Long Harbour has raised £500m for a return to the London build-to-rent sector.
Long Harbour Multi-Family is the third fund to be raised by the investor for BTR development. The majority of equity in it has been provided by an overseas pension fund, with Long Harbour also contributing some of its own capital.
It is Long Harbour’s largest BTR fund and the first time it has received funds from overseas to invest in UK BTR, following a global roadshow launched in January.
The finance will enable the investor to re-enter the London BTR market after a five-year focus on regional development.
“The biggest change for us is the fact that we are going to be much more focused on London,” said Long Harbour chief executive William Astor.
Long Harbour Multi-Family’s first deal will be the £70m forward-funding of a 166-unit scheme at Tottenham Hale, N17, with Berkeley Square Developments, which forms part of the Berol Yard Pencil Factory mixed-use development.
“We are really looking for any areas that are going to undergo some kind of fundamental change,” said Astor. “In Tottenham Hale there’s a massive infrastructure spend coming in; it’s a regeneration area, so it’s at a lower price point and analysis tells us there are growth opportunities there.”
Long Harbour will look to deploy the remaining capital over the next 24 months and the fund has a 20-year term. It will target sites that are primed for regeneration, with a projected increase in earnings, seeking “develop-to-core” returns.
Schemes will be around 200-400 units, dipping to 150 in London.
“We are slightly upscaling in terms of size,” said Astor.
Long Harbour director Rebecca Taylor added: “Our focus at the moment will still be primarily on the forward-fund structure. We still can’t take planning risk, but we have a new strategy which allows us to purchase land directly and develop it ourselves.”
Long Harbour said it selected sites by analysing factors such as business creation, patents, population migration and private sector earnings to identify pockets of potential growth and demand.
The company favours developing its own product, which is typically managed by its in-house operator Way of Life.
This latest BTR drive follows Long Harbour’s first fund of £150m and its second of £250m, both deployed into the BTR market over the past six years focusing on regional assets with a portfolio today of around 1,900 units.
“We cut our teeth back in 2013, buying existing buildings that were underperforming secondary assets and turning them around successfully. What we have learnt from that is, unless the buildings are specifically designed for rental, they can be very inefficient to manage,” said Astor.
He added: “Funds one and two have been very good for us. We have been able to buy assets or sites at good prices. But it is an income product so we’ve got to demonstrate long-term income.
“The returns over the next five years will be key for us. If this is going to be successful, we have to hit good returns. This asset class has to perform.”
CBRE Capital Advisors acted as the lead placement agent for the LHMF venture; Bright Capital advised in North America and Jade Advisors in the Middle East.
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