Moorfield launches UK REIT to buy homes for rent

As a longstanding investor in Build to Rent and the living sectors, Moorfield has launched its UK REIT as it looks to buy homes for rent.

Left to right: Charles Ferguson Davie and Marc Gilbard, Moorfield Group | BTR News
Left to right: Charles Ferguson Davie and Marc Gilbard, Moorfield Group.

UK-focused real estate investment manager Moorfield Group has launched a new investment vehicle – MREIT – that will initially target acquiring existing and newly-built homes within two residential-for-rent sub-sectors: single-family homes (SFH) and student HMOs.  

MREIT has raised £100m of capital to date and is targeting over £500m of investment capacity and is aimed at institutional investors such as pension funds and insurers.

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 is looking to take advantage of the market opportunity this presents.

“We believe that MREIT’s acquisition strategy will offer an attractive exit option for buy-to-let investors looking to sell, as well as house-builders 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.”  

Charles Ferguson Davie, Chief Investment Officer, Moorfield Group

MREIT also sees opportunity in volume house-builders looking to reduce their stock through bulk sales and focusing on delivering rental units due to a decrease in first-time buyers and lessening demand from 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.   

“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.” 

Marc Gilbard, Chief Executive Officer, Moorfield Group

The Private Rented Sector is estimated to be worth some £1.5tn 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.

Moorfield believe there is an opportunity to provide a better quality of home and service to renters than they typically receive, through applying consistent brand standards including design and technology.  

 The company 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.  

MREIT is structured as an Article 8 (light green) vehicle in recognition of the sustainability benefits of its strategy, which is centred around acquiring and upgrading existing stock.

Moorfield’s target is to improve 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.  

“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.” 

Sadie Malim, Head of Special Projects, ESG and Legal, Moorfield Group

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.

Being active in both these markets since 2020, Moorfield 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, the company has been a longstanding investor across the living sectors.

Being an early entrant in Build to Rent since 2012, the company has invested in retirement villages since 2008 and purpose-built student accommodation (PBSA) since 1997.