Goldman Sachs makes UK build-to-rent debut with £118m development loan

Merchant banking division provides its first multifamily loan in the country to develop Birmingham’s tallest residential building.

Goldman Sachs is the latest lender to enter the UK build-to-rent residential market with a £118 million (€136.5 million) development loan to property investor Apache Capital Partners.

The bank’s merchant banking division, Real Estate Principal Investment Area, will back the construction of Birmingham’s tallest residential building with a 4.5-year facility that includes a 12-month extension option.

The 481-home project has a gross development value of £184 million and will be delivered by Apache and private rented sector residential developer and operator Moda Living. The deal to fund the development brings Goldman’s total European credit investing through its real estate debt funds – the Broad Street Real Estate Credit Partners series – to $1.4 billion over the past three years.

A spokesman for Apache Capital told Real Estate Capital that it had received a dozen compliant offers to fund the scheme. He said it had eventually selected Goldman Sachs because of the bank’s “ability to deliver a loan of this size and magnitude, the overall terms of the offer and the individuals involved”.

Chris Semones of Goldman Sachs’ merchant banking division said: “This transaction continues our originate-to-hold strategy for large loans against high-quality projects with excellent sponsorship, strong market fundamentals and resilient cash flows.”

Apache pointed to Birmingham’s demographics as one of the reasons for its decision to sponsor the scheme. It said that 40 percent of the city’s inhabitants are under 25 years old and that 22.5 percent are between 20 and 34. Although one in five households rent privately, Apache said there remains a “severe” lack of professionally managed rental accommodation, with only 500 build-to-rent units in the market.

In October 2018, Apache partnered with Harrison Street Real Estate and National Farmers Union Mutual to create the UK’s biggest privately funded multifamily investment platform. The platform is funding seven of Apache’s initial schemes with Moda.

Apache brought in LaSalle Investment Management to fund Moda’s The Lexington project in Liverpool through a four-year £58.5 million senior debt facility. It also secured an £85 million loan from pbb Deutsche Pfandbriefbank to fund Moda’s Angel Gardens scheme in Manchester.

Richard Jackson, managing director and co-founder of Apache, said: “Our platform with Harrison Street and NFU Mutual has shown that there is significant institutional interest in residential property and, in spite of Brexit, demand for defensive, long-term income streams continues to thrive.”