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'Door open' for JVs as Thames Valley eyes £300m build-to-rent operation

Exclusive: Thames Valley Housing Association’s commercial arm Fizzy Living has told CN “the door is open” for joint ventures and contractor partners as it plans a nationwide build-to-rent programme worth up to £300 million.

Fizzy has in the past two months begun injecting a £40m investment from Macquarie Capital into London developments to quadruple its fledgling portfolio, and could potentially add £20m more.

The firm is targeting developers whose sites are in progress but haven’t yet come to market, as well as projects that are on hold.

Once the 500-unit benchmark is reached, the company expects to attract between £200m and £300m in institutional investment, using the funds to embark on a national construction and purchasing plan for bespoke built-to-rent housing.

“Contractors will need to get used to working in a different way with us”

Mark Allnutt, Thames Valley

The programme could include site purchases from developers, as well as development partnerships with both pure contractors and with those with housebuilding arms who can “feed the machine” with land or sites.

“We’re looking for creative contractors who want to work in a non-adversarial manner and everybody makes a good margin at the end of it,” Thames Valley development director Mark Allnutt said.

“It’s all up for grabs – there’s no existing supply chain, there’s no existing framework agreement – it’s all up for the taking.”

Several housing associations and contractors are eyeing up the private rented sector as the loss of grants has pushed social landlords into more commercial operations.

Thames Valley manages around 14,000 affordable homes in the South-east. It set up Fizzy in 2012 with £30m of seed funding to gain a foothold in the private market and subsidise its social aims.

“Contractors will need to get used to working in a different way with us,” Mr Allnutt continued.

“What we’re not interested in is lowest price adversarial contracting, with problems along the way resulting in claims for extensions in times, loss and expense, and the rest of it.”

The new firm is targeting sites of around 100 units in affordable locations along London commuter routes with its initial £40m fund, but hopes to go nationwide in the long term.

Negotiations are currently under way on three sites, one of which was on hold due to a lack of a first-phase buyer.

Fizzy chief executive Harry Downes told CN there was “no reason” to stop at the initial target of a 1,000-unit portfolio, adding that “the private rented sector has huge demand”.

He added that the backing of Thames Valley’s £1.4bn balance sheet and their preference to buy entire developments made Fizzy a “very attractive partner” – and one that would “compete really hard” to win sites.

Fizzy is currently working with HTA Architects to develop “specialist properties” to base its own sites around, and to apply to those they purchase.

“There’s none around – nobody’s building this at the moment,” Mr Downes said. “If we’re making a long-term commitment to rental we should be building a product that’s ideal for it.

“We’re hoping institutions will see that they can now invest in the UK market – anyone would agree that it is an attractive asset.”

Mr Allnutt added that other kinds of accommodation – such as family housing – could be considered once the initial investment into young professional units was made.

“There’s a whole generation of people just putting up with poor landlords – nobody in any sort of authority seems to care.

“There’s a lot of activity, but because we’re so focused [on one market] we can turn things around very quickly – we have absolute confidence.”

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