Berkeley establishes own Build to Rent platform

Berkeley Group is establishing its own Build to Rent platform, adapting a strategic approach to maximising returns from long-term regeneration sites.

Open plan living area at Victory Pier, a Build to Rent development managed by Berkeley Group | BTR News
Open plan living area at Victory Pier, a Build to Rent development managed by Berkeley Group.

Recognising the severe shortage of high-quality rental accommodation, Berkeley Group announced today in its results for the year to 30 April a natural extension of its strategy that will see the company establish its own Build to Rent platform.

The new platform will be developed over the next ten years. It will see the delivery of around 4,000 new Build to Rent homes across the company’s 17 nature rich, well-connected, and low-carbon brownfield urban regeneration developments.

Berkeley’s position has always been that, if it cannot deploy capital to deliver appropriate risk-adjusted returns, it will return surplus capital to shareholders. With the creation of the new Build to Rent platform, the surplus capital that the company indicated in December would be available to make additional returns from 2027, should no new investment opportunities arise, will now be allocated to the development of the rental portfolio.

Berkeley sees this new platform an attractive opportunity to accelerate the delivery of its existing assets by building a best-in-class London and South-East focused Build to Rent residential portfolio and platform. It will enable them to maximise value on their brownfield regeneration sites from this growing market segment to the benefit of both society and shareholders.

With a strong demand for rental properties in and around London, and with upward pressure on rents forecast to remain, Berkely will be looking to lock in build costs early in the investment cycle.

With yields linked to long-term interest rates, there is strong potential to drive value accretion over the next ten years, as well as incremental income while the properties in the portfolio remain owned by Berkeley.

Berkeley has sold over 1,000 homes across five sites in the last three years to institutional investors on a forward commitment basis. The company now believes that adopting a more strategic route into the Build to Rent sector will drive best value for these assets by creating a portfolio of scale, professionally managed, with proven income levels stabilised prior to disposal.

“Recognising the strong occupational and institutional investment demand for high quality, well-managed rental homes in London and the South East, Berkeley is establishing its own Build to Rent platform to maximise returns in today’s market conditions.

“Berkeley has identified around 4,000 homes across 17 of its sustainable and well-connected brownfield regeneration sites as an initial portfolio for this platform.

“Developed over the next ten years, and broadly representing a 10% increase in delivery, the portfolio will be financed by a combination of internally generated funds (over and above annual scheduled shareholder returns), debt secured against rental properties once income generating, and the introduction of third- party capital at the appropriate time – fully supporting Berkeley’s long-term corporate 15% pre-tax ROE target.

“Berkeley’s passion and purpose is to build quality homes, strengthen communities and make a positive difference to people’s lives. We stand out as the only large-scale UK homebuilder focussed on brownfield regeneration, which is a vital driver for growth and a powerful force for good in our towns and cities.”

Rob Perrins, Chief Executive, Berkeley Group

Berkeley’s Build to Rent residents will benefit from the same high level of customer service experienced by the company’s purchasers in its 900-home developed and managed portfolio between 2011 to 2014.