Apache Capital forms JV with Harrison Street Real Estate Capital
Apache Capital has formed a joint venture with Harrison Street Real Estate Capital.
With additional investment from National Farmers Union Mutual Insurance Society and Apache Capital, the joint venture intends to fund the development of up to seven premium build-to-rent schemes (BTR) across England and Scotland (Phase One).
“These new equity commitments underscore that the United Kingdom’s build-to-rent sector is developing into an institutional asset class, attracting long-term global investors,” said John Dunkerley, co-founder and CEO of Apache Capital Partners. “Harrison Street has been investing in and developing student housing assets in the United Kingdom since 2015, and we look forward to partnering with them and NFU Mutual as we expand our portfolio, which we will fund and operate with long-term institutional build-to-core investors.”
The joint venture has closed and recently began construction on the first of these build-to-rent development schemes, The Lexington, which is located in Liverpool. The new platform intends to invest on an asset-by-asset basis as construction of the other six schemes Phase One over the next 20 months. The seven schemes in Phase One include properties in Birmingham, Edinburgh, Glasgow, Liverpool, Leeds and London (two assets).
“We are pleased to make our first investment in build-to-rent, diversifying into a new and emerging sector in the United Kingdom,” said Tom Bostock, property investment manager at NFU Mutual. “We identified Apache Capital as a long-term partner with a unique premium portfolio that’s been carefully secured and being developed by them in partnership with Moda. Its scale, quality, differentiated offering and services, makes it stand out in the U.K. market. We look forward to building on this relationship.”
The Lexington represents Harrison Street’s and NFU Mutual’s first BTR transaction in the United Kingdom, underscoring that build-to-rent is developing into an institutional asset class as investors are attracted to its defensive, countercyclical qualities.
Apache Capital and its development partner Moda have created a U.K. premium build-to-rent portfolio worth £2 billion ($2.7 billion), currently comprising more than 6,000 homes across 10 schemes secured in prime city center locations.
Apache Capital and Moda’s £154 million ($204 million) flagship AngelGardens scheme in Manchester’s NOMA district will open mid-2019 and has been full funded by Apache and is not part of the Phase One portfolio. Apache Capital and its development partner Moda are continuing to identify and acquire development land to further expand its build-to-rent portfolio. Within the next two years, Apache Capital and Moda will have acquired a portfolio at least as large as Phase One, which will all be financed, operated and held for the long term.
The U.K. government is forecasting rental demand increasing by more than 30 percent, from 13 million people in 2015 to 17 million by 2025. House price growth, demographic changes and consumer trends that favor hassle-free city center living have driven significant growth in the United Kingdom’s private rental market, with more people now renting rather than buying their homes. This has created a new institutional class asset, known in the United States as multifamily housing and in the United Kingdom as build-to-rent.
In North America, there is more than $3.3 trillion invested in multifamily housing, according to CBRE and the National Multifamily Housing Council. While institutional investors currently represent just 1 percent to 2 percent of the £1.29 trillion ($1.71 trillion) rented housing sector in the United Kingdom, their market share is growing as more product becomes accessible, according to Savills. In the United States where institutional investors hold over 20 percent of the rented housing market, institutional allocations to the rented housing sector are 25 percent of funds on average, second only to the commercial office sector.
