LONDON: Eco World International Berhad (EcoWorld International)’s 70% owned UK joint-venture, EcoWorld London today announced the signing of Heads of Terms with a substantial North American Pension Fund for one of the most significant Build to Rent (BtR) deals ever undertaken in the UK.
Fresh off the completion of acquisition of the eighth site under its joint-venture with Willmott Dixon on 20 August 2018, EcoWorld London has agreed terms with Invesco Real Estate and its investors to forward fund the development of more than 1,000 new BtR homes on two sites in Kew and Barking with a value of nearly £400 million. This represents one of the biggest single commitments into the emerging UK BtR sector – the landmark deal is further testament to the confidence of international investors in the EcoWorld brand and recognition of the company’s strong track record for delivering high-quality homes, superb lifestyle services for residents and flourishing new communities.
The Kew site is located next to the new Brentford Football Club’s 17,250 capacity stadium that is currently under construction and just minutes away from Kew Gardens, a UNESCO World Heritage Site. The Barking site is located next to the historically important Barking Abbey, which housed William the Conqueror in 1066 whilst he constructed the Tower of London. Both sites are well connected to Central London through train and underground networks and offer highly desirable yet affordable rental accommodation for tenants.
EcoWorld London will complete the construction of the developments to the high specifications agreed with the investors and will then undertake the long-term management of the assets on their behalf. Planning permission has been secured for both sites and development work has already commenced with construction due to complete in stages from 2020 onwards.
As both parties head into a period of exclusivity, the detailed contractual arrangements are targeted to be concluded by the end of October 2018.
The deal underlines EcoWorld London’s commitment and ambitions for the BtR side of its business as the company will continue to seek opportunities for similar BtR agreements as part of its growth strategy. According to research by CBRE, the annual BtR investment volume in the UK is currently relatively small at £2.4 billion compared to £103 billion a year in the US. With North American funds now actively pursuing BtR opportunities in the UK, there is huge growth potential for the sector and CBRE expects the annual investment volume to quadruple within 5 years to £10 billion.
Commenting on the Heads of Agreement, Tan Sri Liew Kee Sin, Executive Vice Chairman of EcoWorld International, said:
“EcoWorld International sees great potential in the UK Build to Rent market and this deal validates our strategic move to make the fast emerging Build to Rent business one of the key growth drivers for EcoWorld London. As a business we are perfectly placed to develop and manage these schemes to the high quality that investors and residents expect from us and through EcoWorld London we have the best in class Build to Rent capabilities – this significant investment by a US-based global pension fund in two of our projects is testament to that. In the future we will seek to do more deals of this kind and we have already received expressions of interest from other funds , particularly from Asia, keen to pursue potential investments into the UK Build to Rent sector. This signifies their confidence and ours in the positive long-term prospects of the UK property market, particularly that of the Build to Rent sector.”
Commenting on the Build to Rent market, Cheong Heng Leong, Chief Executive Officer of EcoWorld London, said:
“This deal highlights the immense opportunities in the emerging Build to Rent sector and represents an important new engine of growth for EcoWorld London and the UK. The timing of this announcement is also important – it clearly demonstrates London’s enduring appeal to well-informed global property investors who can see beyond current pre-Brexit market uncertainties to seize good opportunities to acquire quality assets.
On our part, we have designed our Build to Rent business model centred around a golden brick arrangement where land and costs incurred are paid upfront, and the remaining costs funded through a progressive payment structure. This is an ideal structure for us to anchor our UK growth ambitions – it enables us to effectively leverage on a relatively small amount of upfront equity to fund the entire Build to Rent development and generates positive project cash flows earlier. As a result of this our Build to Rent business can be scaled up very quickly and we will be able to work on multiple projects concurrently.
Kew and Barking are great locations for renters in terms of affordability, connectivity and local amenities, and we have identified many more of such sites within EcoWorld London’s existing portfolio where we can deliver our Build to Rent projects. This will stabilise and enhance EcoWorld International’s income generating capacity going forward to include steady cashflows from institutional investors buying Build to Rent properties to complement retail sales made to local homeowners and international investors on the Open Market Sale side of the business.”