Interview: Why Redrow’s Banking On Joint Ventures With Housing Associations

The Redrow construction site overlooking the glassy Thames near to the 02 arena in East London looks like many of the other new-build apartments blocks going up in this largely careworn area of Newham.

Earth movers and pile drivers clunk around the site as the foundations are excavated for the 295-apartment development.

The area has been recast as The Royal Docks and this development has a suitably serene name – Pontoon Reach – and it’s about 400 metres from the nearest DLR station, Pontoon Dock.

But the development, which is due to have its first residents move in late next year, is different to most other sites in London.

It’s the initial collaboration between Redrow and one of the UK’s oldest and largest housing associations, Peabody, and properties within it will be the first uploaded to Mayor Sadiq Khan’s new ‘homes for Londoners’ property portal by Redrow.

Redrow also has a second project with Peabody that the company is keeping under wraps but says will be in NW London.

Pontoon Reach is a typical example of the private/public collaborations gaining popularity in London as higher costs and evaporating demand among investors bear down on the new homes sector, and developers look for new ways to keep their construction pipelines jogging along.

“I think it is the future of development in London for the next few years,” says James Holmear, Sales and Marketing Director at Redrow Homes.


At a glance

  • Redrow is about to launch its first joint-venture development with housing association Peabody in Newham.
  • 30 properties at the Pontoon Reach site will be listed exclusively on Sadiq Khan’s new property portal.
  • Redrow believes this kind of JV deal is the ‘the future’ of new homes development in London in the medium term.

These collaborations, which in the case of the Redrow site is a joint venture, are mutually beneficial for both sides.

Housing associations like Peabody are able to build developments and increase their stock of affordable rented homes funded in part by JV arrangements, while developers get access to the land held by housing associations and gain kudos from doing business with a respected organisation like Peabody.

“For us it’s access to land whether it’s old estates that require renewal, or land that housing associations have spare or have banked,” says Holmear.

The tone of the marketing material for Pontoon Reach is unusual too. Gone are the constant references to luxury typical of most apartment developments in the capital, and mentions of ‘investment opportunity’ are sparse too.

Refreshingly, the Pontoon Reach feels like it’s being built for real people rather than ‘exciting returns’ and Holmear confirms this is the case.

“We very much target products that have a mass appeal to a wide market. We’re never going to be looking for sites in Zone 1 and Zone 2,” he says.

“Our sweet spot is 500-800 per square foot so we’re looking for people to buy who are in their second job in the City and can probably afford to purchase at this development.

“Or it maybe someone who’s been local for some time and has been renting and now wants to buy. We’re going for broad market appeal and it’s where the majority of our scheme fit.”

Huge presence

Peabody is a huge presence in London. It has developments under construction or recently completed in 14 boroughs around the capital, and Newham is typical.

There Peabody is developing a seven-acre former site of Arsenal football club in Thamesmead into a 1,500-apartment development in partnership with Berkeley Homes, as well as the Pontoon Reach site, which will be completed first.

“Peabody will do more joint venture and development partnerships going forward as we look to ramp up our development pipeline beyond 2,500 new homes a year,” says Peabody’s chief executive Brendan Sarsfield.

Holmear, unsurprisingly, is keen on this trend. “Peabody are looking for more and more private developments like this one to assist them in their drive to bring more affordable homes to the marketplace given grant funding has almost disappeared,” he says.

“They are having to be a lot more commercially orientated; over the past five years you’ve seen all the housing associations merging to become ‘mega’ ones, and developing their own construction arms to create private homes to help finance affordable ones.”


The future of new homes

“I think it is the future of development in London for the next few years and that joint ventures deliver for customers of all tenures at developments like Pontoon Reach.”
– James Holmear, Sales and Marketing Director at Redrow Homes


The mix of properties at Pontoon Reach and how they are managed is also part of the changing pattern of development in London.

Out of the 295 apartments on site, 90 (or 35%) are to be ‘affordable rent’ properties managed and rented out by Peabody while 29 are one-bedroom apartments being sold for £315,000.

This is the top limit for mayor Sadiq Khan’s ‘homes for Londoners’ property portal and only those from London will get first dibs on these flats.

The remainder are being sold on the open market and range from £320,000 for a one-bedroom apartment to £625,000 for a three-bedroom unit.

These, by London’s housing yardstick, are affordable homes and Redrow says it’s had 300 enquiries about properties at the site despite having only recently broken ground.

Joint venture

Peabody is the freeholder at the site and Redrow is there purely to build the homes after which, unusually, Peabody will manage all the homes regardless of their tenure, most of which are mixed up together rather than being arranged in ‘silos’.

“Normally, we build developments and then move onto the next site, but with Peabody it’s different – it means we have a retained involvement via our joint venture with them,” says Holmear.

But he also says he’s sometimes frustrated by the media coverage that some developments attract because social and private owners or tenants are kept apart, sometimes even with separate entrances and facilities.

“A lot of housing associations specify to have the different tenures separated – it’s not always the developer who chooses to do that – because from a property management perspective it’s easier that way,” he says.

Joint ventures between Peabody and companies like Redrow, Berkeley Homes and also, most recently, Mount Anvil, are one way to both deflect this type of criticism, ensure sites are managed for the benefit of all those living on them, and a way for developers to weather London’s ongoing housing market downturn.

 

You might also like