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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.

New PRS developers to transform housing

Britain’s rented homes sector is about to enjoy a substantial transformation as newcomers to the market will, for the first time in a long time, construct blocks of accommodation specifically designed for rental.

In London alone, two million people live in rented accommodation, in 800,000 homes with rents totalling £300bn, noted Nick Jopling, executive director, property at Grainger’s recent results presentation. “That is a largely a portfolio that was never built for rent, it is a lot of it below standard and below quality.”

Grainger’s first new development is being built by Bouygues, in Barking, east London and will contain 100 flats. “There is considerable anticipation about this first build to rent project being handed over by Bouygues, six months early.”

“We think that when you put buildings like this that are designed for rent, and will be serviced for rent, they will not just be attracting new tenants in the market, but absorb existing tenants that are already out there.”

Grainger expects it will lease all the flats in the development over a three to four month period.

A second project, also in partnership with Bouygues will deliver 211 flats at a site in Pontoon Dock, in London’s Docklands. “It will be designed using the ULI design code, and there will be considerable attention to customer focus and to an effectively and operationally smart building, because that is what will drive the net incomes,” promised Jopling. He expects to be on site 2016.

Jopling said Grainger’s aspirations were to see the medium to long term growth of a market rented portfolio and “to be first and foremost truly national market rented landlord in the UK”.

One area where Jopling sees funding coming directly into the private rented sector is from the nation’s pension funds. At Pontoon Dock, the London Pension Fund Authority is backing the project. “There is an increasing attraction of funds like the London Pension Fund Authority,” said Jopling. “The local pension funds of the UK have over £180bn in reserve. I think you will see that on a more local level.”

The current issue in the market, he added, was the perception that the development stage different to that of the “stabilised stage”, when projects are completed and let. “There is plenty of appetite to own that stock once it’s up and built, but getting it up and built is quite a challenge. And that’s what many funds are looking at, at the moment.”

Grainger makes plain its PRS ambitions

Listed residential landlord Grainger has made clear its ambitions to grow a portfolio of private rented sector homes around the UK, hiring a new big hitter.

Derek Gorman has been appointed as managing director of Grainger’s market rented assets, starting in January. Gorman was until recently chief executive of Get Living London, heading the business running the massive private rented estate created from the Olympic village in Stratford.

Derek Gorman is joining Grainger to head its PRS activities

Derek Gorman is joining Grainger to head its PRS activities

Grainger chief executive Andrew Cunningham called the appointment “a clear demonstration of the scale and seriousness of our ambition to be a truly national, leading market rent residential landlord. We look forward to benefiting from his wealth of industry knowledge and experience.”

“It is a pleasure to be joining Grainger, a company with a hundred year history as a residential landlord,” said Gorman, who has a remit to help grow the company’s platform of market rented assets.

And at a results recent presentation, Cunningham made clear the company’s ambitions: “There is very strong and growing demand for market rented properties, And in London over half of all occupiers are now tenants.”

Cunningham said the group would be looking nationally, not just in the south east. “We see opportunities in the regions of higher yields than perhaps in London, and there is a lot of government support for the private rental sector.”

He indicated his support for the recommendation in the recent Lyons review, creating a new, restricted type of planning permission specifically for private rented. “That is one of the things that will make a big difference to the private rented sector going forward. As soon as you get planning conditions or covenants that make sure that land will be used for private rented you will see a very good level of growth in that sector.”

While Grainger’s main business is in buying, holding and selling on tenanted properties, it already has a small but growing PRS portfolio. This market rented portfolio saw a 9.1% increase in new lets in 2013-2014 which, said Cunningham,“is a very strong performance, it is one area where active management pays dividends in terms of returns, so we’re always looking for refurbishment opportunities.”

Grainger and Sigma agree PRS joint venture

Listed residential property company Grainger has signed a strategic partnership with Sigma Capital Group that will see the pair build a major private rented sector portfolio around the UK. The four year agreement could see thousands of new homes assembled for rent, under the Grainger brand, many of them outside London in cities around the UK.

Sigma is already familiar to local authorities as it has three partnership agreements in Liverpool, Salford and Solihull, responsible for delivering a mix of residential and commercial properties. The company was founded in 1996 and was listed on the AIM market in 2000.

“The creation of this strategic partnership with Grainger is tremendously exciting and another milestone development for Sigma as it positions itself as a major presence in the delivery of high quality new homes for the rental sector,” said Sigma chief executive Graham Barnet.

“The partnership enables us to accelerate the delivery of large scale PRS schemes throughout the UK, particularly in England’s major cities outside London. This acceleration of our activities will help further expand the breadth of opportunity with our partners as we deliver on this. The combination of Grainger’s funding ability and asset and property management expertise, and our local authority relationships and development management skills, brings gains to both sides – as well as to our associated partners. We are already appraising our first schemes.”

Back in February, Sigma agreed terms to buy its first London site for a PRS project, at Barking Riverside. The site has the potential to accommodate 318 apartments for rent, in four new apartment blocks. And in November 2013, Sigma agreed a joint venture with Gatehouse Bank to help fund the growth of a private rented sector portfolio.

Grainger brings substantial property management experience to the deal. It has a portfolio of around 4,000 homes the company manages, let under regulated tenancies. In Germany, the company owns and manages around 3,000 homes with a further 3,000 in a joint venture with investor Heitman.

“This agreement leverages both Sigma’s excellent relationships with Local Authorities and housebuilding partners across the UK and Grainger’s proven track record in managing residential property, whilst providing an innovative new avenue for investment,” said Grainger chief executive Andrew Cunningham. “We are at the forefront of the private rented sector and remain committed to delivering high quality new homes, benefitting local communities whilst delivering shareholder value.”

Runners up praised for private rented initiatives

Two projects in the outskirts of London were named as runners up in the MIPIM UK awards, announced last week, behind first choice Get Living London.

First off was London Road, Barking, a 100 flat development being developed by residential landlord Grainger and Aviva. Developed by Bouygues Development, the project includes an Asda supermarket beneath the flats, and is due for completion in the third quarter of 2015.

London Road, Barking, delivering 100 flats for long term rental

London Road, Barking, delivering 100 flats for long term rental

Also highly regarded by the award judges was Taberner House in Croydon, a 32 storey tower that will provide 230 flats converted specifically for rental. New PRS landlord Essential Living has agreed to forward purchase the project, while is being developed to designs by Make Architects. The block will be built on the former site of the Croydon council offices.

The 32 storey Taberner House project will provide 230 flats with commanding views across south London

The 32 storey Taberner House project will provide 230 flats with commanding views across south London



Mayor signs off two major new rental projects

London mayor Boris Johnson has selected developers for two residential sites in east London, with 40% of the proposed new homes destined for private market rental.

The sites at Silvertown Way and Pontoon Dock will deliver around 1,200 new homes, of which 480 will be for private rental. The land is owned by the Greater London Authority, and is part of a tranche of sites taken on by the GLA in 2012, with the aim of bringing them into use quickly.

“These schemes will be built faster than conventional methods, by providing a US-style private rented model alongside traditional tenures,” said mayor Johnson. “It’s important for London’s economy to support the growing rental market, providing top quality homes and management, together with the reassurance of longer term tenancy agreements. I also want to entice more institutional investors to come forward and invest in quality homes for Londoners.”

The developments will include a restriction to ensure that the private rented homes cannot be sold off for a minimum period of ten years.

The larger of the two sites, at Silvertown Way in Canning Town, will accommodate 1,000 homes. It has been awarded to Galliford Try, working with Opal Land, itself a joint venture between Thames Valley Housing Association and Linden Homes. The project split will include 347 private rented homes, 232 for affordable rent, and 154 for affordable home ownership, along with 86,000 sq ft of commercial space. Thames Valley’s PRS specialist Fizzy Living is to manage the private rented homes within the development.

AA Pontoon Dock 1

Homes for rental at Pontoon Dock have been designed by Assael Architecture

At Pontoon Dock the development will include 137 private rented homes, 42 affordable rented and 31 shared ownership homes on a site next to Thames Barrier park. Here, the project will be delivered by Bouygues Development, Grainger and funding partner the London Pensions Fund Authority.

The Pontoon Dock project will be majority funded by the LPFA. Said the authority’s CEO Susan Martin: “Investing directly in the redevelopment of the Pontoon Dock site will not only deliver essential housing for London, but will also provide LPFA with the attractive, liability matching, long-term returns we need to provide for our pensioners.”

Tax threat to private rented sector growth

Developers active in the growing private rented sector are warning that tax changes proposed by the government could drive away essential foreign investors.
A consultation currently open to responses suggests introducing Capital Gains Tax on the sale of UK residential property. This could apply, it is suggested, even if the investment was made through an overseas fund, a vehicle that is currently exempt from a CGT charge.
“The government needs to make it very clear that it wants to encourage institutional investment,” said Bruce Ritchie, the chief executive of Residential Land, speaking to Property Week. The developer has built a substantial portfolio of rental properties in London, supported by overseas investors. “Foreign investors bring billions of pounds into the UK. At one end of the spectrum, it is saying that we need more homes and at the other, it’s thinking about taxing foreign investors.”
Also wary of such changes are developers Delancey, Capital & Counties, Land Securities and Grainger, all of whom have made responses during the consultation process. “It’s a very vulnerable time for this market,” said Grainger. “The government should not put securing investment at risk.”
The British Property Federation warns that the progress already made in the sector could be undermined by changes. “Imposing a further tax is very likely to act as a deterrent to those making large scale investments in the UK’s housing stock.” said the BPF’s Ian Fletcher.
The comments around the tax change contrast with views expressed just days ago about the progress of the private rented sector. Speaking at a recent conference and reflecting on the impact of the first year of the Build to Rent fund, Fletcher noted: “Good progress has been made in a short period, and initiatives such as the Build to Rent fund have helped in establishing the model and encouraging delivery. Projects on the ground are being delivered and there is real momentum coming from various players to put in place the market infrastructure that will further help to attract investors.”

Grainger buys in London but eyes up the regions

Leading residential landlord and investor Grainger has indicated it will now look to the UK regions for future private rented sector investments – just as the company announced it has bought a £160 million residential portfolio in central London.

The latest deal has bought Grainger 61 properties in Kensington and Chelsea, the heartland of smart central London. The houses in the purchase are valued at less tahn their vacant possession value, as 45 are subject to regulated tenancies, while 13 are let on assured shorthold tenancies and 3 are empty.

“This is a rare and exciting opportunity,” said Grainger chairman Andrew Cunningham. “It is a very attractive portfolio in one of the most prestigious locations in London and it includes a high concentration of regulated tenancies, a sector in which Grainger has had a long and successful history of investing. Leveraging this experience and the skills within our unique operating platform to manage and enhance residential property, I am confident that we will generate significant value from the portfolio on behalf of our shareholders over time.”

The company has hinted that it may well sell individual properties as they become vacant, or look to redevelop where suitable, taking advantage of house price rises in London’s raging residential market. Grainger used existing finance facilities to purchase the portfolio, and still has more than £200 million of firepower to use in the market, should it wish.

And that firepower may well be deployed outside the London area, if a report by publication Inside Housing carries weight. They report that Grainger now sees better opportunities in the regions, “in particular in build-to-rent and private rented sector developments” as economic recovery takes hold. An unnamed Grainger source says competition is high in the capital, with a large volume of money chasing a small volume of deals in London.

Agents have recently reported that price rises in London mean investors can now get a better return on private rented property by purchasing in the regions, as previously reported by Resimarketnews here.

New guide promises better designed rental homes

The Urban Land Institute has launched a new design guide, to help developers and builders create better homes that are designed from the outset for renters. Should it be adopted widely by the industry, then renters of the future will have far better homes to live in, compared with the frequently indifferent choices they face today.

The guide underlines the importance of building high quality homes, with supporting facilities and great customer service. It covers location, scale, exterior, interior and public spaces, and how living in a properly designed rental home should be a great experience.

The project has been supported by the government’s Private Rented Sector Taskforce, and guided by Nick Jopling who, apart from being executive director of property at major landlord Grainger, is chair of the ULI’s Residential Council. “Our ambition is for this to become a benchmark for everyone involved in the design, delivery and ownership of Build to Rent property,” he said. “It is not a house building manual. It tackles what has to be done differently for the successful delivery of high quality and wide ranging UK build to rent housing.”

Russell Pedley, a director at Assael Architecture, added: “Our research has enabled us to draw out the design differences, that not only identify the efficiencies that help improve the viability and durability of build to rent. It demonstrates that with the right approach, it can help foster communities in a building that are easy and fun places to live for singles, couples and families.”

It is hoped that the guide will become as widely adopted as the British Council for Offices Specification Guide, a private sector initiative that has substantially improved standards of design in office projects, reducing overspecification and wastage at the same time.

More on the guide, and how to order a copy, here.