Hearthstone Investments, the specialist residential property fund manager, has secured the backing of the UK's biggest house builder Barratt Developments, with a seed investment deal of £22.5 million (approx. 28.7 million) spread over three tranches and linked to the growth of the fund.
The arrangements will see Barratt contributing a portfolio of show homes, which will then be licensed back to the company. This will provide the fund with immediate income, before the show homes are subsequently let to private tenants or sold once the development site completes. The deal is the first in a series of property based seeding deals with major house builders that are expected to total around £50 million (approx. 64 million).
The TM Hearthstone UK Residential Property Fund, which is due to soft launch over the coming weeks ahead of a full roll-out in September, is the UK's first FSA authorized residential property fund. As such it is eligible for tax efficient wrappers like ISAs and SIPPs, and will be available within standard investment platforms to both private and institutional investors.
Commenting on the Barratt partnership, Christopher Down, founder and Chief Executive of Hearthstone, said: "We are thrilled to secure the early support of Barratt for the Hearthstone fund. Barratt's show home portfolio, together with that of our other partners, will provide the fund with immediate scale and income, giving investors and their advisers the ability to invest with confidence."
"The Hearthstone business was set up to fundamentally change the way the UK invests in residential property. We believe that investors should have the same choices in residential property as they do commercial property and other asset classes, and our strong relationships with Barratt and other house builders will play an important part in achieving our goal.
"While individual buy-to-let portfolios and owner-occupiers will remain important, the reality is that the country needs investment in housing on a scale which these methods cannot deliver. Professionally managed funds are a very important tool, long established in other countries, which will deliver this investment and offer advantages for both investors and the industry. Hearthstone is pleased to be at the forefront of these changes."
Mark Clare, Chief Executive of Barratt Development said:
"We are pleased to be playing our part in the creation of the UK's first FSA authorized residential property fund. Our strategy is to secure best value whilst unlocking cash from our balance sheet and driving down debt; selling some of our show homes and licensing them back achieves just that. At the same time, this new fund is an important strategic development in our marketplace - the creation of a professional private rental fund operating at scale, which is something that the UK really needs."
Source: Barrat Development