Bouygues Development Ltd., part of Bouygues Group, one of the world's leading construction and services group, and Grainger plc, the UK's largest listed residential landlord, have announced the creation of and their co-investment in a new fund.
The fund will provide institutional investors with the opportunity to invest in scale into the Private Rented Sector ('PRS') which to date has been relatively inaccessible.
The fund is unique in that it has a dedicated portfolio of purpose built PRS development sites in London and South East of England. The development sites are expected to provide over 1,000 residential assets on completion.
The assets will be developed and built out by Bouygues in phases over circa three and a half years, with construction expected to begin in Q1 2012 and the first units expected to complete in Q4 2013.
Bouygues will manage the investment and construction process, while Grainger will undertake the operation of the portfolio after completion, including property management, lettings, facility management, and fund and asset management.
The fund benefits from an exclusive pipeline of projects developed by Bouygues Development, and offers investors the opportunity to acquire the sites at cost, which will enable the fund to deliver superior returns. The fund aims to provide an attractive coupon-based return over the development and investment stages, and a return based on capital appreciation.
The fund has been created with an eight-year life, with an option to extend it by up to three years. Bouygues and Grainger will co-invest into the fund upfront, and seek additional equity investment from institutional investors, totaling up to £150 million.
The Bouygues & Grainger Fund is primarily designed to capitalize on the appetite of UK and overseas investors to put long term money directly into residential property in London and the South East. The fund is also strongly aligned with the UK Government's plans to increase the number of new homes being built, and the Housing Minister's public land initiative.
Nick Jopling, Executive Property Director, Grainger plc, and long-time advocate of purpose built residential building in the UK, said: "The new partnership with Bouygues to set up the Bouygues & Grainger Fund and deliver new private rental buildings by 2013 represents a very exciting opportunity for Grainger.
"Although the fund is at a very early stage this represents a significant milestone in the evolution of the UK residential property sector and today's announcement is a major step toward creating a large scale, attractive and accessible private rented sector in the UK, for both investors and tenants alike."
Madani Sow, Chairman, Bouygues Development, said: "The alliance between Bouygues and Grainger is a great achievement and demonstrates to the UK residential market our willingness to establish the private rented sector as a new asset class that will address the huge housing demand in the country.
"Together we cover the full spectrum of expertise required by the financial institutions and we are glad to announce that some projects are already available for the Bouygues & Grainger Fund."
Source: FTI Consulting