Has Santhosh Gowda’s Strawberry Star Cracked The UK?

It is 12 years since Middle East and Singapore property developer Santhosh Gowda set up a London base and then, last year, revealed that he would build 4,000 units within Greater London and its commuter towns by 2025.

Many competitor home builders were surprised to hear this from the 47-year-old entrepreneur, despite his considerable financial resources and decades of property development experience after starting out aged 18 in India before moving on to Dubai, Singapore and then London.

The UK, and London in particular, is not an easy property market for any developer to chisel its way into.

If you are not familiar with the Gowda story, then you may have come across Strawberry Star, which he set up in 2007 and which now has a board that includes former Berkeley Homes MD Nick Stonley as a non-exec.

Like many Asian property developers who have opened UK offices, Gowda says he was drawn to London because of its tight regulation and financial stability

“We are now focussing as much as possible on volume, high-density schemes within both emerging, regeneration and commuter areas of London, says Gowda.

He says the decision has been taken to move out of luxury for the time being, reflecting the difficult prime new-build market at the moment.

“Instead, we are focusing on first-time buyers particularly those who have been priced out of central London and are looking further afield, but close enough so they can still commute into London for work.”

At a glance..

  • Strawberry Star’s name comes partly from a random choice in order to ‘stick out’ and his time spent working with Middle East developer ETA Star.
  • The company has raised £40m from institutional investors recently to help fund its expansion in the UK.
  • Founder Santhosh Gowda says Strawberry Star is currently looking at more London commuter-town sites that will increase its construction pipeline significantly.

The company’s management team reflects its unusual if not unique property mix, describing itself as an end-to-end operator covering residential development, investment advice and deal making, capital finance, bulk acquisitions as well as consumer-orientated new homes sales and both property lettings and management.

The team includes executives with experience gained at Ronson Capital Partners, Dexters Estate Agents, United House Developments, BNP Parisbas Real Estate and the post-Olympics London Legacy Development Corporation.

But Gowda, who resides in Singapore, is candid about the company’s difficult initial years.

Launched as a vehicle for HNWIs to invest in London property development, the global financial crash then occurred just a year after it launched, forcing Strawberry Star into a more diversified approach both in terms of revenue, reach, returns and funding.

“When we started in the UK it was one entity with a very small team backed by Middle Eastern and Asian investors,” he says.

“The financial crash was an opportunity because we were able to secure some good assets and that led us into lettings and management, which enabled us to leverage our portfolio and manage our assets.”

Unsustainable approach

Strawberry Star then launched its property development operation in 2009, because although it had been acquiring stock from other developers, it felt this was not a sustainable business given the then tough trading conditions.

Gowda then moved away from relying on HNWIs for funding and established two Guernsey-based development funds.

The first – Strawberry Star UK Property Fund LP Inc – was closed at £25m in 2016 and the second – Strawberry Star Real Estate PCC Ltd – in 2017. This latter fund holds £40m in equity.

“We have been working with our HNWI clients for over 15 years now but we realised there was increasing interest from institutional investors in what we were doing,” says Gowda.

“We will be looking for more institutional investment in the future to offer them more long-term returns.”

Mixed-use schemes

Strawberry Star then looked to broaden its appeal with a sales and marketing operation and a facilities management arm, and became involved in more mixed-use schemes.

“It was not planned; we kind of evolved and that’s how Strawberry Star arrived at this place where we call ourselves an end-to-end property service company doing everything in-house,” says Gowda.

“Now, it’s all about our portfolio and investors’ portfolios and how we can control and manage them in an efficient way.”

High profile builds

Strawberry Star has begun building several high-profile developments recently.

This includes last year’s launch of its first foray into London’s commuter belt, a 877-unit mixed-use scheme that only recent began construction in Luton town centre and is due for delivery in 2021.

There has been the much-heralded Sky Gardens in Vauxhall’s Nine Elms district and its Hoola tower in Royal Docks, both of which offer homes for sale and to rent directly managed by Strawberry Star.

It has also recently completed an initial scheme in partnership with Galliard, a residential block in Southall.

Gowda says he plans to do more schemes with Galliard, most likely in other ‘regeneration areas. It also recently acquired another site in a formerly care-worn area, a 470-unit development in Harlow.

4,000 units?

This ramping-up in activity has moved Strawberry Star towards achieving its 4,000-unit ambition.

The company currently has 2,000 units planned or under construction and is actively looking at several other London commuter towns to expand and accelerate its pipeline.

Other developers looking at Strawberry Star might wonder how the company has made such significant steps in a relatively short period?

Gowda claims several unique aspects to his company to explain this. The first is its unusual multi-disciplinary approach, something most UK developers of all sizes tend to eschew, and that it builds ‘communities’ rather than just blocks of apartments.

This includes, in Luton, facilities such as communal gardens, child-care facilities, food retail, health facilities, restaurants and gyms.

“We have also focussed on working with the local community to create employment opportunities at the sites, which has been an important part of the planning process,” says Gowda.

Help to Buy

Like many developers at the moment, its focus on the first time buyer market means Strawberry Star is reliant on Help to Buy, which most of its scheme currently qualify for.

“I strongly feel that Help to Buy should be extended past 2023 because, particularly recently, it has been the one thing that has kept the property development industry going,” he says.

There would be very few fellow developers who would disagree with Gowda on that, even if their companies don’t take the same multi-disciplinary approach as Strawberry Star.

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