Apache Capital Partners and Moda Living are taking on circa £80 million of debt to finance development of their first UK Private Rented Sector (PRS) scheme.
Apache Capital’s Gulf-based investor clients have funded the £128 million Angel Gardens, a 34-storey PRS development in Manchester. Moda Living will also retain a co-investment.
The project is the seed asset in Apache and Moda’s joint venture which aims to develop a portfolio of £1 billion of UK PRS investments in London and regional cities, comprising between 4,000 and 5,000 units.
Angel Gardens, which has full planning consent, will be funded by one bank with the finance ready to be drawn in April, said Richard Jackson, Apache’s co-founder and managing director.
“There was a strong level of demand and we had a lot of offers before we selected our banking partner”, Jackson said.
Apache Capital has about £500 million of direct property assets under management. Alongside PRS, new housing developments where all the properties are built for rent and not for sale, its other strategy is investment in social infrastructure such as student accommodation, retirement housing and care homes.
“What we like about the PRS sector is that it offers long-income, liability matching for investors, low volatility of returns and diversity of income streams which should stay steady through cycles”, Jackson added. “Being housing, there is an element of non-discretionary spend and we think it’s an attractive defensive asset to hold long-term”.
The joint venture has eight projects in the pipeline, in cities including Manchester, Liverpool, Leeds, Birmingham and London. “We think that makes us one of the larger investors in the sector in the regions. We like to invest into sectors early where there is the emergence of institutional investor demand but not yet the product that we create.
“We are comfortable going into the regions at this point in the cycle when land values are relatively low compared to London and the South East and where supply has been restricted over the past eight years. The risk adjusted returns for the regions are favourable.”
Moda Living, which is backed by UK property developer/investor the Caddick family, built up the pipeline and teamed up with Apache to set up the JV after a process run by CBRE Capital Advisors. CBRE is also advising on the debt finance for Angel Gardens.
Angel Gardens is part of the 20-acre NOMA regeneration project on Manchester city centre’s northern edge. The Co-op and Hermes are leading its development.
Johnny Caddick, director of Moda Living, said: “We have formed a long-term alliance with Apache Capital Partners meaning both developer and the fund are co-invested and committed to delivering an initial pipeline of 5,000 units with a GDV of £1 billion. What this means is we’re setting the pace. Our ethos, and why our PRS portfolio will stand the test of time, is based on building a brand and quality of product that is currently not available in the regions, of which Angel Gardens is a prime example.”
Last month former Grosvenor Fund Management UK managing director Mervyn Howard joined Apache Capital as chairman to support Jackson and co-founder John Dunkerley.