UK real estate investment manager Moorfield has launched MREIT, a private real estate investment trust, targeting opportunities in the residential for rent market across the UK.
The vehicle will initially target acquiring existing and newly-built homes within two residential-for-rent sub-sectors: single-family homes (SFH) and student houses of multiple occupation (HMOs).?
MREIT has raised £100 mln (€115 mln) of capital to date and is targeting over £500 mln of investment capacity. The REIT is aimed at institutional investors such as pension funds and insurers rather than retail investors.??
Charles Ferguson Davie, chief investment officer at Moorfield Group, said:?'We believe that MREIT’s acquisition strategy will offer an attractive exit option for buy-to-let investors looking to sell, as well as housebuilders that are increasingly considering bulk sales in the face of a weakening ‘for-sale’ market.?
'We are targeting locations with strong underlying demand, identified for our core demographics – long-term renters and domestic students - but where new supply is limited to ensure that MREIT benefits from sustainable rental growth.?
'The success of US single-family REITs demonstrate a way forward for institutional investment into UK residential-for-rent and we are confident that MREIT will help unlock this asset class, which has been difficult for institutions to access due to the granularity and fragmented ownership of existing stock.'?
Market exits
MREIT is looking to take advantage of the market opportunity presented by buy-to-let investors exiting the rental market due to increased taxation, mortgage costs and regulation.
Nearly half-a-million landlords are expected to sell their rental homes in the next five years according to property consultants Hamptons International, with 140,000 leaving the market last year.?
MREIT also sees opportunity in volume housebuilders looking to reduce their stock through bulk sales, and focusing on delivering rental units, in the face of falling demand from first-time buyers and existing homeowners.
Data from the Bank of England shows the number of mortgage approvals fell to its lowest level in the five months to July, which has been attributed to rising interest rates and a weaker economy by industry commentators.??
ESG angle
In recognition of the sustainability benefits of MREIT’s strategy, which is centred around acquiring and upgrading existing stock, MREIT is structured as an Article 8 (light green) vehicle.
Moorfield will target improving all EPCs to at least above a C75 level and to B (or above) where possible and will manage the homes in line with Moorfield’s Responsible Landlord Code of Conduct.?
Sadie Malim, head of special projects, ESG and Legal at Moorfield Group, said:?'By focusing on upgrading existing assets to be in line with modern environmental and management standards, alongside acquiring newly-built units, MREIT will enable institutional investors to contribute to the greening of the UK’s built environment.??
'Improving the quality of UK housing will have a positive impact on resident’s mental and physical wellbeing, the environment, and local economies.'?
MREIT’s current portfolio comprises around £50 mln of investments made so far by Moorfield’s fifth value-add fund, Moorfield Real Estate Fund (MREFV), which is split approximately 50:50 between single-family homes and student HMOs.?
