– MREIT will target £500m+ investment capacity to acquire newly-built and existing assets in the UK residential-for-rent market –
Moorfield Group (‘Moorfield’), the UK-focused real estate investment manager, has launched MREIT, a new investment vehicle that 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 £100m of capital to date and is targeting over £500m of investment capacity. The REIT is aimed at institutional investors such as pension funds and insurers rather than retail investors.
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.
The Private Rented Sector is estimated to be worth some £1.5 trillion and almost all of this is currently owned by individual buy-to-let investors, with only 0.1% of landlords owning more than 100 properties(1). Moorfield believe there is an opportunity to provide a better quality of home and service to renters than they typically receive at the moment, through applying consistent brand standards, including design and technology.
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.”
Moorfield expects MREIT’s focus on improving the quality of accommodation and customer service that renters on average incomes receive to appeal to ESG-minded institutional investors.
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.
“In line with our consumer-centric approach across our living sector portfolios, MREIT will offer high quality accommodation with the levels of customer service that we have implemented in the build-to-rent and purpose-built student accommodation sectors as well as a commitment to being a responsible and compassionate landlord.”
MREIT’s current portfolio comprises c.£50m 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.
Moorfield has been active in both these market segments since 2020 and also separately manages c.£100m of similar assets through the manager’s fourth value-add fund, MREFIV.
In addition to these residential-for-rent strategies, Moorfield has been a longstanding investor across the living sectors, being an early entrant in build-to-rent (investing since 2012), retirement villages (investing since 2008), and purpose-built student accommodation (investing since 1997).
Marc Gilbard, Chief Executive Officer at Moorfield Group, said: “Through MREIT, we are pleased to offer institutional investors another route to access a necessity-driven asset class with sustainable rental growth that has typically tracked inflation.
“UK residential has been one of our longest – and strongest – conviction themes, with demographic tailwinds and a stark demand-supply imbalance continuing to underpin values and support resilient rental growth over the long-term.”