KUALA LUMPUR: Eco World International Berhad (EcoWorld International) announced today that its 70% owned joint-venture, EcoWorld London has formally signed contracts on a deal worth £389 million through which Invesco Real Estate which will acquire over 1,000 Build-to-Rent (BtR) homes in London representing the entire BtR component of 2 sites, namely Kew Bridge and Barking Wharf. This is pursuant to the Heads of Terms earlier announced on 29 August 2018 by EcoWorld International and it remains one of the most significant BtR deals ever undertaken in the United Kingdom (UK). This transaction follows less than 6 months from the date EcoWorld London completed its acquisition of 70% of the Willmott Dixon residential development business for £84 million, covering 8 sites.
The acquisition is being made on a forward funded basis which will enable EcoWorld London to recover approximately £66 million of its land cost shortly after exchange of contracts. Additional Golden Brick payments, tied to the completion of foundation works for each section, are expected to commence 6 months from exchange with the remaining construction costs financed by Invesco Real Estate, on behalf of its client as works progress.
The apartments are to be specifically developed at Kew Bridge in West London and Barking in East London for long-term rental on behalf of one of Invesco Real Estate’s international separate account clients. Both locations have strong transport links to Central London, which has been identified as having an undersupply of rented homes and the ability to outperform the wider London market. Construction work has commenced on both sites and the new homes will be available to rent from late 2020.
Apart from being one of the biggest single commitments into London’s emerging BtR sector, Invesco Real Estate’s client, on whose behalf the investment has been made, is a leading global real estate investor making its first residential investment in the UK. This deal is therefore a testament to the faith of not just Invesco Real Estate, a renowned global real estate investment manager, but also its international client in the experience and track record of EcoWorld London’s specialist residential investment team.
As part of the agreement, EcoWorld London will let and manage the rental homes on behalf of the investor under a long-term contract. Each site forms the first phase of a wider development being undertaken by EcoWorld London and will showcase the developer’s strengths in creating highly liveable residential enclaves as well as its strong placemaking capabilities.
The integration of the BtR homes alongside EcoWorld London’s other residential offerings will also accelerate the development of the Kew and Barking sites – this will expedite the formation of vibrant new residential communities in both locations which is a key aim of EcoWorld London to assure the long-term sustainability of all its projects.
The successful closure of this landmark deal therefore forms the first step in EcoWorld International’s strategy to become a leading provider of rented homes in London within the next five years. Based on its existing portfolio of projects, EcoWorld London has already identified other similar sites on which it will be able to deliver more of these BtR homes for future institutional investor partners.
Commenting on the deal, Heng Leong Cheong, Chief Executive of EcoWorld London, said:
“We are delighted to have signed the contracts with Invesco Real Estate for this most significant deal for the UK BtR sector. We see a clear mismatch between the homes that Londoners need, and those available in the market, in particular homes catered specifically for the rental demographic, and we are determined to do our bit to correct this.
At present, each of the leading BtR companies in London has less than 5,000 homes under management. Through EcoWorld London our ambition is to secure a pipeline of over 10,000 homes in the next five years to become a BtR Market leader. We will do this through the launch of a new operating company focusing solely on rented homes which will be led by our highly experienced EcoWorld London team.
Our confidence in the long-term prospects of the UK property market, reinforced by this deal with Invesco Real Estate, fuels our commitment to supporting the UK’s efforts to address the housing shortage across London and the South East of England."
Tan Sri Liew Kee Sin, Executive Vice Chairman of EcoWorld International, added:
“The successful signing of contracts for such a sizeable investment, only 3 months from the date the Heads of Agreement was announced, is testament indeed to the strong pulling power that the London property market continues to command globally. We are also gratified that Invesco Real Estate and its client, both of whom are highly regarded international property players, have chosen to place their trust in EcoWorld International to deliver their first BtR investment in the UK.
This is a fantastic start to EcoWorld International’s ambition of becoming a BtR Market leader in the UK. BtR is the most resilient and fastest growing property sector in London today due to the chronic undersupply of affordable homes available for rent, particularly along the commuter belt where EcoWorld London’s projects are located. With large international funds now actively pursuing good quality BtR opportunities in the UK, the sector’s growth prospects will be even brighter. This underscores our confidence that whatever the outcome of ongoing Brexit negotiations, the BtR market is recession proof and will continue to strongly outperform other market segments well into the foreseeable future.
Apart from the huge potential for growth, BtR, with its forward funding model, also requires minimal upfront funding to be sought from lenders and shareholders. It is therefore immensely scalable as we can undertake numerous such projects concurrently without over-extending our balance sheet. Based on the foregoing, EcoWorld International is therefore very comfortable to continue investing in the growth of our BtR business in the UK. We regard BtR as being foundational to our goal of becoming a global property player of note, with a comprehensive skill-set able to cater to the needs of not only end-users and retail investors, but also the discerning and demanding institutional investor market."