(Commonwealth) _ Vistry, a prominent UK housebuilder, has made a significant stride in the housing market by securing an impressive £819 million deal to develop a substantial number of rental homes. This strategic move reflects Vistry’s dedication to the partnerships housing sector and comes after a comprehensive review of its strategy following the company’s £1.1 billion merger with Countryside in the previous year. Under the agreement, Vistry will collaborate with Leaf Living and Sage Homes, both backed by Blackstone-managed funds and Regis Group, to forward-purchase 2,915 units from Vistry across 70 development sites. This endeavor marks an essential step in providing much-needed housing across the UK, as well as showcasing Vistry’s commitment to addressing the evolving housing landscape.
The partnership with Leaf Living and Sage Homes will significantly contribute to the rental housing market. Leaf Living will acquire 1,522 homes for the private rented sector, while Sage Homes will take ownership of 1,393 affordable homes for rent and shared ownership. These homes are intended to cater to a wide range of housing needs, from private renters to those looking for affordable and shared ownership options. In addition to the financial benefits, Vistry’s leadership expects the portfolio to deliver an adjusted operating margin exceeding 12% and a return on capital employed of around 40%. These financial targets are in line with Vistry’s medium-term financial goals, highlighting the company’s dedication to achieving sustainable and profitable growth. Vistry’s Chief Executive, Greg Fitzgerald, expressed his satisfaction with the partnership and emphasized the company’s history of successful collaboration with Leaf Living and Sage Homes. He also underscored the significance of this opportunity in further strengthening these relationships and solidifying Vistry’s position in the market.
This development comes on the heels of a strategic shift announced by Vistry in September, following the merger with Countryside. The company made the decision to shift its primary focus to partnerships housing, effectively merging its traditional housebuilding business (which consisted of 8,700 homes) with the partnership business formerly known as Countryside Partnerships. This strategic shift generated considerable interest in the market and led to a positive response from investors, with shares in the publicly-listed firm experiencing a boost. Under the new strategy, Vistry aims to pre-sell a minimum of 50% of homes on its development sites to a variety of partners, including housing associations, build-to-rent investors, local authorities, and later living providers. This approach not only diversifies Vistry’s customer base but also provides the company with greater visibility into its future earnings. This is in contrast to the traditional housebuilding model, where sales are typically made to individual buyers after the completion of homes.
The shift to partnerships housing is part of Vistry’s broader strategy to create a more sustainable and predictable revenue stream. By entering into strategic partnerships and securing forward-purchase agreements with institutional investors and housing associations, Vistry can mitigate some of the market volatility associated with traditional housebuilding, such as fluctuations in demand and house price cycles. Vistry’s CEO, Greg Fitzgerald, emphasized the benefits of this unique partnerships model, stating that it provides the company with significant earnings visibility, aligns with medium-term financial targets, and is a market-leading approach that sets Vistry apart in the industry.
Vistry’s £819 million partnership with Leaf Living and Sage Homes underscores the company’s commitment to the growing partnerships housing sector. This strategic move aligns with the evolving housing landscape and aims to address the increasing demand for diverse housing solutions. The partnership not only brings significant financial benefits to Vistry but also demonstrates its dedication to achieving sustainable and profitable growth in the housing market. The shift to partnerships housing has generated positive market response, and Vistry’s unique approach positions it as a market leader in the industry, with the potential to significantly contribute to its long-term financial goals.
