Buyer Walks Away From £1B UK Rented Resi Deal

A U.S. private equity firm has walked away from a £1B deal to buy a major portfolio of UK single-family rental homes and the company that manages them due to macroeconomic uncertainty.

Pretium Partners was under offer to buy Sigma Capital but is not progressing with the deal, Bloomberg reported. Sigma was one of three large UK SFR portfolios or companies up for sale in a sector that has attracted huge amounts of capital recently. 

Sigma is owned by Canadian investor Oxford Properties and London-based European fund manager PineBridge Benson Elliot, which took the business private for £190M in July 2021. The duo and other investors then put up cash to build out Sigma’s development pipeline. 

Pretium was in talks to buy the business for more than £1B: £900M for its portfolio of 4,150 homes, about half of which are built, and about £150M for the company that manages the portfolio. Macroeconomic volatility and, in particular, changes in the UK-U.S. exchange rate were major reasons the deal didn't progress, Bloomberg said. 

Pretium is run by former Goldman Sachs banker Don Mullen, one of the people who helped conceive the Big Short bet against the U.S. housing market in 2007. It was one of the earliest investors in U.S. SFR and has about $57B in assets under management. 

Sigma manages listed SFR company PRS REIT, but that portfolio is not part of the sale.

PRS REIT put itself up for sale separately last autumn after a row with activist investors. Its portfolio is valued at £1.2B, and last month it said that Long Harbour was the sole bidder for the company. The £1.15 per share Long Harbour has offered values PRS REIT at about £585M. The price is a premium to its current share price but an 18% discount to its net asset value. 

Also on the market for £1.2B is the PRS division of housing association L&Q, which owns 3,147 homes in 53 schemes in Greater London. Again, the management platform is part of the sale, which should increase the appeal to new market entrants. A second round of bidding is underway.