Telford Homes chief executive Jon Di-Stefano has revealed details of the financial trade-off behind the AIM-listed London developer’s plan to deliver 50% of its £1.5bn pipeline as build-to-rent (BTR).
“Our net margin on traditional sales is 16%,” Di-Stefano told an audience gathered this week at M&G’s first completed BTR site in Acton.
“The cashflow improvement from having BTR sites forward-funded by the eventual owner and the lack of sales risk means we are happy to accept a 12% net margin,” said Di-Stefano, who promised in March to increase Telford’s BTR output to 50%.
The east London-based firm has grown rapidly since 2013. Revenues have risen from £142m to £292m and profits have increased from £9m to £34m. Investors were told in May that Telford was “on track” to exceed £40m in profits for the year to March 2018 and £50m the following year.
“Our ambition is to become a key BTR provider,” said Di-Stefano, who took over as chief executive of the business in 2011, after nine years as finance director.
M&G is funding two Telford schemes: 150 units in Bow and 125 in Upton Park.
Alex Greaves, head of residential investments at M&G Real Estate, told the audience its income yield target of 3% to 4% was being achieved on the 173-unit Rehearsal Rooms development close to North Acton station.
M&G is one of a growing number of investors fuelling the growth of the BTR sector. BTR development activity has leapt 37% to 96,000 since March, according to figures released this week by the British Property Federation and Savills.
More than 17,000 BTR units are complete, 24,000 are under construction and 55,000 are in planning.
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