The Mayor of London, Boris Johnson, has struck a ground-breaking deal that will see institutional investment used, for the first time in the UK, to build a large-scale residential rental development. The move will set the stage for further institutional investment in the capital’s residential property market, accelerating delivery and boosting the economy.
The development of the Newington Butts site in Elephant and Castle, owned by the Greater London Authority, will see preferred developers, Mace and Essential Living, using institutional investment to deliver one of the largest professional rental developments seen in the capital for decades, containing 462 units, 188 of which will be affordable, and creating hundreds of new jobs.
In the first deal of its kind in the UK the developers have, at a pre-development stage, secured institutional backing via M3 Capital Partners working with Essential Living. The Mayor has actively sought to encourage institutional investors, such as pension funds and insurance companies, to invest in residential construction and take development risk in order to increase and accelerate the number of homes being built. Today’s deal represents a major step forward in this work and it is hoped will encourage other institutions to invest in developments across the capital.
In a major milestone for the London’s property market the tower will also contain one of the largest number of homes for long-term private rental in the country when complete. Over the last decade the number of households in the UK in rental accommodation has increased by 77 per cent, with over a quarter of London households renting.
The Mayor, who wants to speed up supply of purpose built private rented homes that will give tenants greater security via longer leases, was particularly keen that this prime site, close to the heart of London, had a substantial private rented offer.
The homes, when complete, will offer a unique high quality bespoke rental design, professional management services and attractive communal areas including a seven storey terrace area. Homes in the tower, designed by Rogers Stirk and Harbour architects, will also be available on long leases and will mirror similar style longer-term rental apartments in large cities in the US.
As well as these residential units the site will also include a new theatre space for the Southwark Playhouse and a café as well as retail and marketing space.
The development of the Newington Butts site is a key part in the on-going regeneration of the Elephant and Castle opportunity area, helping to create a town center that will provide employment, better homes, improved transport links and community facilities for residents. The Mayor of London Boris Johnson, whose commitment to releasing public land for development has boosted the London economy by £3.2 billion (approx. €3.66 billion) in the last eighteen months, said: “Housing, like roads and railways, are a vital part of the capital’s infrastructure. We need to build more homes in London if we want to secure the capital’s economic future and the importance of institutional investors in making this happen cannot be ignored. This ‘holy grail’ of investment in the riskier pre-development stage is a hugely important milestone but it is just the beginning. I want to entice other institutional investors to come forward and invest in quality homes for Londoners, boosting the economy and creating thousands of new jobs.”
Peabody is the preferred affordable housing partner to provide around 159 shared ownership and 29 rental units.
Work on the tower will begin early next year and it is earmarked for completion in 2017.
Source: Greater London Authority