Joint venture to fund 1,500 homes
A middle-eastern investor has teamed up with two property companies in a deal to fund 1,500 new affordable shared equity homes.
The initial £20 million tranche from the subsidiary of an investment bank is believed to be the first Islamic finance investment in the UK’s affordable housing sector.
A joint venture company - made up of housing developer Landspeed, investor Apache Capital and Bahrain-based Tadhamon Capital - will buy around 500 homes a year from house builders to be sold on a shared equity basis.
The company, Landspeed TC-AC Affordable Homes, initially expects to spend around £20 million in tranches of between £2 million and £7 million on a deal-by-deal basis.
The company will work alongside developers in London and the south east to take homes through the planning process before buying them at a discount of between 10 and 15 per cent. It will then sell up to 75 per cent of the property to purchasers who are not charged rent on the remaining share and do not need to repay the balance - although they can staircase to full ownership over time.
Ted Reddick, director of Landspeed, said the model has only become viable since the coalition government slashed grant funding by 60 per cent to £1.8 billion in the 2010 comprehensive spending review. This has forced housing associations to reduce their bids for the intermediate elements of section 106 affordable housing.
‘Cutting grant has levelled the playing field and has really put the focus on delivering an affordable product,’ added Mr Reddick. ‘Since the loss of grant we are, in many instances, now as competitive - if not more competitive - than many registered providers.’
The joint venture, which has been working with Jones Lang La Salle, has bought 12 shared equity homes in Newport on the Isle of Wight from Barratt and 11 from Taylor Wimpey at Hambrook in Chichester. The company has also agreed terms on 16 apartments in Hawkinge near Folkestone.
The investor said the model had the capacity to grow beyond an initial target of 1,500 homes.
Richard Jackson, founding partner at Apache Capital Partners, said: ‘With our Middle Eastern backing, we have significant capital allocated to the Landspeed strategy, which is sufficient to underwrite the acquisition of around 1,500 properties.
‘If the market opportunity remains attractive and the strategy continues to perform we would not hesitate to allocate further capital.’
