Investor M&G Real Estate has agreed to buy 97 new build homes in Bath from developer Crest Nicholson, to create a core of private rented homes in the city.
The block purchase at the Bath Riverside development will cost M&G £25.2 million, for a mix of one and two bed apartments. It is intended that the deal will be the first of several between M&G and Crest Nicholson, allowing the investor to build a PRS portfolio, which Crest Nicholson will build. The homes are expected to start appearing on the rental market from February 2016.
“We look forward to working with Crest Nicholson on other schemes,” said Alex Greaves, head of residential investment at M&G. “We believe this to be the first transaction of its kind between an institutional investor and a listed house builder, marking a major opportunity for institutional investors seeking access to the UK residential sector. Our residential strategy provides stable, income-driven returns for investors and, in time, thousands of much-needed, well-managed rental properties.
“As we build on this initial agreement to bring scale to our portfolio of rental properties, it’s vital we continue to champion quality. It is our hope that the involvement of institutions like ours will lead to more homes coming on tap and higher standards, just as it has done with the student accommodation market. We want our residents to be proud renters because we and our partners have developed high-quality homes.”
Chris Tinker, executive board member for Crest Nicholson, added: “This is an exciting development in Crest Nicholson’s drive to explore new models of housing delivery across the southern half of the UK. With housing at the forefront of the political agenda, an institutionally funded private rented model has the potential to underpin a meaningful increase in housing output at a time when the need to sustain growth and meet housing need is at an all-time high.
“This type of partnership agreement could mark a step change and acceleration in the PRS model which will ultimately help unlock land, create jobs and bring wider economic benefit as well as bringing forward the delivery of much needed new homes and mixed tenure communities.”
While housebuilders typically argue they can make more money from building homes for sale, private rented sector components can be attractive as part of a larger site development. They enable the housebuilder to gain construction pace more quickly, thus completing a project faster; and can also prove beneficial in negotiating with planners, who sometimes look more favourably on PRS units, and may consider offsetting part of an affordable housing quota against the rental units.