British investment company Mill Group has revealed plans to revolutionise investment in the private rented sector in the UK. A new tax efficient Reit (real estate investment trust) will combine institutional and crowdfunded cash, to invest in rental housing.
The Reit will give several tax advantages to investors. It will also allow smaller investors with a minimum £1,000 stake to invest in rental property. And it will give smaller landlords the option of converting their existing property into a Reit shareholding, passing on the responsibility of property and tenant management to the new organisation.
Mill Group starts with £2 million of its own funds and commitments from investors, and will add £300,000 from crowd funds, provided via SyndicateRoom. An additional £2.5 million is expected to be raised from other institutional investors, while the Reit is expected to list on the UK stock market in the near future. As such, it will present an opportunity for individual investors to buy shares, giving them a stake in the private rented sector without buying directly into their own property.
The Reit will be chaired by Ian Ellis, former chief executive of Land Securities Trillium, who said: “Renting long-term is now the accepted norm for a large cohort of young professionals and new families, and the Mill Residential Reit will provide good-quality, private rented accommodation in attractive locations where there is strong local demand.”
The company has already purchased seven residential properties in London, Bristol and Guildford, to start the investment portfolio. Ultimately, it intends to grow the fund size to around £50 million.
The Reit is an established tax efficient corporate structure already used by many companies listed on the UK stock market, notably those investing in commercial property. Rents are restricted in their investment activities, and must return a substantial proportion of their earnings to shareholders.
Mill Group chief executive David Toplas added: “There is real scope for value to be added through residential development and refurbishment, using the special tax status of a Reit to both acquire and hold residential investment properties in this fragmented market.”
“We recognise the role that crowdfunding platforms such as SyndicateRoom can play in helping businesses like ours to raise finance from retail investors who appreciate the total returns from a residential portfolio and want an easy and liquid alternative to a self-managed, buy-to-let property.”
Recent research from Mill Group suggests investors are now more interested in private rented sector housing than they are in the previously hot sector of student accommodation. Comments provided by 60 institutions suggested 85% were already making investments in residential in some way. Said Mill Group’s Andrew Smith at the launch of the reseach: “This clearly shows investors are more ready than ever before to invest in much-needed rented housing in the UK. They are committing resources to the sector, but progress is being held back by a lack of internal expertise and the limited supply of suitable stock.”
“Accordingly, joint ventures remain a preferred route into the sector, with investors looking for management expertise and comfort in numbers.”