A UK-based private property investment and management company has launched the Sandstone Residential REIT, focused on traditional residential property across ten cities in the UK.

As a result of the move by Sandstone, 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, the firm claims.

In March, it was revealed that the UK’s property market grew at its fastest rate since 2007, with property assets offering highly attractive investment opportunities. There have been no signs of this slowing down as restrictions have eased and society reopens.

Meanwhile, 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.

Sandstone, which was founded in 1997, aims to help clients to build portfolios of residential properties, which are then rented to students. Initially known as Grant Property, Sandstone has helped clients from 40 countries invest in 3,000 traditional UK residential properties, representing a net asset value of around £1 billion.

The company says the Sandstone REIT is now a logical next step, for clients – existing and new. 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 typically seeking to invest in building portfolios anywhere from an initial £10 million upwards.

According to the firm, 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.

“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,” Peter Grant, founder and chief executive of Sandstone Group, said.

“We are already seeing interest from client groups in the UK and Europe, as well as Singapore, Hong Kong and across Asia.” 

He added: “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.

Grant says there are very few residential REITS in the UK, and insists the 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 continued.

“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%.”

He says the combination of great locations, modern interiors, high safety features and low energy costs, all result in student tenants typically staying for two-three 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,” he concludes.

“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.”