The developer has launched Urban Splash Residential, reporting that a soft launch for the fund seeking an initial £20m has been over-subscribed.
This initial portfolio comprises 123 homes and will target an internal rate of return of 15-20% with modest gearing.
The fund has thus far acquired 10 modular houses at Irwell Riverside, along with 33 apartments at the group’s long-running Park Hill redevelopment in Sheffield, 80 apartments at Bradford’s Lister Mill. These homes have been acquired at an average cost of £148 per sq ft, initial gross yield on cost of 8.5% and net yield on cost of 6.8%.
Splash chairman Tom Bloxham said: “I am delighted to unveil this portfolio and to welcome outside investors into an Urban Splash property portfolio for the first time.
“I believe residential property is the ultimate defensive investment for wealth preservation; everyone needs a home and there is lots of potential in inflation-led increases in rents, as well as the access that investors will have to Urban Splash’s pipeline of developments and management platform.”
“PRS remains one of the most attractive assets classes but has historically been difficult for institutions to access at scale – so our vast experience of developing and managing residential apartments over the past 25 years means that we have created an attractive proposition for investors.
“The new fund is entirely independent of the Urban Splash group but the fund and the group are already enjoying a mutually beneficial symbiotic partnership. The fund will help speed up delivery of much needed new homes and be able to offer new homes for rent alongside Urban Splash’s traditional sales model.”
Bloxham and his board are among the initial investors, along with Paul Gough from STAR Capital and “a number of private equity and property professionals, previous FTSE CEOs and leaders from the tech and music industries”.
Former UBS analyst Akeel Malik will lead the business, with John Forbes as chairman. Mariana Investment Partners is in place as FCA-regulated alternative investment fund manager.
Malik said: “The commitment of our initial investors shows that USR is an efficient vehicle for individuals seeking to gain exposure to the residential housing sector, away from the diminishing appeal of individual buy-to-let portfolios – which are becoming less attractive as increases in tax and SDLT charges rise.”