Blackstone Takes Major Step Into Build-To-Rent With £819M Vistry Deal
Blackstone has bought a huge portfolio of yet-to-be-built houses from homebuilder Vistry for £819M, representing a major push for the private equity giant into the UK rented residential sector.
Vistry Group has signed a partnership agreement with Leaf Living and Sage Homes, both of which are backed by Blackstone-managed funds, plus Regis Group.
In what is Blackstone’s first large-scale move into the UK build-to-rent sector, Leaf and Sage are to acquire 2,915 units from Vistry totalling a gross development value of £819M.
The homes are on plots across 70 of Vistry's developments, with delivery to commence this year and the majority of homes completed within the next two years, the company said.
It is part of a growing trend of homebuilders selling large portfolios to large investors as the market for selling to individual buyers stagnates, a trend that is boosting the UK single-family rental sector.
The plots formed part of the group's former housebuilding land bank and are being pre-sold in line with Vistry’s strategy of pre-selling circa 65% of all units across the business as the company moves forward with its strategy to merge its housebuilding operations into its partnerships business.
The agreement is one of the UK’s largest new-build residential investment transactions and covers 1,522 units being delivered to Leaf and 1,393 affordable homes for rent and shared ownership being delivered to Sage, the largest provider of newly built affordable homes in England.
Blackstone bought into affordable housing provider Sage in 2017 and backed Leaf Living in 2021. The deal with Vistry is by far the largest undertaken so far by Leaf.
Vistry said that the agreement “exemplifies Vistry's high return, capital light partnerships business model” and said that it expects an initial cash receipt of circa £160M in its financial year 2023, with further staged payments across the development programme.
The company said that as well as releasing capital, the secured revenues will enable Vistry to accelerate the delivery of units across the 70 sites, with delivery to commence this year. The portfolio is expected to deliver an adjusted operating margin in excess of 12% and a return on capital employed of circa 40%, in line with the group's medium-term financial targets.
Vistry’s previously stated adjusted profit before tax expectation for 2023 is £410M, with year-end net debt of circa £100M.
Vistry is one of the largest British housebuilders by number of homes built and typically works with local government authorities and housing associations to build affordable homes through its partnerships unit.
The company completed the £1.25B acquisition of rival Countryside in November 2022, and in October this year Vistry lowered its annual profit forecast because of a reduction in site margins and said it would cut 200 jobs as it focused on affordable housing.
