Edmond de Rothschild REIM has agreed its largest build-to-rent deal yet, a near-£80m forward-funding agreement for 400 flats at Birmingham’s Kent Street Baths.
The investment manager initiated a £50m investment for 262 flats at the site in 2019 and has now added a 21-storey tower to its ownership.
Tim Holden, co-head of residential in the UK, said: “There were a lot of very good practical reasons for buying into that building, not just about taking the extra flats.
“It was the right thing to do because of the nature of [the scheme] and where it is. It took it into a comprehensive regeneration for the area, as well as making sure that tower was built and [creating] a hub in the centre.”
The acquisition was made from landowner Benacre Estates, in partnership with the High Street Group. Newcastle-based HSG has reworked the plans and will focus on developing the commercial space, comprising a Co-Op, serviced office space, a bar and gym.
“We’ve set up the building contract with Winvic, put our specification in for our product and we will take it forward with High Street Group working alongside us,” says Holden.
Delays in the previous deal around the start of the pandemic and a shift in the market provided an opportunity for the buyer. “We always wanted to buy the whole site,” Holden adds. “The timing was right, we had the appetite for it and we believe in the product and in Birmingham.”
The acquisition is being made on behalf of the Edmond de Rothschild Residential Fund UK, which has nearly deployed all of £260m secured from European institutional investors. EDR REIM is also seeking further finance to fuel new acquisitions in the regions.
“The sweet spot”
Holden launched the UK BTR fund under Cording in 2018. It was renamed following the Edmond de Rothschild buyout and subsequent consolidation of business arms last year. The residential business benefits from a vertically integrated structure incorporating in-house development, asset management and property management functions.
The UK fund made its first acquisition at the 384-home Merlin Wharf in Leicester in 2019. The building is currently being let with rents of £740-795 for a one-bed and £975-£1,075 for a two-bed flat.
“What we are looking at is regional cities with people on medium incomes, the strategy is driven by average earnings, lots of demand, limited supply, cities where there are so many investing,” says Holden. “We have a penchant for trying to build buildings with plenty of outdoor space. Merlin Wharf has two courtyards and sits on the canal.” The scheme will also provide a gym, concierge service, with working and lounge space.
Schemes tend to be large – around 350 homes is the “sweet spot”, says Holden. Further sites include a 382-flat scheme in Warrington.
A 117-flat scheme in Nottingham and 160 homes at a second Leicester site called Wellington House.
“If you look at where our projects are on a map, they are easy walks to facilities and train stations. That’s because before we embark on an opportunity, we walk the area to get under the skin of it,” says Holden.
He had been pounding the pavements in Birmingham for some time before settling on Kent Street Baths, just eight minutes from the city’s main station at New Street, and close to the upcoming HS2 site at Curzon Street.
Now, EDR is also closing in on other schemes in the Midlands, North East and North West, with Newcastle, Edinburgh and Glasgow all on the list. “We have a couple of projects in the pipeline that we are working on at the moment and we are looking for more capital for those,” says Holden.
From the outset the target was always around £500m. “The view is, when we get there we will see,” he adds. “The PRS market is relatively new to the UK and we’ve had a reasonable amount of success in building a product and delivering.”
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