PROPERTY firm Sigma Capital is beginning to reap the rewards of it private rental sector strategy with a ten-fold increase in pre-tax profit to £2.14 million.
Sigma, whose Edinburgh office is its financial and strategic hub, said there was increasing momentum in its strategy, which has led it to develop partnerships with local authorities, house builders and funding partners. Sigma plans to build a large scale private rental model that is capable of delivering in excess of 10,000 new rental homes – though there are no current plans to build in Scotland.
Revenue at the company increased by 74 per cent to £6.72m for the financial year to 31 December 2015, leading to earnings per share of 2.76p, up 626 per cent on 2014.
“We’re in a strong position,” said chief executive officer Graham Barnet. “The direction of travel is going to get busier. It’s easier to show investors what you’ve done, rather than what you plan to do.”
Sigma said that private rental demand was growing, with the percentage of owner-occupied homes currently at 65 per cent, its lowest level since 1988.
Commenting that these macro developments and a shortage of housing stock meant its strategy was gaining significant traction, Mr Barnet said it had taken three to four years of careful planning to begin to deliver such positive results.
“The crux of our partnerships is deep personal relationships with people who know a lot about the residential property market,” he said. “Without those relationships, we’d never have got off the ground.”
A joint venture with Gatehouse Bank came to fruition last year with 549 homes now let. Annual income is forecast to be more than £7m.
A second phase of 813 homes, with a gross development cost of over £100m, launched in December, backed by Kuwaiti investors.
Sigma also launched a self-funded rental portfolio in Dec 2015, backed by a £20m share placing. An initial phase of 346 new family homes with a gross development cost of £44m will be rented in Greater Manchester, Merseyside and Sheffield by August this year. Mr Barnet said it has a target of renting out 550 new homes with a gross development value of over £60m by the end of 2017.
Mr Barnet said the company was concentrating on the north of England, and moving south.
“Scotland is a different environment – there’s a lot of politics with a small ‘p’ between national and local government,” he said. “And there are some nuances of land dealings that we’ve not cracked yet. With the capital investors we deal with, we need to give them a compelling reason for investing in Scotland, and at the moment regulations don’t help make a positive case.”
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