Big money invests in the suburbs
High finance has always had a taste for property, usually city centre offices and apartment blocks. Now it's looking at regular family homes...
There’s a term used by people in the property industry - Build to Rent. It probably means nothing to people outside that world. But it’s becoming more likely that you could find yourself living in a Build to Rent - or BTR - home.
It means a big investor, like a pension fund, puts up the money for a whole estate. It then becomes the landlord with the rents generating a steady return on the original investment.
This model has funded some of the new gleaming towers in Manchester city centre. And now it’s being rolled out to the suburbs. The brothers behind the discount chain B&M want to knock down the Burnage branch and build 115 homes on that plot by the Kingsway. They’re doing it through a company called Triple Jersey which is based in the tax haven of Jersey. I’ll dig into their plan in a separate post because I wanted to focus on another big housing development that involves big, institutional money.
Last month work started on the redevelopment of Mellands playing fields on Mount Road.
There will be 303 homes:
207 - private rent
60 - 'affordable' (11 social rent, where rent is linked to local incomes and rises are capped by government, and 49 shared ownership - you buy a stake but also pay rent)
36 - flats for people leaving care managed by homeless charity Centrepoint
It turns out all 207 private rented homes will be owned by a company called Sigma Capital which will manage them under its Simple Life brand. For the past few years Sigma has been owned by New York investment firm Pinebridge. It's an institutional investor - it raises money from organisations and individuals and invests it for a return. It’s ultimately owned by Singapore-based Pacific Century Group which is chaired by the billionaire Richard Li.
The Mellands development is part of a 1,000 home agreement Sigma has around Manchester with housebuilder Kellen Homes. Kellen is owned by Renaker which has built many of the city centre towers, some of which have been sold to institutional investors.
Does it matter that these homes are being financed like this? After all, that cash is getting houses built. But like any landlord, they'll be looking for a good return. Will locals in Gorton be able to afford the rent? The initial plan for homes at the B&M site was given the cold shoulder by local councillors, including leader Bev Craig, who felt it was inappropriate in the area because of the rents they were aiming for. The slightly odd thing about the Mellands development is there was no mention of this ownership model, Sigma Capital, or its target rents in any of the planning documents considered by councillors.
So what’s Sigma’s track record as a landlord? A glance at Simple Life on the reviews site Trustpilot shows an overall rating of 3.5/5, based on 1,050 reviews. Plenty are happy (63% 5 star) but 22% were 1 star with complaints about fees and lost deposits.
What do you think? Welcome finance for extra housing? Or potentially fewer houses for individuals to buy, and high rents?
By the way, these playing fields have been owned by the Greater Manchester Youth Federation for about 100 years. They say they’re no longer viable but this development also includes two full size football pitches and a club house.