On Tuesday, EQT Real Estate, a division of Swedish private equity investor EQT, announced that it is partnering with Sigma Capital, a publicly listed U.K. housing development and urban regeneration company, on a joint venture to build 3,000 high-quality “build-to-rent” (BTR) homes at market rates in affordable sections of Greater London and surrounding commuter towns.
The venture, valued at GBP 1 billion (about $1.3 billion) in total build, is EQT Real Estate’s first foray into the U.K. market. Sigma Capital has pioneered the BTR market in the United Kingdom and currently manages more than 4,200 rental homes nationwide.
Homes England, the affordable housing agency of the U.K. government, will provide a loan facility of GBP 50 million (about $64 million) to support the venture. In a statement, Homes England Interim Chair Simon Dudley said the investment will “accelerate the delivery of much-needed high-quality rental accomodation and unlock substantial private sector investment in the housing sector.”
Sustainable beds, sustainable sheds
In a statement on Tuesday, EQT said the initiative combines its current thematic investment focus on “beds and sheds” (residential and storage property) in European gateway cities, along with its ongoing strategic commitment to social impact initiatives. Late last month, EQT Infrastructure announced that it would acquire a majority stake in Europe’s 4th-largest senior housing operator, Colisée Group, with a similar impact rationale.
The new homes will be built in close proximity to transportation links, including train access to central London. EQT Real Estate and Sigma have each committed GBP 300 million ($384 million) and GBP 16 million ($20 million) in initial funding, respectively.
Like other EQT Real Estate deals, building sustainability will be a major component of the investment. Wherever possible, buildings will tap into local community heating networks, use photovoltaic solar panels, and incorporate key wellness and quality-of-life measures such as access to green outdoor areas and adequate bicycle storage.
“This joint venture with Sigma Capital marks an exciting entrance into the UK for EQT Real Estate, as it represents the first transaction in this market since the business line was established in 2015,” said Rob Rackind, Head of EQT Real Estate and a partner at EQT Partners. “I cannot think of a more compelling investment opportunity at the moment than to deploy capital into this high conviction strategy, and one that should deliver significant social impact, by providing market-rate housing to renters in affordable locations within Greater London and its commuter towns with strong transport links.”
U.K. Housing Minister Rt. Hon. Christopher Pincher MP, added, “This Government is committed to delivering 300,000 new homes a year in England by the mid-2020s, ensuring everyone has the opportunity for a decent and secure place to call home.”