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Mill Group success from crowdfunding PRS

The UK’s first crowdfunded PRS investment project has received overwhelming interest from investors, securing more than £2 million in less than two weeks.

Mill Group, which announced it will create a Reit to invest in private rented housing, says it has raised £2.1 million in just 12 days, exceeding its initial target for fundraising. Working with crowdfunding platform SyndicateRoom, it has attracted the funds from 49 private investors.

A further tranche of £0.5 million will be made available via the platform, recognising the strong demand. In addition, Mill Group will be tapping IFAs and institutional investors for share sales ahead of the group’s listing.

“We have been very pleased with the level of interest in our buy-to let REIT – the first time that people have been offered an easy way to invest in this popular asset class via a share that will shortly be listed on a UK stock exchange,” said David Toplas, chief executive of Mill Group Residential.

“At last people can invest in a buy-to-let investment that is suitable to put into your SIPP or ISA – but people will have to be quick to get into the IPO as it will be closing soon as we want to complete the listing process by Christmas.”

“Most people appreciate that residential investments have performed well, but have heard horror stories about tenants not paying, or worse, not looking after the property, and are very pleased to hear of a hassle free buy-to-let alternative to invest in a spread portfolio run by professionals.”

The fundraising was deliberately set up to encourage the smaller investor, with a minimum £1,000 commitment, but such is the level of interest that typical investments have averaged more than £15,000.

More about Mill Group’s plans to invest directly in private rented properties around the UK here.

Mill Group plans rental housing REIT with crowdfunding

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.”

Bovis to build 510 private rented sector homes

Housing developer Bovis Homes has won two contracts to build new homes for the private rented sector. Between them, the two deals will see the company deliver 510 homes across sites in the UK, through 2014 and 2015.

It also means Bovis can sell off some older plots in its land bank, some of which have already been written down in its accounts. Without this deal, there is a clear indication that the private residential sales market is not lively enough or profitable enough to have had the company building out these plots for sale, within the next couple of years.

One deal with Mill Group involves 190 homes, of which 110 will be houses, to be delivered on sites in Horsham, Bristol, Brockworth, Southampton, Cambridge and Hemel Hempstead. The £45 million joint venture has Mill as the majority owner and is supported by £8.77 million funding from the government Build to Rent scheme, and senior debt from RBS. Bovis will put £1 million in, and advance £4 million as a loan. The homes will be completed over the next 18 months, and will be rented and managed by Investors in Homes Management, a Mill Group subsidiary.

“This new joint venture forms a key part of our strategy to build a significant PRS portfolio and demonstrate our commitment to structure, source, finance and invest in the right opportunities,” said Mill Group chief executive David Toplas. “There is a significant, well-recognised shortage of homes and an ever-growing need for good quality, affordable rental accommodation, and this deal will help tackle that. We are delighted to play our part to encourage greater institutional investor participation, ultimately helping to spur an increase in supply of private rental homes.”

For Bovis, the deal puts some of its existing land bank into action, bringing forward mothballed sites for construction, and delivering it better returns than if the sites continue to be held for future development and sale individually. Says a company statement: “These homes will be delivered over and above the group’s prevailing private sales, accelerating the development on each of the sites included without sales risk, with an average housing profit margin which is not expected to dilute the group’s anticipated operating margin in 2014 and 2015.” The units will be counted in Bovis Homes’ reported completion figures.

Details of the second deal, involving 320 homes, are not immediately clear. However, for Bovis, this will enable it to shift new homes on sites mainly in the Midlands and north. The company says the deal will enable it to “accelerate trading” through several older sites, “some of which are written down”.

“We are delighted to have agreed these two private rental sector deals which provide the opportunity to deliver over 500 additional new homes during 2014 and 2015,” said David Ritchie, chief executive of Bovis Homes. “Through achieving ths, Bovis Homes is accelerating delivery across a number of existing housing sites and enhancing shareholder returns.”