Build-to-rent developer Sigma has formed a joint venture with EQT Real Estate, the real estate platform of global investment firm EQT to build apartment blocks and houses in less expensive parts of the capital.
Under the terms of the partnership, EQT and Sigma have initially committed equity of £300m and £16m respectively to the joint venture. Homes England has given the JV an initial loan facility of £50m.
Including gearing, it is intended that the JV will have an initial capacity to establish an investment portfolio of approximately 3,000 homes, with a total value in excess of £1bn. Homes will be let at market-rate rents under Sigma's 'Simple Life London' brand.
Outside of London, Sigma has already developed more than 4,200 build-to-rent (BTR) homes in the regions over the last five years, with these generating an annual rental income of around £40m when fully let. In addition, Sigma has a further 2,900 homes under construction, at varying stages of development in the UK regions.
The JV launches with the acquisition of five sites from Countryside Properties. These sites are expected to deliver 361 homes for a total gross development cost of £102m and include locations in Ealing, Enfield and Havering. In addition, two further sites under development by Sigma, at Fresh Wharf, Barking, and Beam Park, Havering, will be acquired by the JV on completion. This will add an additional £48m of assets to the JV. The two sites together will comprise an additional 157 homes and are expected to be completed in the first half of 2021.
Sigma Capital Group chief executive Graham Barnet said: "We are delighted to be expanding our delivery of new rental homes in the UK with the launch of our London JV with EQT Real Estate, a strong and visionary partner.
"Homes England, which has supported Sigma with every major initiative to deliver the new housing that is much needed across the country, is also providing invaluable backing to the JV. Once again, Homes England is proving its commitment to supporting organisations looking to deliver homes at scale in the UK. We are also pleased to be working with Countryside Properties in Greater London to replicate the success of our partnership in the regions.
"We look forward to delivering thousands of high-quality, affordable new rental homes across the Capital with our partners at EQT Real Estate, and providing London renters with a higher standard of customer care."
EQT Real Estate head Peter Shacalis said: "EQT Real Estate is thrilled to be entering the London residential market, one with a severe supply shortage of professionally managed, high quality, good value homes to rent, with Sigma Capital. In addition to the initial seven schemes, we are currently evaluating a growing pipeline of projects in Greater London to build a large scale, resilient and downside-protected institutional BTR portfolio with robust and diversified rental income. EQT Real Estate looks forward to partnering with the Sigma team to realise our shared vision over the coming years."
Homes England interim chair Simon Dudley said: "We are excited to be strengthening our work with Sigma Capital. By supporting their joint venture with EQT Real Estate we are using our resources to accelerate the delivery of much needed high-quality rental accommodation and unlock substantial private sector investment in the housing sector."