Chicago's LaSalle Buys 270 Rental Units in U.K.

By Art Patnaude 

U.S. real-estate investor LaSalle Investment Management has struck two U.K. rental apartment deals in its latest step toward becoming one of the country's biggest owners of multifamily properties.

Chicago-based LaSalle said Tuesday it bought a total of 270 multifamily units in London and Leeds for a combined GBP55 million ($79 million). The firm has now invested GBP115 million in 562 U.K. apartments specifically built to rent since making its first acquisition last summer.

The multifamily sector in Britain is still in a nascent stage. Small landlords with a handful of homes dominate the rental market. But a decadeslong effort to institutionalize the fragmented sector is gaining traction.

A decade ago, there were practically no purpose-built rental homes here. These typically have amenities like concierge services or gyms. Now there are over 23,080 either completed, under construction or in the planning process, according to the British Property Federation, an industry group.

"In the U.S. it's a fully-established sector. We see no reason why that can't happen in the U.K.," said Andrew Stanford, U.K. residential fund manager at LaSalle. "It's certainly been a long time coming."

One major driver: More British people are renting. In the past few years, buying homes has been increasingly unaffordable as house prices moved higher, outstripping wage growth.

Investor demand for less-developed parts of the real-estate market, from industrial warehouses to student housing, is also playing a role. Demand for property has pushed up prices around the world, as returns on property investment appear attractive because interest rates remain low.

Lasalle bought 87 apartments in the Rathbone Market redevelopment in East London for GBP30 million from the English Cities Fund, created by the U.K. government to spur private-rented sector investment. The gross-initial yield was 5.2%.

In Leeds, the firm bought Waterside Apartments from U.S. private-equity firm CarVal Investors LLC for GBP25 million at a gross-initial yield of 6.7%. The 2008-built blocks have 183 one and two-bedroom apartments.

LaSalle has around $5 billion of residential assets under management globally. It plans to invest GBP500 million in the U.K. multifamily sector "within the next few years" on behalf of its institutional clients, Mr. Standford said.

Write to Art Patnaude at [e-mail]

(END) Dow Jones Newswires

January 12, 2016 10:13 ET (15:13 GMT)

Copyright (c) 2016 Dow Jones & Company, Inc.