CDL Hospitality Trusts enters UK BTR sector

CDL Hospitality Trusts makes first investment in UK BTR sector
The Castings, Manchester, UK (Concept drawing –subject to change)

Singapore-listed CDL Hospitality Trusts (CDLHT) has entered into a land purchase agreement and a development funding agreement to invest into a residential build-to-rent (BTR) forward-funding scheme in Manchester, UK for a purchase consideration of £73.3 million (S$136.0 million).

CDL Hospitality Trusts said this transaction is a forward-funding arrangement which allows CDLHT to invest in a residential BTR property at a fixed-cost, with cash flows managed over the duration of development.

Pursuant to the land purchase agreement, CDLHT has acquired certain land and buildings located on the south east side of Longacre Street, Ancoats, Manchester, UK, from Packaged Living (FREOF V Heyrod) LLP, for a consideration of £9.5 million (S$17.6 million).

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In connection with the land acquisition and under a development funding agreement, the vendor will redevelop the land into a residential BTR building to be known as “The Castings”, for a price of £63.8 million (S$118.4 million), of which £58.2 million (S$108.1 million) will be paid out periodically over the development period and the remaining £5.6 million (S$10.4 million) will be paid shortly after practical completion of The Castings.

”The fixed cost model under the forward-funding scheme allows CDLHT to limit the development risk associated with the transaction as it is structured with payment mechanisms to safeguard the interest of CDLHT,” said the company in a statement.

“The Castings marks our maiden foray into an adjacent lodging space. We are executing on our revised principal investment strategy whereby we are pivoting to amplify our growth by increasing our addressable market. We aim to both achieve enhanced income stability and asset class diversification, which takes us beyond geographical diversification of hospitality assets,” said Vincent Yeo, Chief Executive Officer of CDLHT’s Managers.

The freehold 352-unit BTR block will comprise a mix of studios, one, two and three bedroom units, with a total residential floor area of approximately 219,600 sq ft.

The Castings will also comprise internal and external common amenity spaces, which may include a gym, a cinema, resident lounge areas, a roof terrace and ground floor retail spaces (subject to design and changes), spanning approximately 17,300 sq ft.

In addition, there will also be 20 car parking spaces and approximately 350 bicycle storage spaces.

Build-to-rent markets in Manchester and across many cities globally are very resilient, backed by macro trends such as persistent housing shortage and increases in the house price-to-income ratio, which result in affordability becoming an impediment to home ownership. Growth in rental housing demand is a trend that we see continuing and especially for build-to-rent offerings, which are purpose-built with tenants in mind to promote a sense of community and with better amenities,” added Vincent Yeo.

“We see a positive growth trajectory for this promising sector in the UK and believe that build-to-rent assets will gain market share from traditional landlords. Supported by strong demand and supply dynamics and the asset’s superior location, we expect The Castings to achieve steady rental growth over time. Our attractive entry price will also position the asset for capital appreciation in the future, amidst voracious institutional investment demand.”