Almost £100 million of funding provided to property developers in past six months
LaSalle Investment Management (“LaSalle”) is seeing high demand for development financing with banks still reluctant to commit fully to the property sector following the financial crisis. The leading global real estate investment manager has moved to close the gap in development financing with a series of deals worth almost £100 million in the last six months and believes that this is an indication of the growing confidence in the market among some developers.
The most recent of these deals is a £40 million development financing deal with Brookgate, the property development and investment company, for three student accommodation buildings at Anglia Ruskin University (“ARU”), Cambridge. The deal, which was announced this week, is one of the first institutional funding deals in the student sector outside London.
John Yeend, Director of LaSalle Investment Management, said: “This deal demonstrates that we are able to partner with developers to close the gap in financing where there are good quality development opportunities. This is the second major deal we have financed in the last six months and highlights the growing confidence among some developers to seek funding.
“We believe that there will be more opportunities to finance developments, for example in the Central London residential market where capital growth there remains strong. We will work closely with developers when we see potential rental and occupational growth. This latest deal in Cambridge demonstrated both.”
LaSalle’s financing will enable Brookgate to develop ‘cb1’, a 26-acre gateway development on Station Road, Cambridge. The three student buildings will total 140,000 square feet and provide 511 en-suite bedrooms in 112 studios and 399 apartments. In addition there will be 8,859 square feet of retail space for letting. Construction started on 11th March 2011 for completion in summer 2012. Designed by architects TP Bennett, the buildings will be constructed to achieve a BREEAM ‘excellent’ rating for sustainability.
John Yeend “The development at cb1 will offer our clients a quality income stream in a prime student location and is one of a number of developments that our client funds are funding.”
The buildings will be leased to ARU on a nomination agreement, rather than a conventional lease but with the benefit of annual RPI linked uplifts and LaSalle’s purchase price reflects a yield of 7.0%.
The development was enabled by a deal in 2010 between Brookgate and Network Rail to create a radically improved public transport interchange at the heart of the city and including the refurbishment of existing station buildings. The ARU buildings will provide much-needed, purpose-built student accommodation for central Cambridge, allowing students to move out of multi-occupancy housing which can then revert to family dwellings.
In addition to student accommodation, the cb1 master plan will provide 600,000 square feet of commercial space and 630,000 square feet of residential, plus retail, restaurants and bars. The project also provides a refurbished station concourse and new public square, new transport interchange, high quality hotel and a multi-storey car park.
Bidwells advised Brookgate on the transaction, while AHBN represented LaSalle Investment Management.
