Aberfeldy Village in east London is one of the biggest private rented sector developments to date and will more than double the housing density of one of the UK’s most deprived neighbourhoods.
Project: Aberfeldy Village (first three phases)
Client: Poplar HARCA
Contract value: £250m
Main contractor: Willmott Dixon
Developer: Prime Place
Architect: Levitt Bernstein
Start date: January 2012
Completion date: December 2020
The Aberfeldy Estate may stand almost literally in the shadow of the Canary Wharf financial district, yet it is the poorest estate in London and levels of public health are the second worst in England, behind only Knowsley in Merseyside.
Against this unpromising backdrop, the estate is undergoing a comprehensive regeneration, which will include one of the UK’s largest private rented sector developments to date.
Aberfeldy Village is a ground-breaking project in many respects: the financial structuring, which has allowed the scheme to progress two years earlier than originally scheduled; the masterplanning, which will more than double the housing density on the estate to almost 1,200 units; and the design of the PRS homes, which have completely different layouts to typical private rented properties.
The PRS element is the result of a 50:50 joint venture between Poplar Housing and Regeneration Community Association (HARCA), which manages the estate, and Willmott Dixon’s be:here subsidiary, which was set up in 2012 to target the nascent PRS sector.
Both parties will get a revenue stream from the agreement, and be:here will operate the PRS properties. In addition, Willmott Dixon Housing will deliver the construction work across the entire regeneration and the group’s private residential arm Prime Place will market the for-sale homes.
The PRS driver
“The PRS development has had a positive impact on the whole scheme,” says Poplar HARCA CEO Steve Stride. “Because of the funding, the whole regeneration is happening far quicker than it would have otherwise, and we will get income which can subsidise the affordable properties.”
“We looked at this and said, ‘Hold on, with our funding arrangement we can deliver more homes more quickly’”
Simon Chatfield, be:here
The overall regeneration is split into three stages. “The greatest significance of Aberfeldy is the first of the three phases, where we are able to deliver far more units than previously intended because of the funding structure,” says Simon Chatfield, operations director for be:here, who was previously head of major projects at Hyde Housing Group.
“The problem with market-sale homes is that the speed of construction is constrained by the number of units the developer can sell, and typically that’s unlikely to be more than 20 a month.
“But we aren’t selling the PRS units. We are funded by institutional investment, which means we get all the money up front.
Willmott Dixon’s mould-breaking PRS
“Initially, the first phase of the development here was going to be 105 units. We looked at this and said, ‘Hold on, with our funding arrangement we can deliver more homes more quickly’. So we increased the first phase to 233 and then to 338.
“They will be completed in a few weeks, which is two years earlier than originally scheduled. And from the investors’ viewpoint, when the units are complete and tenants move in, that’s when they start to get their money back.”
Leaseback with a twist
The financial arrangement for the PRS element of Aberfeldy Village is a slightly complex leaseback deal. Development funding is provided by institutional investor M&G, which has bought a 250-year leasehold interest on the land. This is then leased back to Poplar HARCA for 30 years once the redevelopment is complete.
After that period, the social and affordable units revert back to the housing association for a nominal sum while the investor retains ownership of the PRS homes.
Other than M&G’s investment, the only other external finance supporting the Aberfeldy redevelopment is coming through the LLP set up between Willmott Dixon’s development arm Prime Place and Poplar HARCA for the private-sale units. This is straightforward development finance on a 60:40 debt:equity basis.
“It’s now only three-minute walk from the estate to the nearest DLR station. There’s an important message there about transport infrastructure helping regeneration”
Steve Stride, HARCA
The development has been a long time in gestation. Willmott Dixon was selected as Poplar HARCA’s developer partner in 2010 and signed the contract for the first phase in 2012, when construction work started.
“An important catalyst for the scheme was a new pedestrian crossing over the urban motorway that previously formed a barrier between Aberfeldy and the Canary Wharf district,” Mr Stride says. “It’s now only three-minutes walk from the estate to the nearest DLR station. There’s an important message there about transport infrastructure helping regeneration.”
Breaking the mould
It is the design of the PRS homes that be:here believes is breaking the mould.
“They are a bespoke design,” Mr Chatfield explains. “Because of the London Design Guide, there is little difference in size between private sale, affordable and PRS – but the layout of the PRS flats is very different.”
Willmott Dixon’s mould-breaking PRS
The first thing a prospective tenant will notice is that there is no corridor; the front door opens straight into the open-plan living area. This creates a roomy, extra 5 sq m of living space.
In the two-bed flats, where bedrooms come off this open-plan area, there is a feel of the New York apartments in Friends, the US sitcom which helped make flat-sharing fashionable back in the 1990s.
“Exactly,” Mr Chatfield agrees. “We feel that’s how people want to live. In the private for-sale market, people expect corridors. They expect a master bedroom and a guest bedroom. But a lot of these are being sold to buy-to-let investors who rent them out. So in come two sharers but one has to take the smaller guest bedroom.
“With Aberfeldy’s PRS units, both bedrooms are the same size and have ensuite bathrooms. Additionally, there is extra sound insulation between bedroom and lounge, in case one of the tenants is having an early night, and around the washing machine unit.”
There are also facilities elsewhere in the block for PRS tenants, including ‘broom cupboards’ on lower floors for storing bikes, and all flats will have super-fast broadband.
From a construction cost viewpoint, Mr Chatfield says there are differences between the various types of unit, but not as might be expected.
“Developers build to sell, they’re thinking short term,” he says. “Whereas for PRS, we are in it for the long term – we want low maintenance costs over the 30 years of our agreement, and Poplar HARCA has the same thinking with its socially rented units.
“That has informed our design and specification – for example, the flooring is very hard-wearing and has a 25-year guarantee. It’s the same principle as for PFI projects.”
The flats are being rented at £1,000 per month for a studio, £1,300 for a one-bed flat, and £1,800 for a two-bed. By comparison, the private for-sale flats are going for £500 per sq ft.
Mr Chatfield says the marketing of the PRS units has gone “fantastically well”. “We have been able to rent ‘off plan’ by using a virtual tour of the units,” he says. “The 25-34-year-old young professionals who are typical tenants seem happy with the digital tour, though others want to see it physically.”
The first three phases of Aberfeldy Village are expected to complete in 2020, though work on subsequent phases may well be under way by then.
Start from scratch
Such was the poor quality of the existing stock, Poplar HARCA had decided it was more economically advantageous to start again from scratch – an approach that would also create more homes and a more mixed tenure.
The regeneration will have a dramatic impact on housing density. It will rise from 297 units – 211 affordable, 86 leaseholders – to 1,176 total – of which 805 are for private sale, 158 PRS and 213 affordable (including 25 shared ownership).
These are the units in phases one to three, and Poplar HARCA expects to receive planning approval for a further three phases.
The area of the estate which has been replaced by phase one was vacant before demolition started, which helped the speed of the redevelopment. “The decant for subsequent phases will be more tricky for Poplar HARCA,” Mr Chatfield says. “But it has the advantage of a tight geographical focus, so tenants don’t have to move far.”
Right-to-buy properties have slowed the process a little, he adds: “It does make it harder to regenerate estates when there are these units – it becomes costlier and takes longer because of negotiating with individual leaseholders.”
The 3 ha redevelopment is centred on a pedestrianised street that will include retail, health and community facilities. The 15 residential blocks, which range in height from six to 10 storeys, are tenure blind. The one, barely noticeable external difference is that the bottom three storeys do not ‘stack’ in line with those above. “These lower floors are socially rented and have different layouts to the PRS units above,” Mr Chatfield explains.