Early this year Goldman Sachs purchased a portfolio of 918 residential properties. Reports say the properties were purchased from a build to rent developer Sigma Capital who created the portfolio in a joint venture with Gatehouse a shariah-compliant bank owned by Middle Eastern interests.
The properties were apparently a mixture of 2 and 3-bed houses over 15 sites in the North West. Costing about £110 million it sold for £150 million. The bulk of the funds went to the Bank.
The portfolio had been built up over a period from 2014 The rental income is said to be about £8 million so a yield of 5.3%.
Why is this deal so significant?
We would point to 4 key feature:
- The portfolio is not a large block of flats or properties in one location. It is properties spread over a number of locations. Yes they are new build but the reality is they will have to be managed like a normal residential portfolio
- They have been purchased with a view to building a portfolio of 3,000 properties It is said that the purpose is to then sell the portfolio to an institution. But the important point is we will end up with a 3,000 portfolio run by an Institution on an ongoing basis. We believe this will be the first of its kind ( although anyone with other examples please let us know) This could really set a trend if it works
- The number of properties The largest private landlord is believed to be Grainger with 8,000 properties or so. The largest individual landlord is Fergus Wilson with about 1,000 properties so in one leap this portfolio will be a major new entrant into the market.
- The price paid for the portfolio was a significant uplift on the cost. It provides a yield of 5.3% in the North of England where up until very recently you could get yields of 10% or more reasonably easily . Goldman Sachs are one of the smartest operators in the world so clearly they see this yield as worthwhile. This shows the potential value of larger portfolios once assembled. Again one would like to know why this yield for these properties worked but clearly it did
This is one to follow and learn from Let us hope we are given more information about how it is all going