London Square has launched an affordable housing arm with an £80m debut scheme in partnership with Federated Hermes.
The business, Square Roots, will apply for approval as a for-profit registered provider of social housing and aims to expand through acquisitions and tapping London Square’s £500m pipeline of affordable assets.
Square Roots will deliver its first homes at Axion House (pictured) in Lewisham, south-east London, on behalf of Federated Hermes’ residential platform Hestia. The development comprises 141 homes, with 116 shared ownership and 25 London affordable rent homes.
London Square has been shifting its focus to affordable housing amid challenges in the private sales market. This year it inked a third deal with Clarion for St Michael’s Courtyard in West Croydon, with 55% affordable housing. The developer was also selected by Waltham Forest for the Lea Bridge development with housing association One Housing.
In financial results for the year ended 31 March 2020, London Square reported a forward sales book of £190m, with 49.4% affordable housing through bulk sales to registered providers. This compares with £180m the previous year, of which 16.2% was affordable housing. It also reported 33% affordable housing in a potential 3,500 homes in its pipeline.
The business expansion will allow London Square to invest in and manage affordable tenures beyond discount market rent and is the latest example of private sector investment in recession-proof affordable housing.
M&G Real Estate is setting up a shared ownership REIT, joining investors L&G Affordable Homes and Blackstone, which acquired a stake in housing association Sage in 2018.
Adam Lawrence, chief executive of London Square, said: “The launch of Square Roots shows our commitment to providing much-needed new homes across all tenures in Greater London.”
Will Gibby, director of fund management at Federated Hermes, added: “Axion House fully aligns with Hestia’s strategy and our wider approach to responsible investing, enabling us to deliver a scheme that will provide affordable homes and impact positively on the environment and surrounding community.”
London Square has a £1.2bn land pipeline of 2,353 homes and is seeking to more than double this to £2.6bn. Square Roots will sit alongside the three existing business divisions: London Square Developments, focusing on private for-sale homes; London Square Partners, which works with the public sector; and the commercial developer London Square Works.
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