Thu, 11/10/2018 - 10:21
Private real estate investment management firm Apache Capital has formed a joint venture with Harrison Street Real Estate Capital (Harrison Street) which, together with additional investment from NFU Mutual and Apache Capital, intends to fund the development of up to seven premium build-to-rent (BTR) schemes across England and Scotland.
The new platform has successfully closed and recently began construction on the first of these build-to-rent development schemes, The Lexington, which is located in Liverpool. The New Platform intends to invest on an asset-by-asset basis as construction of the other six Phase One schemes are brought forward over the next 20 months. The seven schemes in Phase One include properties in Birmingham, Edinburgh, Glasgow, Liverpool, Leeds and London (two assets).
The Lexington represents Harrison Street’s and NFU Mutual’s first BTR transaction in the UK, underscoring that build-to-rent is developing into an institutional asset class as investors are attracted to its defensive, counter-cyclical qualities.
Apache Capital and its development partner Moda have created, within four years, one of the largest UK premium build-to-rent portfolios worth GBP2 billion, today comprising over 6,000 homes across 10 schemes secured in prime city centre locations. Apache Capital and Moda’s GBP154 million flagship Angel Gardens scheme in Manchester’s NOMA district will open mid next year and has been fully-funded by Apache, and is not part of the Phase One portfolio. Apache Capital and its development partner Moda are continuing to identify and acquire development land to further expand its GBP2 billion build-to-rent portfolio. Within the next two years, Apache Capital and Moda will have acquired a portfolio at least as large as Phase One, which will all be financed, operated and held for the long term.
The UK Government is forecasting rental demand increasing by more than 30 per cent, from 13 million people in 2015 to 17 million by 2025. House price growth, demographic changes and consumer trends that favour hassle-free city centre living have driven significant growth in the UK’s private rental market, with more people now renting rather than buying their homes. This has created a new institutional class asset, known in the US as multifamily housing and in the UK as build-to-rent.
In North America, there is more than USD3.3 trillion invested in multifamily housing, according to CBRE and the National Multifamily Housing Council. Whilst institutional investors currently represent just 1 per cent to 2 per cent of the GBP1.29 trillion rented housing sector in the UK, their market share is growing as more products become accessible, according to Savills. In the United States where institutional investors hold over 20 per cent of the rented housing market, institutional allocations to the rented housing sector are 25 per cent of funds on average, second only to the commercial office sector (source: IPD, IPF, KTI).
John Dunkerley, Co-Founder and CEO of Apache Capital Partners, says: “These new equity commitments underscore that the UK’s build-to-rent sector is developing into an institutional asset class, attracting long-term global investors. Harrison Street has been investing in and developing student housing assets in the UK since 2015 and we look forward to partnering with them and NFU Mutual as we expand our portfolio, which we will fund and operate with long-term institutional build-to-core investors.”
Rob Mathias, Senior Managing Director at Harrison Street, says: “We are excited to partner with Apache Capital, a world-class investor and leader in the premium UK build-to-rent space. The Liverpool BTR market is backed by strong demographics, including a large and growing population of young professionals who are not yet ready to buy a home, and the property itself is situated in a prime location.”
“We have been closely watching the UK residential market for some time, and are pleased to bring the experience we have acquired investing in and developing high-quality purpose-built student accommodations across the UK, to this venture. The JV’s pipeline is very strong and we look forward to evaluating these additional attractive properties as we seek to identify new investment avenues for our clients.”
Tom Bostock, Property Investment Manager at NFU Mutual, says: “We are pleased to make our first investment in build-to-rent, diversifying into a new and emerging sector in the UK. We identified Apache Capital as a long term partner with a unique premium portfolio that’s been carefully secured and being developed by them in partnership with Moda. Its scale, quality, differentiated offering and services, makes it stand out in the UK market. We look forward to building on this relationship.”
Trowers & Hamlins, JLL and Macfarlanes acted for Apache Capital. Dentons and DLA Piper served as legal counsel to Harrison Street. Gowling and Knight Frank acted for NFU Mutual.
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