Grainger has agreed to forward fund 194 homes at Finzels Reach in Bristol, as tipped by Estates Gazette in September.
It is paying £47.5m for the build-to-rent development, which it will take possession of on completion. Grainger expects a gross yield of 7% when fully let.
The scheme is currently being developed by Cubex, a company owned by Palmer Capital. Grainger is buying the special purpose vehicle that is owned by clients of Palmer Capital.
Wilmott Dixon has been appointed as contractor, with the scheme scheduled to complete in 2019.
The rental scheme is spread across three blocks, Georges Wharf, Hawkins Lane North and Hawkins Lane South.
Helen Gordon, chief executive of Grainger, said “We are pleased today to announce significant progress in our PRS investment strategy, by agreeing to forward fund a 194 build to rent scheme in Finzels Reach in Bristol, a location we believe has strong market prospects and excellent growth potential.”
Grainger has now invested more than £300m into new rental development since Gordon took the helm in January. It has been trying to enter the Bristol market for some time.
However, limited development opportunity in the city centre and equally competitive office and student markets have made development expensive. Grainger was close last year to agreeing a deal on the ambulance station site on Castle Street with Bouygues, but this fell through.
The 4.7-acre Finzels Reach site was formerly home to the Courage Brewery. Plans were drawn up before the property crash for a major mixed-use scheme with more than 350 flats, 250,000 sq ft of offices, and a significant leisure component.
However, LPA receivers at Savills were appointed in 2013, and in August and November Palmer Capital bought the debt, and brought it forward with Cubex.
In February this year, the pair secured a 82,000 sq ft prelet of the 115,000 sq ft Bridgewater House to EDF Energy, before its £56m sale in April to a private investor. In August 2015, AXA Real Estate Investment Managers completed a forward funding deal for the 168-bedroom Premier Inn hotel for £17.8m.
Alex Price, chief executive at Palmer Capital, said “It will enhance the thriving mixed use community we have developed at Finzels Reach and provide much needed accommodation to Bristol city centre.”
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