Category Archives: investor

Amstone Developments plans more than 600 apartments for rent in Salford

Investor sought for major Salford PRS development

North west developer Amstone Developments has launched a search for a development partner to help fund its £130m private sector rental development in Salford, named Clipper’s Quay.

Agent Savills has been hired to seek out a funder and potential long term investment partner for the project, which includes 614 flats. The scheme won planning permission last year for a new build project on the site of a former cinema at Salford Quays. Also included in the development will be more than 17,000 sq ft of retail space, reports Property Week.

The Clipper’s Quay development is in Salford, close to Media City and the recently relocated headquarters of the BBC.

beherebarking

Willmott Dixon adds Barking PRS site

Developer Willmott Dixon has agreed to buy a site for 650 private rented homes in Barking, east London. The flats will be developed under the group’s Be:here PRS brand, occupying a 3.88 acre site adjacent to a planned Sainsburys supermarket.

The site has been bought from Estates & Agency Group, which previously won permission for the supermarket development on the Abbey Retail Park site. “Barking is a key milestone in Be:here’s plans to create vibrant rental communities at scale across London and other major cities,” said Andrew Telfer, chief executive of Willmott Dixon’s development division.

The addition means Be:here now has a pipeline of around 1,300 private rented sector units, including a development at East India Dock, which is just completing construction and will shortly be let. It is also under way with another project, this time in west London at the Vinyl Factory site in Hayes.

berewood

Grainger adds two Hampshire PRS projects

Grainger has won planning permission for two major build to rent developments in Hampshire. The schemes, at Berewood, Waterlooville and Wellesley in Aldershot will deliver 212 homes for rental.

The projects are both phases of larger phased residential developments, and have been brought forward from a planned start date that would have been years into the future. The permission at Berewood an innovative planning agreement with the local authority – another demonstration that planners can help unlock PRS projects in their neighbourhoods.

“These new build-to-rent developments will not only deliver much needed new homes in the local area but also support our desire to provide purpose built, quality private rental accommodation as well as accelerate the provision of amenities for the community as a whole,” said Grainger executive director Nick Jopling.

“Today’s news supports Grainger’s strategy to grow its market rented business and our increasing focus on investment outside of London, where we have extensive experience managing residential portfolios. Grainger is committed to the market rented sector where we can bring our long and established track record of managing homes to the highest standards for people across the UK for the benefit of all our stakeholders.”

At Berewood, Grainger has reacted to local market conditions. Local authority Winchester Council saw a major increase in the number of privately rented households in its area, up 50% between 2001 and 2011; an even more dramatic 100% increase was observed in neighbouring Havant. A deal with planners sees 104 new homes built with a guarantee they will remain PRS housing at market rents for at least 12 years, after which 40% of them – 42 units – will become affordable housing, and will revert to Grainger’s social housing subsidiary Grainger Trust. The deal effectively gives Grainger a 12 year guarantee of returns at open market rents, to recover their investment.

At Wellesley, the permission for the 108 homes for rent is not tied to future conditions. The project as a whole, which includes  3,850 homes, already has a provision that 35% of the total will be affordable.

The company says its commitment to the Hampshire developments proves that purpose built PRS development can work outside city centres, in more suburban environments.

Aberdeen invests £60m in Stratford PRS tower

Investor Aberdeen Asset Management has bought a 26 storey tower block of 166 let apartments in Stratford, east London. The deal indicates the appetite of long term investors in the private rented sector, and specifically in buying completed, well let developments.

The £60 million deal is part of a commitment from Aberdeen to invest around £500 million in the UK residential market over the next five years. The Stratford block will be held within the group’s Aberdeen Property Trust investment vehicle.

“This is the Fund’s largest investment into the private rented sector and it will provide a strong sustainable income stream to the fund,” said fund manager Gerry Ferguson. “It also helps with further risk reduction which has been one of the hallmarks of the Trust over the ten years which we’ve been managing it, and we anticipate adding more high quality private rented properties in the future.”

The block, originally part of a project named Athena, has an unusual history. It was due to be completed for the 2012 Olympics, before financial problems hit its backers. Only recently has it been completed.

Owned by Aberdeen: 180 Stratford

Owned by Aberdeen: 180 Stratford

Aberdeen already manages around £1.2 billion of residential assets, outside the UK, of which half are still being developed. Ed Crockett, property fund manager, said the investor has a large appetite: “This purchase is part of a wider commitment which Aberdeen has to the private rental sector. The property is in one of the most vibrant and affordable locations in London. The city’s population is growing at a rate most would associate more with an emerging market than a developed one, which is one reason that private residential units are an attractive investment for us.”

“Long term asset managers like Aberdeen are ideal landlords for private residential tenants. They bring the full weight of their experience managing real estates assets to bear on the growing private residential sector, and combine it with the professionalism which our own clients demand.”

Russell Chaplin, Aberdeen’s chief investment officer for property, added: “This is the latest in a line of private residential purchases which Aberdeen has made across Europe on behalf of its clients. The case for the sector to grow, particularly in Europe’s winning cities, is clear with the number of people predicted to rent property set to increase over the coming years. We believe there is plenty of opportunity to grow the amount of assets we own in the years to come.”

The block at 180 Stratford High Street is part of a larger scheme originally named Athena and started by the Irish McFeely group. The developer went bust before the Olympics in 2012, leaving the scheme incomplete. More recently, investor Long Harbour bought the building, completed the development and rebranded it, before letting all the flats over a four month period.

Long Harbour is an asset manager that has around £600 million of money invested across a range of property and infrastructure assets. The company called the deal “part of the natural turnover of Long Harbour’s PRS portfolio” and said it would be investing further in the private rented sector.

Student moves show the way for PRS investors

International investors are buying into UK student accommodation in a big way, as they open their eyes to alternative investment assets.

Two North American investors and a Russian oligarch have between them spent $2.5 billion in the last few weeks on UK student housing developments. The moves give a hint of the demand for residential assets that could soon head into the UK private rented sector – as soon as completed developments are available for sale.

The US buyers are Greystar and the Canada Pension Plan Investment Board. Greystar, which likes anything with beds in, has agreed to buy a £600m portfolio of Nido branded student housing from UK private equity seller Round Hill Capital, reports the Wall Street Journal. This follows the pension board’s purchase of UK student housing company Liberty Living, in a £1.1 billion deal that gives it 16,700 rooms across 17 cities.

Meanwhile, Russian oligarch Mikhail Fridman is reported to have splashed out around £532m for another student accommodation portfolio. And investor Carlyle Group has sold its Pure Student Living portfolio, which had grown to 2,170 student rooms across five London sites, to a Luxembourg based investor, LetterOne Treasury Services.

In the UK market, student housing has seen massive growth, with early investors profiting from the growth of a new dedicated market to house university students in purpose built accommodation on or near further education campuses across the country. Returns are now coming down, with prices rising as more investors move into the space. Real Capital Analytics assesses the average sector return at 5.8% this year, down from 6.4% last year.

More PRS for Olympic village project

Balfour Beatty has signed a £35m investment deal with the London Legacy Development Corporation to develop more new homes around the former Olympic site in Stratford.

Two new neighbourhoods, named East Wick and Sweetwater, will be created over the next eight years, in a joint venture with Places for People. Together, the pair are destined to include 450 affordable homes, 530 units for market sale and 500 private rented sector homes.

There will be a mix of townhouses, mews homes and apartments, while the new settlements will also include a new nursery, library and health centre, with shops and office space. East Wick is to the north west of the former Olympic site, adjacent to the former press centre, which is itself being transformed into a new centre for digital business under the brand Here East. Sweetwater, also on the western side of the park, will be to the south of East Wick.

 

East Wick and Sweetwater will sit to the west of the Olympic Park

East Wick and Sweetwater will sit to the west of the Olympic Park

“This project marks our entry as an investor and developer into the UK’s regeneration and housing sector,” said Leo Quinn, chief executive of Balfour Beatty Group. “This market is growing and offers significant opportunities for the Group in the coming years. I look forward to continuing our strong partnership with the London Legacy Development Corporation to ensure that commitments made as part of the London 2012 Games are delivered. With our partner, Places for People, we are very excited to be able to create these new, vibrant, sustainable communities for East London.”

David Cowans, chief executive at Places for People, said: “With our partner, Balfour Beatty, we have the perfect opportunity to work with LLDC to create a truly unique and exciting place to live. This is exactly what Places for People is about, making great places and ensuring that the true Legacy of 2012 lives on by creating opportunities for the existing communities around the park to share in its success.”

Designs include these funky round towers

Designs include these funky round towers

Designs for the two new settlements have already been prepared. An architectural team includes Studio Egret West, Sheppard Robson, Alison Brooks Architects, ShedKM, Piercy & Co and Astudio.

Rent controls could help PRS develop

As the May general election approaches, attitudes towards the Labour Party’s suggestion that private sector rents should be controlled is starting to receive a wider level of support. And some of that support is coming from new institutional investors in the sector.

In comments reported in the Financial Times, John German of Invesco Real Estate, who is also on the residential committee of the British Property Federation, indicated that some level of control would not cause a problem for institutional investors, who stand poised to invest billions in the UK private rented market.

“There are rent controls and rent controls,” said German. On rent rises he said some upper cap on annual increases, perhaps indexed, “would create exactly the type of investment that a lot of institutions are looking for, which is a linkage to inflation”.

Labour has proposed among its election policies that it would look to introduce rent controls to limit increases; and give tenants greater security of tenure by offering longer tenancy agreements. “The feedback I get from the political parties is that they get the idea residential property is a huge asset class in the UK,” added German. “They see investment by institutions in the UK private rented sector as an ideal way of trying to tackle some of the housing problems in the UK.”

Invesco, already active in other mainland European residential investment markets, has indicated it thinks the UK PRS market is fundamentally attractive with the potential for attractive returns. And the company has already backed developer Be:Here with a £33m investment in its PRS scheme in Hayes with the promise it will support further Be:Here projects with investment.

And writing in the New Statesman, London Labour MP David Lammy argues for a middle line when considering rent controls. “Let me be clear about what I mean when I talk about rent control. I don’t mean the old-school “first generation” rent control that was introduced in the UK during the Great War, which prevents any increase in rents, diminishes investment returns in real-terms over time, and discourages people from becoming landlords. I don’t mean the type of rent control that keeps rents so low that they are not enough to pay for the proper maintenance of a home in a liveable condition. I mean rent controls that nod to the market but allow for the realities of what it is to have a home to live in; the type that are espoused by those who could hardly be called left-wing ideologues, including Angela Merkel and Michael Bloomberg.”

He favours the German system, noting that:
• renters have tenancies with no end date and can only be evicted under a restrictive number of circumstances, such as being behind with rent, or damaging the property
• landlords cover the charges of letting agents (i.e. they get included in rent)
• initial rents cannot be more than 20% above average local rents
• rent rises are capped at 20% over three years
• rents are linked to a commitment from the landlord to retain the property in good condition
He concludes: “Perhaps a system like Germany’s is exactly what London needs to address the uncertainty and unaffordability faced by tenants in our private rented sector.”

Lammy’s linkage with the German market is highly significant. Invesco has already invested more than £100m in housing in that market, effectively declaring itself satisfied with the German system. And German investor Patrizia, which has made a highly successful business out of investing in the German private rented sector, is now looking to create a similar, large scale, operation here.

Lammy further argues that the British supply problem “has more to do with cautious developers, the planning process, and a scarcity of developable land than it does with rent prices.” He argues for conditions to encourage more institutional development, such as concessions on rent controls for new developments. “Rent controls should not apply to any new property built after 1 January 2014. Or maybe they should not apply to the first tenant of any new development; that will have the added benefit of encouraging longer term leases by property developers.”

Concludes Lammy, MP for Tottenham: “Though not a silver bullet that will singlehandedly solve the crisis, we should think about how rent controls – done sensibly – can be part of a comprehensive plan to ensure that all Londoners can afford a home in our city.” The New Statesman article is here.

PRS landlords need to embrace new technology

Developers who want to win in the private rented sector need to embrace the tech revolution. That’s the claim of James Scott, chief operating officer of The Collective.

It’s high time landlords learned from what is around them, to appeal to the growing generation rent audience, says Scott. “Look at other industries, and you’ll see a shift in favour of receiving something as a service rather than owning it: the Boris bike, Netflix…. so why not have your living space as a service – or, as we in the industry call it, rent.”

He also points to developments in the hotel industry, where smartphone apps are now being introduced in place of room keys. At the new Hub by Premier Inn, the group’s compact city centre hotel format, check in is automatic via geotagging, with lights and room temperature controlled by an app. “Gimmicky, one might argue, but it shows an understanding of what their consumer has come to expect.”

PRS provides space, says Scott, and it must deliver more for less, with inclusive services that technology can efficiently manage and share. Property related information to do with deliveries and maintenance, and the settling of bills, should be instantly available, and easy to access. Perhaps, says Scott in the article published in Property Week, new technology will enable space to be used much more efficiently than it is right now.

The Collective is a property development and management company that offers a shared living product designed for young professionals – combining ensuite rooms with shared kitchen and other facilities in their buildings, on leases that are typically 9-12 months long. The company has a portfolio of properties across central London.

Investors queue up to enter Dutch PRS market

Investors are looking to spend a record EUR5.5 billion in the Dutch housing market. In a situation that has echoes of the UK’s newly growing institutional private rented sector, Holland is seeing strong investor interest, while new supply is constrained.

Research published by Dutch analyst Capital Value identifies EUR1.6 billion of capital from Dutch pension funds, more than EUR1 billion from private investors, and EUR3 billion from foreign investors, all looking for property to buy in Holland.

“For the Dutch housing market it is a good thing that, in addition to Dutch investors, there are so many foreign investors that are prepared to purchase rented housing,” said Capital Value managing director Marijn Snijders. “Consequently, more and more foreign banks are expressing an interest in financing housing in the Netherlands.”

“Previous research had already revealed a growing interest on the part of German banks. We are now seeing that banks from other countries are also keen to get a foothold on the Dutch market. This will lead to a more diverse financing market which is a healthy development for the Dutch housing market.”

As in the UK, the sales market is strong, meaning house builders are constructing for private sale and restricting the amount of new homes built for rent. And as in the UK, the shortage of supply against demand for rental housing looks like it will be unresolved for some time to come.

“Never before has so much capital been available for investments in rented housing,” said Capital Value’s Kees van Harten. “Local authorities, investors, the construction sector and corporations have a joint responsibility to ensure that this capital can actually be used. If there is insufficient supply on the market, there will be a risk that investors will start looking for alternative opportunities.”

In a similar way to that being suggested in the UK as a way forward, Capital Value says local authorities have a key role, encouraging developers to include market rent housing in project plans.

Last year’s largest investment transaction in the Dutch housing market saw German investor Patrizia – also lining up for action in the UK rented housing market – spend EUR578m buying a portfolio of homes from Vestia.

Also active was Round Hill Capital, which acquired a series of Dutch housing portfolios through the year. It spent EUR365m in the autumn on a portfolio of 3,786 homes across Holland.

Said Round Hill’s Michael Bickford: “We continue to believe that the housing market in the Netherlands represents an attractive investment opportunity due the positive fundamental backdrop in the Dutch market, together with the stable cash flow of this asset class and our established residential management capabilities.”

Could this level of activity start to take place in the UK? It could, within a couple of years. By the end of 2015, for example, property developer Criterion Capital aims to have up to 3,000 rental apartments under construction, all potentially for sale to a portfolio investor.

M&G reveals details of tenant services at Acton PRS project

Long term investor M&G, part of the Prudential group, has revealed more details about the PRS development in Acton where it is backing a build to rent development of 152 flats. M&G has forward funded a development by HUB, with a £43.5m development, previously reported here.

There will be a full-time concierge on hand, space to store bicycles, and long term contracts giving tenants the reassurance they can stay for as long as they want. And there will be a party or function room, that residents can hire if they are having a party, or the family gathering gets too big to be accommodated in their flat.

Victoria Square, Acton, where 152 private rented apartments are being developed

Victoria Square, Acton, where 152 private rented apartments are being developed

“These will be homes for normal working people, not oligarchs,” Alex Greaves of M&G told the Guardian recently. “In a typical buy-to-let the tenant knows the letting agent, but not the owner of the block, and doesn’t know who to call if things go wrong. Our properties will have a single manager, with on-site service. We will have economies of scale that individual buy-to-let investors don’t have. If we can keep the tenants happy we hope they will stay longer and we get lower voids.”

The Guardian also notes that the growth of purpose-designed, build-to-let blocks should also reduce the quantity of new homes grabbed for purchase by small scale, buy-to-let landlords. This should have a positive knock-on effect, reducing price inflation in the housing sales market, and giving first time buyers a greater chance.

With its upcoming Crossrail train connections, Acton is a development hotspot for private rented sector developers. PRS specialist Essential Living recently purchased the Perfume Factory nearby, which has potential for conversion into around 500 flats. Essential Living is expecting to start work on the project in 2016.