Monthly Archives: July 2014

Canary Wharf developers opt for resi and rental in Wood Wharf mix

Office developer Canary Wharf Group is reinventing itself as a residential developer and landlord, in a recognition that the returns from homes are now more attractive than for offices.

The group’s new Wood Wharf project, to the east of the main Canary Wharf office district, will contain 3,100 homes in a new mixed use project. And a considerable number of those homes will be retained by the group for open market rental.

“The reason to go into residential is that we have never done it before, and maybe we missed a trick,” chief Sir George Iacobescu commented recently. “What has happened is that the value of residential has now crossed the value of office.”

Previous residential developments on the Isle of Dogs, close to the centre of Canary Wharf, have to date been carried out by independent third party residential developers, such as Ballymore. While these companies have not gone away, their ability to develop sector-leading projects has been compromised by the recession and a new harsher development funding environment.

Canary Wharf Group is promising the provision of “high quality, not high price” rental apartments. “Nobody is doing top quality for rental,” Iacobescu told Property Week. The developer will also be looking to build a sense of community convinced that people who put down roots are more likely to renew the lease on their flat. As a result, there will be careful management of the local retail mix, and a programme of events to amuse the locals as well as encourage visitors.

Local authority Tower Hamlets has recently granted permission for the Wood Wharf project, which will total 4.9m sq ft of space in 30 new buildings. More than half of the new space will be residential, and alongside market housing, there will be affordable homes, managed by local housing associations, within the project boundaries, further encouraging a mixed neighbourhood. A new school is promised, along with around 100 high street shops, cafes and restaurants.

woodwharf3

Wood Wharf will also include a range of business space, designed in a variety of forms. In contrast with Canary Wharf, which was originally built to house expanding financial services companies and has now broadened to a wider range of corporate occupiers, Wood Wharf intends to primarily set out to satisfy the space needs of companies in the creative media, technology and telecoms sectors. It is estimated that around 17,000 people will work in Wood Wharf, with up to 3,500 jobs going to local residents.

The developers have promised to complete the first phase of Wood Wharf by 2018, in time for residents to benefit from the arrival of the first Crossrail trains linking Canary Wharf to central and west London.

 

Mould makes £20 million bet on London private rental market

Veteran UK property investor Raymond Mould has signalled his interest in the private rented sector market, with a £20 million investment in a joint venture that will see him hold 59 apartments for long term rental.

Mould’s new venture, Newtree Capital, is linking up with London apartment developer Galliard Homes, to build 114 homes in south east London, on a site at Grove Place, Eltham. Newtree will take over a whole block of flats once the project is completed, containing a mix of one, two and three bed properties.

“We are delighted to have completed this joint venture for Grove Place with Galliard Homes with whom we hope to add further projects to our transaction pipeline,” said Mould. “The transaction demonstrates that good opportunities continue to exist in the private rented sector, notably outside the prime core areas of Central London.”

Newtree is already in talks to involve itself in a number of other private rented projects in UK housing markets where fundamentals point to a good medium term rental return. Some of these could be by way of purchasing completed properties, while others as with Grove Place could involve taking a stake in a development, ahead of construction.

Galliard is also talking positively about carrying out further projects with Newtree. Said Stephen Conway, Galliard chief executive: “We welcome Newtree Capital as a new joint venture partner to the Galliard Group and look forward to working with them on Grove Place. We very much hope to undertake future transactions together in due course.”

This is not the first time that Mould has taken a shine to the residential rental sector. In 2009, through his London & Stamford vehicle, he built a portfolio of rental homes, starting with the £41.4 million acquisition of 146 flats at Highbury Square; while these were initially rented out, the rise in the London market subsequently encouraged the investors to sell out, rather than hold. This time, will Mould stay in for the medium term?

Genesis plans further private rented sector growth

Housing association Genesis is one of the small numbers of organisations from that sector that has committed to growth into the private rented sector.

The group is looking to build around one third of its 1,000 homes output a year for outright sale, or market rent, according to chief executive Neil Hadden. The balance will be its traditional affordable home format, or some form of intermediate tenure, usually shared ownership. It is already building projects to the private tenure formats in Chelmsford and Barnet, and is looking to exploit the government’s Build to Rent funding programme to advance projects.

Housing associations are – as a group – suffering. The grants being offered to develop homes for rental in the subsidised sector – to those on local authority lists – are reducing. They can borrow from the financial markets, but that has a greater cost long term. Or there are alternative parts of the housing market they can get into, to create additional revenue streams.

Among its peers, it appears that currently the majority of housing associations are shy of taking such a directly commercial move such as moving into the development and management of private rented sector homes. However, some others are getting involved, such as Thames Valley, which has set up arms-length subsidiary Fizzy Living to develop a private rented sector brand and portfolio of property.

Genesis looks after 33,000 homes across London and the south east, including 401 market rent apartments in the Halo tower development in Stratford, which the group sold to investor M&G in a sale and leaseback deal in 2012.

“The reduction in public subsidy for affordable housing has meant we’ve had to look at different ways of providing that subsidy,” Hadden told Property Week recently. “Getting involved in more commercial activities is one way of providing funding to bridge that gap.”

Genesis has already successfully tapped into the government’s Build to Rent funding pot, winning a £45.5 million bid in April this year, to help fund the development of 485 private rented homes – more here.

German investor closes massive Dutch housing deal

German property investor Patrizia has signed a 5,500 home acquisition deal, the largest transaction seen to date in the Dutch housing market that gives a hint of the way the UK rental market could go.

The EUR578 million deal will see Patrizia taking on a mixed rental housing portfolio previously owned by Dutch housing association Vestia. The investor will place the homes within one of its investment funds, which will use money from one of the German pension funds as its major source.

Could an investor of the scale and confidence of Patrizia enter the UK rental market as an investor? Having disclosed why it likes the Dutch market, there are some common themes, so such a possibility is not far fetched.

The reason for Patrizia investing in the Dutch market is down to its belief in long term value protection and growth. This is due to projected population growth as far ahead as 2025, falling average household sizes and therefore continuing significant demand for housing.

“For some time now, our institutional investors have had such confidence in us that they are investing with us outside their familiar national borders,” commented Klaus Schmitt, COO of Patrizia. The company says it is on track to become Europe’s leading real estate investment company.

The portfolio that Patrizia has bought into has 340,000 sq metres of residential floorspace in total, with just 3% vacant. Around 70% of the homes acquired are currently subject to rent control.

Patrizia already operates three investment funds specifically focused on the residential market. Of these, two are investing in German properties, with a third looking wider across Europe for its investment opportunities. Its major German investment deals included the EUR1.4 billion purchase of a 21,000 home portfolio in 2012, and a co-investment in a 31,900 unit portfolio in 2013.

Patrizia is already investing modestly in the UK, through minority stakes in commercial property deals. It holds 10% of a company holding properties in Birmingham, Bracknell and Camberley, and also took a 5% interest in the acquisition of the Winnersh Triangle (or IQ Winnersh) commercial estate west of London.

New online portal to shake up lettings and home sales markets

A group of estate agents is launching a new online letting and sales portal, to challenge market leaders Rightmove and Zoopla.

OnTheMarket is due to launch in January 2015, and is backed by some of the country’s largest estate agents. Members of the group formed to deliver it, called Agents Mutual, were driven to act by the rising charges that existing websites are charging them for listings.

“OnTheMarket has the appeal to attract the full spectrum of consumers and it has the gravitas to distinguish our brand as the natural home of locally visible, full service independent estate and lettings agencies,” said Agents Mutual chief executive Ian Springett.

The group already has more than 2,900 lettings and estate agencies committed to join, with another 100 joining every week. When agents sign up, they commit to advertising all their properties for 5 years and to list them on only one other competing portal – a commitment that threatens to break the duopoly in the market that Rightmove and Zoopla appear to have. Among the big brands that are reported to be on board with the new venture include Savills, Knight Frank and a number of regional estate agency chains.

With consumers increasingly using tablets and smartphones to access the internet, it will be interesting to see how the new portal differs from its legacy competitors.

Essential Living plans private rented development in Acton

Private rented developer Essential Living has bought a former perfume factory in Acton, west London, for conversion to a private rented homes development.

The site, currently home to two office buildings, has the potential to provide up to 500 homes, once redeveloped. Acton is currently the focus of much house builder and private rented sector activity, due to its position as one of the new Crossrail stations; this promises to provide residents with easy public transport access to central London and the City.

Essential Living plans to convert Berkshire House in Maidenhead into flats for private rental

Essential Living plans to convert Berkshire House in Maidenhead into flats for private rental

The site has the potential to take residential towers up to 20 storeys high, with a mix of homes. However, its offices are still occupied, and so any successful planning application could potentially lead to a residential project being completed no sooner than 2018.

Acton’s attractions mean others are taking an interest. Only last month, investor M&G forward funded a project in the area to develop flats specifically for rental.

Charlie Hustler, head of land at Essential Living, told Property Week: “This is our most ambitious project to date, both in terms of scale and scope. The housing offer will boast a range of high-quality apartments and mews homes, forming a truly sustainable community for west London.”

Essential Living's north London redevelopment site in Swiss Cottage

Essential Living’s north London redevelopment site in Swiss Cottage

Essential is backed by US investor M3 Capital Partners, and is already under way on a number of projects. It has bought several sites including an office block in central Maidenhead for conversion to flats, and an office site in Swiss Cottage, where 200 apartments are planned. While Essential’s strategy of buying office blocks and then obtaining planning consent for conversion is risky and slow initially, it does offer the company the potential for greater returns from the portfolio they ultimately develop.

Urban Splash plans to double private rented portfolio

Developer Urban Splash is planning to grow its private rented portfolio, after making it through a period when it had to concentrate on survival and the reduction in company debts.

Chief executive Tom Bloxham now plans to more than double the company’s private rented sector portfolio, having finalised recent refinancing deals. Agreements with new funder the Pears Group came alongside a deal to sell £77 million of homes – a 654 flat portfolio in Manchester, Plymouth, Bristol, Bradford and Leeds – to housing association Places for People.

In contrast with other forms of property development and investment, residential property has proven longevity, said Bloxham. “We’re still living in residential apartments that were built hundreds of years ago,” he told Property Week. “We believe it’s a market that’s here to stay, it’s a market that we know very well and it’s a market we are looking for opportunities to build another 1,000 plus units.” Despite the changes the company has been forced to make, it still operates a portfolio of more than 800 private rented homes.

With London already overpriced, Bloxham says the time is right to turn attentions to regional markets. His company has long experience in Birmingham, and in Sheffield, where it took on the refurbishment of the Park Hill flats, a substantial development of a listed block of former council flats that overlook Sheffield centre.

Mayor calls on public sector to release land for homes

London’s mayor Boris Johnson has renewed calls for public sector departments to release land for housing. It is believed thousands of homes could be built on sites currently lying fallow, as bungling bureaucrats in the NHS, fire and police authorities and other public bodies fail to get moving.

The call for more “brownfield” sites to be released for housing development is a popular one – politicians love the idea as it takes the focus away from development in the countryside or on the edge of existing towns and villages. Yet despite regular pleas for redundant land to be brought forward for reuse, London officials revealed this week that their requests all too often fall on deaf ears.

Deputy London mayor Richard Blakeway said the NHS, in particular, simply fails to engage, telling the Standard: “Our frustration is that there are public bodies, in particular the NHS, that are sitting on huge swathes of land but have little focus on bringing it forward for development. In our last review of what land might be available, the NHS did not even provide a return.”

Among the sites sitting with weeds growing but nothing more, are St George’s Hospital in Hornchurch, which closed in 2012, the Dulwich Hospital that has stood unused since 2005, and Springfield Hospital in Barnes.

Speaking for the business community, baroness Jo Valentine, Chief Executive of London First, said: “Across London there are empty sites and redundant buildings owned by the public sector that could be much better used for housing. But there is no body dedicated to actually identifying where all this land is, so actually getting round to selling it happens at a glacial pace. First we need to give the mayor the power to create a 21st century Domesday Book for London so we know where this land is. Then we need to ensure he has the ability to get on with selling it using his trademark gusto.”

 

East Village fits the bill for London’s younger renters

Almost two thirds of renters at East Village, are under 30, as London’s former Olympic village provides private rented homes for the capital’s bright young things.

The demographic breakdown of the residents at East Village was revealed as the two year anniversary of the start of the 2012 Olympics approaches in the next few days. In the time since the world watched the global sporting event at Stratford, the area has been transformed, with a new public park, sporting facilities now open to the public, and a growing new neighbourhood where around 2,500 people now live.

Derek Gorman, chief executive of landlord Get Living London, which is developing and managing East Village, revealed the split of tenants by age and source, in an interview with the Standard newspaper’s Peter Bill.

East Village, Stratford

The area is clearly appealing to a younger demographic. Residents under 25 account for 31% of East Village residents, while those 25-30 account for a further 31%. The 30-40 year olds represent 25% of the total, leaving just 13% of tenants aged 40 or older.

Taking a look at the source of renters arriving in East Village, two thirds have moved from elsewhere in the capital, while just 3% arrive straight from overseas. It is not clear why those local movers are choosing East Village, though the opportunity to rent direct from a landlord that provides inclusive rental contracts, proactive maintenance and a pleasant, well-managed environment may have something to do with their decisions.

Currently, Get Living London manages 1,400 private rented homes at East Village, and the next phase, a pair of towers containing 448 more homes, will shortly go before planners for pre-construction approval.

£70m rental project planned for Coventry

Developer Barberry Group is seeking a finance partner to build 404 homes for rent in the Midlands city of Coventry. The £70 million project has the potential to meet growing demand in the area for new homes, particularly among the local population of young professionals.

Barberry owns the Bishop Gate site in the city, which was formerly the location of the city’s Royal Mail sorting office. The company has previously proposed a retail development with a superstore, and a mixed use office and retail scheme, neither of which has attracted sufficient interest.

Barberry managing director Henry Bellfield told Property Week: “The development is satisfying the shift in preference towards city centre living, which is attracted to the social and leisure amenities of town centres. At the moment, we feel residential and particularly PRS is something that produces a far more exciting scheme.”

A design incorporating one and two bedroom flats, above ground floor retail, has been drawn up by architects Assael, and submitted for planning approval. The local authority has agreed in principle that a private rented residential project would be appropriate for the site.

According to research by CBRE, Coventry is one of the most attractive regional locations for residential development. In an assessment carried out in March 2014, the consultants listed the city ninth in a ranking of city markets, saying: “Coventry has the potential for above average rental growth as it has the strongest growth in working age population.” Its proportion of private rented households was put at just 20.6%, with average city centre rent of £595 per month delivering a gross yield of 7.5%.

Said CBRE’s Chris Lacey: “Coventry is the most obvious city to focus on, but in understanding the fundamental investment drivers, this is a project that can deliver exceptional returns.”