is under-represented in terms of the stock market.
Praising Grainger’s management team, it says that the business has secured over £650m of PRS investments in the last 18 months, with a further £243m either in solicitors’ hands or dependent on planning permission.
The report treats the institutional version of the PRS as if it were commercial property.
The rest of the report looks at sectors including offices, shopping centres, doctors’ surgeries and self-storage.
It also looks at student accommodation, and in particular the institutional provider Unite. Peel Hunt has upgraded Unite to a ‘buy’ rating, reflecting what is sees as growth in the student housing sector.
While the Government has become notorious for private landlord bashing over the last couple of years, it has been encouraging of institutional ‘build to rent’ schemes and landlords.
The two very different parts to the sector are not necessarily exclusive – although Grainger makes a point of telling tenants “When you rent with us, you deal directly with us”.
However, London agent KFH was recently appointed to manage Britannia Point, a 182-unit PRS development by Criterion Capital.
The 17-storey building was converted to offices and was once voted London’s ugliest building.
Grainger’s latest acquisition last month is a portfolio of three tower blocks in Manchester with 192 private rental homes.
One developer who has nimbly switched to this sector to satisfy demand for product is the AIM listed Telford Homes.Don’t be fooled by the moniker their stomping ground is London mainly the less fashionable areas of London -of Newham ,and Tower Hamlets
Already secured deals with institutional heavyweights M&G (the men from the Pru). Further deals with London& Quadrant and the global giant Greystar in 9 Elms makes them the go to developers
Developing at the crossover coal face of private and social housing they are just the sort of developer the Gov’t should be encouraging to provide much needed affordable housing Currently involved in reconfiguring a major part of Poplar and its Festival of Britain shopping centre,. the Goldfinger designed Balfron Tower .They have also been a major force in transforming Stratford
Rolling their sleeves up and winning awards
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Telford have done well both in terms of share price and growth. Grainger has been one of the largest private landlords for years and was originally known as the Grainger Trust. I first became aware of them when I met Lord Portsmouth who lived in Basingstoke and was also known as Lord Lymington and his family name is Wallop…how on earth could you forget that lot!
They were social landlords and have been around since 1912, but now move and talk like any big investment fund. Their year end numbers were encouraging and have a big fighting fund to buy £100’s m pounds more of schemes. Their gearing is low, but their performance talks of increasing rents and when they sell, it is for an increased price over the book value. Lets see how long the gravy train remains..as these will be the type of landlords that President Corbyn et al will not like, even though they provide a good standard of accommodation and there are some funky schemes up North. They are all banking on property ownership dropping to 60% of the adult population or less, hence their prospects and increasing rent roll, but the danger is they are still the landlord for those where rising rents will be a problem and the business LTV will come under pressure if interest rates keep rising. Lets see if all the sheep rush in and turn this into another busted flush, trying to fan the last embers of a boom market…I wait with interest
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P Daddy
Yes maybe a limited life for new entrants to all this when voids start reducing their returns to less than 2%The battleships are already out of the harbour with institutions like the Pru and it takes a long time to turn them around
You only have to look at their disastrous foray into estate agencies .They were still gobbling up practices for capital sums in 1990 -1 based on bumper profits earned in the past when the market had already turned against them
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