Grainger’s REIT conversion – what landlords need to know
Grainger PLC is the UK’s biggest listed residential landlord and has just converted into a Real Estate Investment Trust (REIT). The company is now very much involved in the UK’s aggressive Build-to-Rent (BTR) sector build-up, and this is a move that could reshape the market.
What is a REIT?
A REIT is a listed property company that enjoys special tax treatment, but the company (an Investment Trust) must meet strict conditions. REITs were introduced into the UK in 2007, a regime that allows qualifying property companies to avoid paying corporation tax on rental profits and capital gains from its investment properties.
The concept was developed in the U.S. when REITs were established by Congress in 1960 to give all investors, especially small investors, access to income-producing real estate. Since then, the REIT has served as the model for around 40 countries around the world.
In 2007 a UK REIT regime was introduced, which aligned with international markets, and in 2012 reforms were introduced that abolished an original 2% entry charge. This broadened the UK stock market listing rules and opened up the property market to institutional and foreign investors.
The growth of REITs in the UK was driven by the commercial property giants like British Land and Segro and by the 2020s the concept expanded into the residential private rented sector (PRS), BTR student housing and healthcare. Grainger’s 2025 REIT conversion confirms REITs place in the UK’s PRS and BTR space.
A UK REIT must be listed on a recognised stock exchange (in the case the London Stock Exchange) and at least 75% of its assets and income must be directly connected with rental property. Ownership must vest in a wide range of investors with no shareholder owning more than 10% of the company, and 90% of the profits must be paid out annually. There is no defined minimum size, but the costs of administration rule out any company with portfolios less than hundreds of millions of pounds in size.
This REIT milestone for Grainger PLC represents the culmination of the company’s nine-year strategic transformation into a 'pure play' Build-to-Rent ("BTR") business, with a portfolio of around 11,000 rental homes, valued at £3.5bn, and with over 25,000 tenants. The conversion culminates in the Company's successful transformation from a complex and diverse residential ground rent reversion, rental and trading business into the UK's leading BTR residential investment business.
Helen Gordon, Chief Executive of Grainger, commented:
"Our successful conversion to REIT status marks a significant milestone in Grainger's strategic transformation. Over the past nine years, we have fundamentally reshaped our business to become the UK's leading Build to Rent provider. This conversion enhances our ability to deliver sustainable returns to shareholders while continuing to provide high-quality rental homes for our customers."
The main advantage is that the company’s income is passed straight through to the investors (shareholders), who are taxed individually on their dividends in the normal way. The concept is to “look through” the company and tax the investors directly, avoiding the double taxation that normally applies to corporate structures.
So, the REIT is exempt from corporation tax on rental profits and on capital gains. What comes with that is a mandatory distribution of at least 90% of rental profits as dividends, creating a reliable income stream for the trust’s investors.
The result is an appealing structure for investors, attracting more capital, and especially as many pension funds and overseas investors are mandated to invest only in REITs. In effect these structures level the playing field, putting the REIT property companies on the same footing as direct property ownership.
Unfortunately, not. This is only for landlords at some scale. REITs bring large corporations more money back into their investors’ pockets and give cheaper access to global investment capital.
For Grainger, as a REIT, it means rental profits and capital gains will now flow through to investors without being hit by corporation tax. For smaller landlords, it’s another sign of how the rules increasingly favour large, institutional players over private individuals.
The company’s origins go back to 1912 when the Grainger Trust was formed by the Dickinson family in Newcastle-upon-Tyne. It acquired and managed tenanted residential properties and ground rent investments until in the 1970s and 80s it had grown significantly by acquiring large residential estates from publicly owned entities such as British Coal, British Rail, and Reckitt & Coleman.
Floated on the London Stock Exchange in 1983, it completed its transition from a regional player to a national, publicly traded property business. At that point, it held gross assets of around £18 million. What followed were a series of strategic acquisitions: Channel Hotels & Properties in 1989, Bradford Property Trust in 2003, Development Partnerships in 2006 and several joint ventures before entering the BTR market.
The company subsequently entered a build-to-rent partnership with Transport for London (TfL), with a targeted delivery of around 3,000 homes across multiple TfL-owned sites in London. Latterly, as of late 2024, Grainger managed an investment portfolio valued at £3.0 billion, alongside a development and trading portfolio of approximately £0.3 billion. The company now describes itself as the UK’s largest listed residential landlord and a leader in the BTR sector.
Grainger plc, as one of the UK's largest professional landlords, has historically been involved in the leasehold sector, including a focus on the management of ground rents. The company argues it was never a primary player in the controversial leasehold ground rent practices that drew regulatory attention. It maintains it has a fair and structured approach to ground rent management within its portfolio.
The UK government has implemented and is implementing more reforms to address issues associated with UK leaseholds, particularly concerning ground rents:
The Leasehold Reform (Ground Rent) Act 2022 abolished ground rents for new long residential leases in England and Wales, aiming to protect leaseholders from escalating costs. The Leasehold and Freehold Reform Act that followed in 2024, which further reformed and simplified the process for leaseholders to extend leases and acquire freeholds, enhanced transparency and fairness in leasehold arrangements. More reforms are now in the pipeline.
Build to Rent in the institutional market is still a relatively small sector compared to buy-to-let (BTL) representing only around 2% to 2.2% of the UK's total PRS. Estimates differ, but there are said to be, on good authority, around 130 to 140,000 completed and operational BTR homes, with another 50 to 55,000 under construction and 114 to 142,000 in the planning pipeline, a total of approaching 300,000 homes as of Q1 2025 (Savills & Knight Frank)
Investment in the sector reached a record £5.2 billion in 2024, up 11% from 2023 (Knight Frank) and in the first half of 2025 investment totalled £2.2 billion, with single family homes (SFH) taking up half of that. Analysts now speculate that BTR could eventually account for 30% of the PRS, or some 1.9 million purpose-built rental homes in the UK, if the current rate of growth continues and scales up.
The PRS is said to contain around 1.5 trillion pounds’ worth of rental stock of which BTR accounts for under 1% in value terms – that’s with 30,000 BTR homes estimated at £9.6 billion in total. The rest is overwhelmingly held by individual landlords, most of whom hold under 4 rental properties. According to Savills’ research there are estimated to be 1.9 million buy-to-let mortgaged homes (owned by individuals) with a good proportion owned outright.
There are trends to consolidation: between April 2021 and October 2024, 290,000 rental properties left the market as small landlords were selling up – that’s equal to nearly 6% of the PRS in England and Wales, says Savills.
The small-scale landlords BTL ownership is now consolidating, so those landlords owning 5–24 properties now own a larger share of the market, up to 35.4%. Average portfolio sizes grew from 3.2 to 4.5 properties per mortgaged landlord between 2018 and 2024 (Savills).
Accompanying this consolidation is the move to incorporation, so buy-to-let company numbers have increased considerably to over 400,000. This figure is up from over 9,000 incorporated BTL property companies in 2016.
For small-scale landlords, running a REIT isn’t an option. But the model will alter the playing field over time. The growth of BTR brings more competition and REITs enjoy their structural tax advantages, with access to cheaper institutional capital than BTL landlords can hope to get.
Successive governments have steered rental property investment towards large-scale, corporate landlords, encouraging and creating opportunities for these landlords. The direction of travel is very clear: professionalisation and larger-scale property ownership is the way to go.
Understanding how REITs work helps small-scale landlords understand the forces reshaping the UK rental market, and the challenges of competing with Grainger-sized players. There is also the opportunity for BTL landlords leaving the sector to invest in listed REITs for exposure to property returns without the management hassle there is today, and even more so with the advent of the Renters’ Rights Bill.
A recent FT article entitled “Build-to-Let Down” puts institutional investment in the PRS under the microscope. The article examines the UK’s aggressive expansion of BTR being prioritised as part of Labour’s plan to deliver 1.5 million new homes before the 2029 election, backed by institutional capital from the big institutional and private equity (PE) players such as Legal & General and Blackstone.
But, despite them injecting thousands of new units into the market, actual rent prices are still climbing. This is especially the case in the London boroughs which have received a heavy BTR development density. Brent, Ealing, Newham, and including regions like Greater Manchester and Salford.
Rents are actually rising faster in BTR areas, so according to the FT London’s middle-ring boroughs have seen rent hikes of 48–52% since 2015, considerably outpacing the London-wide average of 43%. Brent reached nearly a 60% cumulative rent increase by 2024; that’s despite delivering more new homes than nearly any other borough. In Greater Manchester, BTR accounts for 20% of the PRS stock, yet rent has increased 68% over the past decade and in Salford rents topped the national growth charts with a 75% increase.
Government policy is for mandatory developer contributions of 20% affordable housing and that’s not materialising. One example is that between 2012–2020, just 471 affordable housing units were delivered in Manchester, making up only 1% of new builds. It seems that developers are opting to pay fees instead of building their quota of affordable homes.
Professionalisation of the PRS is not the panacea it was thought to be, says the FT. It warns that new-build BTR can come with its own problems: poor maintenance, expensive rents and limited tenant protections – in other words, its so-called advantages are not all they are cracked up to be.
The US experience – which is far longer and more extensive than the UK’s - is pursuing legal action against REITS with the Department of Justice targeting BTR operators over algorithmic pricing schemes that harm tenants. The UK’s Competition and Markets Authority (CMA) is also investigating possible anti-competitive behaviours among the new BTR housebuilders.
In many ways the small operator still has, and probably always will, have a competitive niche advantage over these large-scale professionally managed BTR operators: on price, on quality and the ability to react quickly to their tenants needs.
The large-scale BTR operators using REITs have tax advantages over smaller-scale BTL landlords, but this does not mean that they necessarily offer better value and/or quality. Tenants often prefer to live independently away from big new developments and have the flexibility of a personal relationship with their BTL landlord. If the US is experiencing problems with the management of BTR, watch out for those same problems raising their head here.
The government is struggling to meet its building targets, currently falling well behind schedule to meet the 1.5m homes it’s promised to build. It’s aggressively encouraging the BTR developers to make up the shortfall but there’s a long way to go and it’s not the only answer to the UK’s housing problems. There is still room and there always will be for the small-scale BTL landlord.
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