The chief investment officer of Moorfield Group has warned of a “changing investment market” for the private rented sector, as the fund manager pursues ambitious targets for its rental homes portfolio.
The company launched a partnership with residential investment platform Bricklane last year, targeting a £600m portfolio of managed single family homes for rent and the acquisition of 2,000 homes by 2024.
After 12 months, the duo has amassed a £100m portfolio comprising 300 homes. Charles Ferguson-Davie, chief investment officer at Moorfield Group (pictured), told EG the investment market is changing but that the partnership was happy with the growth so far, adding that it is maintaining a “roll-out” plan of increasing its portfolio of acquired properties by £200m a year.
Ferguson-Davie said: “We are dealing with a changing investment market. There are rising interest rates as well as rising inflation. We are trying to establish what that means for our underwriting when we buy a new property.
“What is the right rent to charge? Is it affordable? What will the investment value be when we sell the portfolio? What is our cost of debt likely to be? These are some of the metrics that are moving.”
Ferguson-Davie said the partnership would remain “conservative, cautious and careful” in how it underwrites.
“We don’t see house prices collapsing or falling, but we do hope there will be a reduction in the pace of growth of house prices in the UK,” he said.
“It has been quite excessive, especially in the past 12 months. We would like to see that fall and normalise, making it easy for everyone to buy a house and for us to execute our strategy.
“In the meantime, we would like rents to go back to growing in line with a lower rate of inflation. [Excessive] rental growth is raising affordability issues.”
The PRS partnership initially targeted London, Bristol and the South East. It is now expanding to the Thames Gateway and Bath, and has recently made acquisitions in Reading.
Ferguson-Davie said: “We are adding new markets and are looking to scale up and do more.
“Building relationships with suppliers takes time, and so does building brand recognition for customers. In scale, we think we will be very successful with this strategy – it has certainly proven very successful in the US with some very big players. They have been able to take advantage of the scale of their business and drive down costs that are involved in the business by having more of it.
“The scale of the market is what attracted us to it in the first place, as there are 5m renters out there to go after.”
The partnership is spending an average of £300,000 per property. Investments are acquired and managed by Bricklane through its proprietary platform, Compass.
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