Aberdeen fund makes £25 million private rental acquisition

Aberdeen Asset Management has acquired Queen Street Apartments in Leicester, a development compromising 232 rented apartments, a large car park, swimming pool, gym and sauna in the firm’s latest expansion into the UK Private Rented Sector (PRS).

The apartments are located close to Leicester’s train station, a newly regenerated cultural quarter and the city’s main shopping area. The location, quality of facilities, low void rate and high tenant satisfaction should make for a durable income stream.

The acquisition is the first to be made as part of an ‘Investment Club’ of a number of UK pension funds formed by Aberdeen to invest in the UK PRS.

Aberdeen already manages over £350 million of residential property assets in the UK and is one of the largest residential property fund manager in Europe, managing nearly £4.2 billion of assets.

Aberdeen now manages over 700 residential units in the UK. Its strategy is to purchase developments, or land, in locations where good quality tenants are likely to want to live. This can mean student residential blocks, land or developments near transport centres or services, or existing developments.

The fund manager analyses ways to maximise returns from the property before acquiring them. Typically this involves reducing the turnover of tenants, increasing or improving facilities and making the development more efficient (see Case Study below for more information).

Aberdeen AM fund manager, Ed Crockett, said: “We all know that the UK isn’t building enough homes which means purchasing a property is unachievable for too many. This means there’s real desire for decent quality rental properties that we are trying, for our part, to provide.

“For many years the example of Continental Europe has shown that large institutional investors can deliver good quality rental accommodation that provides their underlying clients with durable incomes. We’re using all of our experience from doing this in Continental Europe to bear in the UK and will continue to invest in rental properties in the years to come.”

Aberdeen raised £115 million of equity earlier this year from a number of UK pension funds to invest in the UK PRS. The ‘Investment Club’ will acquire existing or new developments of residential blocks across the UK.

Case study: Stratford High Street

Aberdeen Asset Management acquired 180 Stratford High Street in 2015. Near the site of the London Olympics, the 27-storey building consists of 178 rented apartments and two retail units.

Too many of the apartments were not let out or were let for significantly less than the market rate when it was acquired. By decreasing the number of vacancies, the rent roll was increased from £2.7m (€3m) to £3.6m.

Additional services have been provided to make tenants’ lives easier. The building now contains a cold room where their supermarket deliveries can be stored during the day. Dry cleaning can be left in secure booths and are returned the next day. There is a 24-hour concierge, an on-site maintenance team and the whole building is covered by one Wi-Fi network.

The idea behind these services is to make renting a more pleasant experience for tenants, leading to tenants staying longer and a more stable income for the owner.

Aberdeen maintains a database of the thousands of rental units that we manage in major European cities. This allows it to easily refine rents so that they are priced fairly according to the market rate and tenants’ expectations.