Sandstone launches new REIT fund fuelled by property market growth
Edinburgh-based private property investment and management company Sandstone has launched a new fund focused on traditional residential property across ten cities in the UK.
The launch of Sandstone Residential REIT means that family offices, fund managers, charities and private clients with SIPPS will now be able to invest in the UK residential market, in a hands-off, tax-efficient way. With a maximum of 50% gearing, projected returns are expected to be 17% per annum, on average.
In March, the UK’s property market grew at its fastest rate since 2007, with property assets offering highly attractive investment opportunities. In a year when GDP experienced its largest contraction in more than 300 years, house prices accelerated to the highest annual growth rate in over six years, by December 2020.
Founded in 1997, Sandstone has helped clients to build portfolios of residential properties, which are then rented to students. Originally known as Grant Property, Sandstone has helped clients from 40 countries invest into 3,000 traditional UK residential properties, representing a net asset value of around GBP 1 billion. The Sandstone REIT is a logical next step, for clients - existing and new.
Sandstone produced a White Paper on its history and market segment, which demonstrates high and steady returns, driven by rising demand and constrained city centre or prime location supply.
The company has achieved returns of 28% per annum, over the past 25 years, based on 75% loan-to-value gearing. The resilience of the student accommodation market and Sandstone’s experience during the pandemic bears this out: occupancy in the portfolio has been above 95%, and rental income rose by 12% in 2020.
In addition to its core services of property sourcing, renovation, furnishing and ongoing rental and management, clients also benefit from annual reviews, green upgrades, and bespoke reporting.
With a focus on property investment, property management and tailored tax-efficient structuring, Sandstone works closely with Deloitte, Grant Thornton and Dickson Minto to meet the demands of larger private clients as well as Family Offices looking to typically invest in building portfolios anywhere from an initial GPB 10 million upwards.
The Sandstone Residential REIT will allow clients, old and new, to invest into a listed fund, benefiting from the advantages of a booming rental market, capital gains, corporation tax efficiency as well as diversification of investment and liquidity. Existing clients will also be able to move their properties into the REIT.
Peter Grant, founder and CEO of Sandstone Group, said: “Sandstone’s new REIT allows a whole new group of clients including Family Offices, Institutions and Charities to capitalise on high performing investments in the UK residential property market, in a hands-off way. It gives them the opportunity to move assets into a listed fund and benefit from the associated gains.
“We are already seeing interest from client groups in the UK and Europe, as well as Singapore, Hong Kong and across Asia.
“Private clients often have strong connections with the UK, whether it’s because of them, their children or grandchildren being educated here. The UK residential market has an incredible track record, combining low risk and high returns.
“There are very few residential REITS in the UK, and our new Sandstone Residential REIT has been created with large institutional investors in mind. It builds on our experience of creating, managing and selling two large scale (£100m) private funds.”
He added: “It offers investors exposure to a really attractive asset class, which combines low risk and high returns. We operate within the student rental market, which has proved resilient, despite the pandemic, with occupancy averaging 95%.
“The combination of great locations, modern interiors, high safety features and low energy costs, all result in student tenants typically staying for 2-3 years. That’s also a win/win for landlords. These factors paired with the strong market and our experience of working within it for over a quarter century, underpins the Sandstone Residential REIT. It also dovetails with the UK Government’s aim to help professionalise the private-rental sector.
“In addition to our core services, we aim to be fully carbon positive as a business over the next twelve months. Property accounts for 52% of global warming, and it’s the number one issue for our student tenants, who are typically under 30 years of age. So, it must be high on our agenda. Since 2006, we’ve cut our emissions by 30%, by changing how we renovate properties.”