Aviva Investors is closing in on its first major PRS deal with advanced discussions to fund Allied London’s two 36-storey towers Nickel & Dime in Manchester.
CBRE was instructed earlier this year to find a funding partner for the £200m development, which comprises 610 flats at Allied London’s St John’s neighbourhood at the former Granada Studios site.
Hong Kong-based R&F Properties was previously in discussions to fund the towers, but talks did not progress and Aviva is now the frontrunner.
The deal would be the first large-scale PRS commitment by Aviva, which first announced plans to enter the sector in 2009. Early talks to set up a £1bn UK PRS fund were reported at the end of the last decade and it has since continued to discuss similar funds but has never followed through to launch.
Ellis Sher, chief executive of Maslow Capital, said: “Whether or not this represents a wholesale move forward into PRS from institutions remains to be seen, but the resurgence in the rental market in Manchester has certainly laid a strong foundation for stronger appetite for PRS among institutional investors.
“We ourselves have seen growing demand for good quality rental accommodation in Manchester and other northern cities, and well-conceived PRS schemes certainly offer exposure to an attractive blend of strong income streams, robust yields and good prospects for capital growth.”
Aviva is also having wider discussions with Allied London about partnering on other elements of St John’s, a residential-led mixed-used project with an estimated gross development value of more than £1.5bn. Allied London holds a 100% interest in the scheme. The company is 70% owned by its chief executive Michael Ingall. Existing debt funders for the project include PGIM Real Estate and the North West Evergreen Fund.
Allied London received planning consent in March for Nickel & Dime, which were designed by architect Denton Corker Marshall. In a statement at the time, Ingall said: “This is very much a research-led development; we believe in this city, in this location and with this design we are creating something very special. We believe people need living options, and private rented communities are very much part of those lifestyle choices.
“We also believe that is once established, PRC will be the prime form of a new property investment asset class, and Nickel & Dime will be best in class, setting the bar for this type of asset”.
Nickel and Dime will each provide more than 300 one- and two-bedroom flats, with resident lounges, co-working space, a “pantry kitchen” and private outdoor space.
Ed Casal, global chief executive of Aviva, announced the investor’s new strategy of shifting from “commodity” assets to “places where people can live, learn, work and play” at EG’s public-private partnerships event at MIPIM in March.
Aviva has since put £400m of predominantly £5m-£25m assets up for sale and begun to invest in larger assets in Manchester. It is also nearing a £100m deal to fund English Cities Fund’s Two New Bailey office development in Salford, Greater Manchester.
Last month, the investor also acquired 55 Spring Gardens, a 55,700 sq ft office building in Manchester’s central business district, from CBRE UK Property PAIF – a fund managed by CBRE Global Investors.
To send feedback, e-mail Louisa.Clarence-Smith@egi.co.uk or tweet @LouisaClarence or @estatesgazette
