Lloyds Bank set to become major landlord with build-to-rent investment

 

In the coming years, the banking group plans to become a top private landlord with major investment in build-to-rent through deals with UK housebuilders.

Lloyds Banking Group, the UK’s biggest mortgage lender, is set to become the UK’s largest private landlord. The banking giant aims to purchase 50,000 properties by 2030. This is according to an internal job posting seen by the Financial Times.

Last month, the bank launched its Citra Living arm, which is where this investment will be managed through. The company has targets of owning 10,000 properties by the end of 2025.

It will initially start small. Citra Living has purchased 45 flats within a build-to-rent development in Peterborough, which is part of a target to buy 400 homes this year. In 2022, the company plans to invest in an additional 400 properties. Citra Living will work with housebuilders to identify sites. The company would then purchase the rental element of the developments.

Currently, the largest private landlord is Grainger, which has more than 9,000 homes and a pipeline to build an additional 8,850. In the coming years, this investment by the banking group would make it larger than Grainger. Lloyds Bank is also the first major high street bank in Britain to make the move into the private rental market.

Diversifying investments

This announcement comes during the first week of Charlie Nunn’s tenure as chief executive of Lloyds Bank. The Financial Times believes the mortgage lender is entering the private rental business to diversify its sources of income.

Becoming a landlord would deliver a new source of income for Lloyds Banks at a time when interest rates are at record lows. Citra Living has projected that after investing in 10,000 homes, it will have a balance sheet worth around £4bn and create approximately £300m pre-tax profit. This shows the confidence the company has in the private rented sector.

In recent years, several big-name insurers and fund management groups have entered the private rental sector. This includes Legal & General and M&G. Additionally, retail chain John Lewis announced plans to convert unused floor space in its department stores into rental properties.

Growing the build-to-rent sector

This venture by Lloyds Bank is the latest example of institutional investment into the build-to-rent sector. The sector has grown quickly from a standing start only a decade ago. Now, more than 10,000 new build-to-rent homes were built in the last two years alone, according to data from the British Property Federation.

Additionally, the build-to-rent market is already on track for a year of record investment as a mix of small and large landlords are seeing the benefits of investing in the sector. Throughout the COVID-19 pandemic, build-to-rent even remained particularly resilient with room for further growth in the future.

Increasing demand for rental properties

A number of factors are encouraging more large companies to enter the private rented sector. This includes the shortage of housing and rise in the number of families renting. In the UK, an estimated one in five households rent privately.

Lloyds Bank forecasts demand to rise for additional rental properties over the next five years. And the company launched Citra Living to help satisfy this increasing demand for new privately rented properties across the UK.

A Lloyds spokeswoman comments: “As highlighted at launch, Citra Living will initially start small, with a focus on buying and renting good-quality, newly-built properties. This will be achieved by working alongside leading housebuilders to address the increasing demand for rental properties.

“The aim is to gradually provide incremental stock to the UK rental market over the coming years.”

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Lloyds Bank set to become major landlord with build-to-rent investment

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