Lendlease lands £1bn BTR funding deal with CPPIB

Lendlease is close to securing a £1bn funding deal with The Canada Pension Plan Investment Board (CPPIB) to finance the launch of a new build-to-rent (BTR) platform, Property Week understands.

The Australia-headquartered development and construction company started its search for a funder earlier this year, and has been in discussions with several potential partners - most of which are international.

Although a deal has not yet been signed, CPPIB is in pole position, according to a source close to the deal. Under the terms of the joint venture, Lendlease would develop and manage the properties under its own private rented sector brand, while its partner would put up the funding in its entirety. The total commitment is expected to reach £1bn.

Four as-yet-unnamed BTR schemes for which Lendlease has already achieved planning permission will seed the platform, but the partners will also be seeking a raft of new sites to grow the business further.

Lendlease has thousands of residential units in the pipeline across London.

Its flagship scheme is the £2bn regeneration of the former Heygate Estate in Elephant and Castle, which will include more than 3,000 homes across multiple buildings.

It is also developing the 1,132-unit Timberyard scheme in Deptford and the mixed-use International Quarter London scheme in Stratford, which will include 333 homes.

First major commitment

CPPIB has already made some tentative moves into the UK BTR sector, although this will be its first major equity commitment. Last year, it was part of a consortium (along with Wells Fargo and AIG) that provided a £800m, five-year corporate development loan facility to Quintain to help finance 5,000 new homes for rent at Wembley Park - the UK’s biggest BTR development.

One area where it has been spending large amounts of money is student housing. It acquired the £1.1bn, 40-asset Liberty Living portfolio in March 2015 and followed this up late last year by buying the Union Street portfolio from Blackstone for £460m.

Other recent deals such as the £200m acquisition of a 50% stake in Milton Park business park in Oxfordshire from Hermes Investment Management, which was completed in July, have underlined CPPIB’s continuing confidence in the UK market.

It has also been tipped as the frontrunner to snap up the £455m Victoria Student Housing Platform, which is being sold by Blackstone, although a deal has not been formally announced.

CPPIB’s entry into UK BTR comes as Canadian compatriot Oxford Properties also looks to establish a foothold in the market. Oxford Properties told Property Week in March it would look to partner with BTR specialists and develop new-build, large-scale schemes, potentially investing more than £1bn.

CBRE was appointed to advise Lendlease on its search for a partner. All parties declined to comment.

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