Long Harbour is plotting a push into direct development, with a debut scheme in north London and plans to independently develop half of its new projects.
It will invest £250m in the 495-flat development at the Mall in Walthamstow (pictured), with the land purchase from Capital & Regional and development costs.
The expansion marks a shift for Long Harbour, which has to date focused on forward-funding deals to build its BTR portfolio.
Contracts were exchanged with Capital & Regional in December. Completion of the deal is conditional on the planning consent section 106 and sign-off from the Greater London Authority. Long Harbour will then take on the development, incorporating modern methods of construction and an ESG focus into the scheme. It is targeting a start during the third quarter of this year.
The acquisition of the Mall comes from the Long Harbour Multifamily investment programme, a £500m joint venture with a Canadian pension plan.
Rebecca Taylor, managing director of BTR at Long Harbour, told EG: “When we raised the fund in 2019, there was a change in that we could do forward-funds and direct development. Going forward, our investment strategy is going to be 50:50.”
She added: “”Development is attractive with regards to propelling delivery and deployment of capital, and as a long term owner it means we can control the product and the offering from the outset rather than having to be led by developers.”
Long Harbour has had internal development and construction teams in place for the last few years and will look to grow this division over the next 18 months to support the pipeline.
“We aren’t able to take planning risk, but do get involved in projects prior to planning to planning consent being granted,” added Taylor. She pointed to The Wullcomb in Leicester as an example of this.
Long Harbour will also build on previous experience with partners in MMC. “Modern methods of construction is something we are really looking into at the moment for the Mall. For us, it is all about certainty and speed of delivery,” said Taylor.
She said that this construction “specifically suits” build-to-rent investors over traditional build-to-sell models “who are led by the rate of sales with speed of delivery not really being the priority”.
Taylor added the ESG focus is a long-term investors in the sector. Long Harbour looks to hold assets for a minimum of 10-20 years and by creating efficient buildings this also reduces operating costs as well as delivering on the green agenda and other social priorities for institutions.
Future deployment
The current £500m fund has already committed £226m across two forward-funding deals at Berkeley Square Development’s Berol Yard in Tottenham Hale, N17 , for The Gessner and The Sessile projects. The latter is backed by £120m in debt from Wells Fargo.
Future schemes are expected to be a mix of outer London boroughs and the regions, with an overall investment target of 70:30 weighted to the capital. Schemes will be 200-400 flats on average, dipping to 150 in London.
Taylor said: “We are still looking at key regional cities, so Bristol, Leeds, Birmingham and Southampton are all on our target list for investment, and commuter areas in London Zone 4 or 5.”
Schemes should be close to parks and regeneration areas and Long Harbour is taking advantage of former retail land and shopping centres, like the Mall. But, adds Taylor: “It is always about location, not just necessarily building residential on top of retail. It has to be much more thought through and part of placemaking and wider regeneration.
“Connectivity is key. Access to green spaces is key and probably more heightened given the pandemic and then the opportunity for more residential-led mixed-use development is something that we are looking at as well.”
Long Harbour’s £500m fund is the third in the series with £400m previously deployed. It has a portfolio of 1,900 flats, with recent schemes including The Lansdowne in Birmingham and The Wullcomb in Leicester.
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