US build-to-rent giant Cortland Partners is in discussions to acquire UK developer Dandara’s £400m regional portfolio.
Cortland’s UK division, which launched in early 2018, is lining up financing from Pension Insurance Corporation Group to back the deal.
Ultimately, Cortland plans to build a £4bn pipeline of 10,000 homes in the UK over a five-year period.
Last October, EG revealed that UK developer Dandara had appointed Rothschild to sell the 2,000-home regional portfolio.
The portfolio includes Chapel Wharf in Manchester, which totals 995 flats; Birmingham’s Arena Central, which has 324 flats; and Leodis Square in Leeds, which comprises 742 flats.
There is also the option to acquire sites in Glasgow and Aberdeen at a later stage, which could bring the total number of homes to more than 3,000.
The £400m acquisition would be a major win for Cortland’s UK team, which last year bought UK developer Orion Land and Leisure and its 485-home Cassiobridge site, with options on a further 1,450 homes under offer.
The operator appointed Andrew Screen as chief investment officer in September, tasked with leading the development and finance team. The BTR veteran was the lead advisor at CBRE on the Orion Land and Leisure acquisition.
It has ambitious plans to scale up quickly, mirroring its US approach. Cortland set a target to focus 50-65% of growth in outer London and the M25, with the remainder in regional centres.
Atlanta-based Cortland owns and manages 45,000 units in the US using balance sheet cash, alongside institutional debt and private equity, with partners including Canada Pension Plan Investment Board and GIC.
Savills is advising Cortland on the acquisition. All parties declined to comment.
PIC eyes first BTR deal
The Dandara deal would be the first major build-to-rent play for PIC as investors seek to capitalise on a booming property asset class.
Institutions from around the world invested £3.1bn in the UK private rented sector last year, up by 33% from 2017, according to CBRE’s UK Residential Investment Report.
The UK pension fund buyout firm has a £31.4bn investment portfolio, with more than £1.5bn in social housing through debt investments with housing associations. In 2018, it invested £265m in social housing, £400m in student accommodation and around £150m in commercial property.
Standout deals included £125m in debt for University Partnerships Programme to redevelop Exeter University’s main campus, and £140m to Durham University for new facilities, following a £90m investment in student accommodation at the university.
Last year, PIC also backed housing association Accord with a £100m senior private placement.
PIC looks for long-dated, secure cash flows to back its pension liabilities, and backed Cortland’s UK expansion at the start of last year.
In 2018, the Abu Dhabi Investment Authority, one of the world’s biggest sovereign wealth funds, acquired a stake of 17.1% in PIC.
Adia bought the stake from private equity firm JC Flowers, one of the founding investors in PIC when it was launched by City financier Edmund Truell in 2006.