Mayor announces groundbreaking housing deal for Elephant and Castle
• Mace and Essential Living to build UK’s first large-scale institutionally backed residential homes on Newington Butts site
• When completed 44 storey tower will be the largest private rental development of its kind in the country
The Mayor, 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 centre 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 £3.2bn 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.”
David Grover, COO for Investment at Mace said: “We are delighted to have been appointed as developer partner on Newington Butts. Mace is committed to helping shape sustainable cities across the UK and overseas through smarter infrastructure and better buildings. This fantastic development will help deliver the Mayor’s vision for future living in London, a completely new type of rental offer in the London market, and we are proud to play our part.
“Mace will be sharing its experiences and expertise from creating high-rise residential schemes in both the UK and Middle East to make sure that the Newington Butts scheme is realised in style and recognised as a pioneering development. Following our success on another project at Greenwich Square last year, this new joint venture development company at Newington Butts, is the next logical step in Mace’s growing relationship with the GLA.”
Darryl Flay, chief executive of Essential Living, said: “The Mayor must be commended for leading the way in creating a new, truly professional rental market where tenants are treated like customers with great amenities, longer leases and a home actually designed for renting.
“Over £100m will be invested here that will support the capital’s work force by providing flexible, high quality rental accommodation that will help draw in future investment for the area. Mace have played a crucial role in numerous landmark London developments and it is a privilege to be a partner with them on this project.
“With a quarter of Londoners now renting mainly from amateur landlords, it is vital that we create a branded sector that can deliver real quality for the first time. Because we manage the homes we build for rent, it enables us to take a long term approach to development, which differs hugely from traditional housebuilding.
“With its fantastic connectivity, Newington Butts will be one of the capital’s landmark developments, showcasing to everyone what new, brand-driven rental homes could be. The amazing work being undertaken across Elephant & Castle is a fantastic example of how ambitious place-making and dynamic civic leadership is transforming our capital and we look forward to working with the Mayor on delivering for Londoners.”
Cllr Fiona Colley, Southwark Council's cabinet member for regeneration, said: "This is excellent news for an area that is shaping up to be one of central London's most vibrant destinations. I'm really pleased to see the regeneration of Elephant and Castle gaining momentum, with work on new homes and a new leisure centre already underway.
“Over the next few years, the area will continue its transformation into a great place to live, work and visit, with the demolition of the Heygate estate, improvements to transport, and the creation of thousands of jobs, homes and central London's biggest new park.
“The GLA's planned development at Newington Butts, including affordable housing and a new home for the Southwark Playhouse, will be a very welcome addition to the area."
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.
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Notes to editors
• The Tower will have 462 units when complete. 188 will be affordable - 159 shared ownership and 29 rental units. Of the remaining market units, 75 per cent (206) will be held for long-term private rent.
• Mace Essential Living tendered for this project through a restricted procedure in compliance with the Public Contracts Regulations, advertised through a contract notice published in the Official Journal of the European Union (OJEU) on 14 September 2012.
• Work is expected to begin early in 2014.
• Mace is an international consultancy and construction company employing over 4,000 people, across five continents with a turnover of £1bn.
• Mace targets strategic developer commissions that align to our business objectives and provide opportunities for the wider organisation.
• Mace will be sure to share its significant experience creating innovative and high-quality high-rise residential schemes from across the world to help Newington Butts become a true London landmark development.
• Mace has three strategic sectors serving clients in the private, public and infrastructure sectors and five strategic hubs in Europe, Middle East & North Africa, the Americas, Asia Pacific and Sub-Sahara Africa that service over 70 countries.
• Essential Living is a new platform created in September 2012 through a partnership between the owners of Essential Land LLP and M3 Capital Partners, a real estate investment and advisory firm.
• Essential Living’s business strategy is to deliver 5,000 private rented homes over the next decade across London and the South East.
• With an initial $200m in equity funding from the Evergreen fund that M3 Capital Partners co-invests into, Essential Living will acquire sites, design and develop properties and subsequently manage them over the long term creating an income-focused rental business.
• They are the first Company to enter the market with this ‘full lifecycle’ approach to renting and the only developer with institutional funding looking at sites on a pre-planning basis.
• Crucially, the homes will be specifically designed for rent and Essential Living will utilise the experience of M3 Capital Partners has built up investing in the multi family lettings and seniors housing across the U.S. and student housing in London and Australia.
• Coupled with M3’s track record, the experience of the Essential Land partners - who have developed over 5,000 residential units in London – will vitally navigate the U.K market and provide a fully integrated development solution for the private rented sector.
• Essential Living was incorporated in 2012 and has invested over £60m in development sites that will be brought forward for PRS in the ‘pre-development’ phase during 2013.
• The Essential Living management team combines a wealth of expertise in finance, land acquisition, residential marketing, town planning and community engagement. It is these skill sets, combined with a long-term equity commitment that make Essential Living one of the market leaders in the emerging private rented sector.