UK’s biggest housebuilder in property fund first

Published by 24publishing for 24dash.com in Housing and also in Local Government

The UK’s largest housebuilder is selling a portfolio of show homes to an investor to help create the UK’s first residential property fund authorised by the Financial Services Authority (FSA).

The deal will see Barratt sell the show homes to Hearthstone Investments and then lease them back until its developments are completed.

Initially the properties will be placed into the fund, equating to £22.5m of ‘seed funding’, with Barratt initially given shares in return. The deal will see some 100 properties placed into the fund.

This will provide the TM Hearthstone UK Residential Property Fund with immediate income and will allow Hearthstone to build a portfolio of private rented property with which people can invest in.

The deal is the first in a series of property-based seeding deals with major housebuilders that are expected to total around £50m.

Christopher Down, founder and chief executive of Hearthstone, said: “Barratt’s show home portfolio, together with that of our other partners, will provide the fund with immediate scale and income, giving investors and their advisers the ability to invest with confidence.

“The Hearthstone business was set up to fundamentally change the way the UK invests in residential property. We believe that investors should have the same choices in residential property as they do commercial property and other asset classes, and our strong relationships with Barratt and other housebuilders will play an important part in achieving our goal. While individual buy-to-let portfolios and owner-occupiers will remain important, the reality is that the country needs investment in housing on a scale which these methods cannot deliver. Professionally managed funds are a very important tool, long established in other countries, which will deliver this investment and offer advantages for both investors and the industry. Hearthstone is pleased to be at the forefront of these changes.”

Mark Clare, chief executive of Barratt Developments, said: “We are pleased to be playing our part in the creation of the UK's first FSA authorised residential property fund. Our strategy is to secure best value whilst unlocking cash from our balance sheet and driving down debt; selling some of our showhomes and licensing them back achieves just that.  At the same time, this new fund is an important strategic development in our marketplace - the creation of a professional private rental fund operating at scale, which is something that the UK really needs.”

Earlier this month, think tank the Resolution Foundation called on housing associations to kick start build-to-let developments by selling new units to investors, which would give them funds to build more new homes.