Square Roots, the for-profit affordable housing business of developer London Square, is on the hunt for up to £1bn of institutional investment.
Square Roots revealed a £500m partnership with Pension Insurance Corporation earlier today, the first project from which will create 125 homes on the former Hawks Road Health Clinic site in Kingston upon Thames, Surrey.
The developer has also received £300m of institutional investment committed across four key projects supported by £30m of grant funding secured in partnership with Hestia, the residential platform of Federated Hermes.
Barbara Richardson, managing director of Square Roots, told EG: “We have signed the £500m investment agreement with PIC, and we have £300m signed with Hestia.
“We easily have the capacity for another £1bn of institutional investment within projects that we have got under review.”
With its partnerships with Hestia and PIC, Square Roots has a committed pipeline of 1,532 homes, as well as 12 projects under review totalling a further 2,360 homes for which it needs additional institutional investment.
Square Roots is looking for sites with scope for 150-400 homes for 100% affordable sites within London and is also looking at section 106 opportunities.
Aligned approach to delivery
Richardson said that when Square Roots was first incorporated it had an independent board separate from London Square and looked at projects based on additionality, or new stock.
The affordable housing developer had planned to take the affordable housing elements of sites captured by planning gain as well as private for-sale elements, and aimed to “only ever look at additionality” because it did not want to interfere with the traditional not-for-profit registered provider market.
However, Richardson added that Square Roots’ strategy has now changed. She said: “The challenges in the market are such at the moment that we are relooking at that as a board. Even our parent company, London Square, has sites that they are committed to now – they have over 1,800 affordable units as part of planning gain.
“They need an affordable provider to take that forward, while many of the affordable providers in London have publicly stated that they are not doing any new developments.”
As a result, London Square is now turning to Square Roots to look at its section 106 planning gains.
The changing market conditions mean that without an RP taking London Square’s affordable housing elements, its pipeline could be in difficulty, leading to Square Roots expanding its own pipeline through work with the parent company.
Square Roots will deliver the affordable element of London Square’s £180m development in Crayford providing 559 homes. Of those, 240 homes are for shared ownership and social rent.
Expansion to home counties
Square Roots is also expanding its horizons to look at sites outside of the M25 and into the home counties.
The affordable housing provider is looking to expand into the single-family housing market, both for rent and shared ownership.
Richardson said: “We are looking at small family type housing with two-, three- and four-bedroom houses, for people who may want to leave an apartment in London once they were a couple, start a family and move out somewhere.
“We can then actually do some kind of trade up for living to some larger family housing for them to be in for the next 10, 15, 20 years.”
Square Roots is looking at a blended portfolio for its single-family housing plans, which will be beneficial for its board, as well as its investors.
Richardson added: “A blended portfolio is beneficial for our investors as well, because different investors want different things.
“Some investors are focussed mainly on purely rented accommodation and some of them are focused more on the shared ownership and they find that [mix]attractive as a portfolio.”
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