Thursday, June 20, 2024

Blackstone in UK rental housing push with £580mn Vistry deal

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Blackstone has reached a deal with housebuilder Vistry to buy around 1,750 new homes for rent as big money managers increasingly see opportunities in the UK’s underserved rental market. 

The £580mn deal by Blackstone and its minority investment partner Regis marks the second major transaction with Vistry in eight months totalling £1.4bn, funding more than 4,500 homes. 

The UK rental sector still largely relies on small private landlords but large money managers are increasingly moving into the market. Residential properties have weathered the downturn in commercial real estate caused by higher interest rates better than many other sectors. 

“Institutional private capital can play an important role in providing high quality housing stock across the UK, particularly in the private rented sector which is significantly undersupplied today,” said James Seppala, head of European real estate at Blackstone. 

The homes will be managed by Leaf Living, a company launched by Blackstone and Regis in 2021 to manage single-family homes for rent in the UK. The US private equity group has backed 16,500 homes in the UK so far between Leaf and a second company, Sage, an affordable housing provider. 

People living in the UK’s 5.5mn private rental homes have suffered through a period of record rent increases that analysts blame on a rush of tenants back into the market after Covid-19 being met by a shortage of landlords, who have faced rising interest costs on their debt and increased regulation.

The Conservative government’s flagship bill to increase tenants’ protections was scrapped when Prime Minister Rishi Sunak called a snap election for July.

Average private rents rose by 8.9 per cent in the year to April, pulling back slightly from a peak of 9.2 per cent in March, according to government statistics. 

Since taking over housebuilder Countryside in 2022, Vistry has shifted its strategy to focus on partnerships to build affordable housing on behalf of the public sector and non-profit organisations. The homes sold to Blackstone are concentrated in the south-east of England, with the sites mainly coming from the land bank for Vistry’s legacy commercial house building business, the company said. 

“This agreement supports our differentiated business model, with the certainty provided by the pre-selling of homes enabling us to accelerate our build programmes, guarantee work for our supply chain, reduce sales and build costs and create vibrant new communities,” Vistry chief executive Greg Fitzgerald said. 

The focus on these partnerships has helped Vistry fare better in the housing market downturn, which has led other housebuilders to slash their output as high interest rates put off buyers. Vistry said it was on track to increase new home completions by 10 per cent this year.

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