Lendlease and Canada Pension Plan Team Up for $2.6bn London Build-to-Rent Project

Lendlease, and the Canada Pension Plan Investment Board (CPPIB), have struck a £1.5 billion partnership to invest in UK’s build-to-rent private rental sector.

The property giant and CPPIB announced their partnership on Tuesday with an initial investment of £450 million in the development of build-to-rent accommodation in London’s Elephant and Castle neighbourhood.

CPPIB will invest 80 per cent of the initial outlay with Lendlease retaining the balance; the investment in build-to-rent apartments will be in Lendlease’s £2.3 billion Elephant Park development. Lendlease’s regeneration of the London estate is well underway.

The companies are long-term partners and will continue to pursue “opportunities” within Lendlease’s residential urban activities in London. CPPIB manages a $331 billion portfolio.

[Related reading: The Viability of Build to Rent]

Lendlease chief executive of International Operations Dan Labbad said the partnership was the next logical step to accelerate the delivery of much-needed homes.

“In recent decades, structural shifts in the housing market have meant that demand has outstripped supply in the private rented sector, leading to a shortfall of homes in London and across the U.K,” he said.

The build-to-rent model, in its simplest form, is when developers build housing with the intent of retaining the building. This move of retaining ownership rather than selling to investors allows the developer to rent it out to lower-income families at affordable prices.

It is a strategy embraced by the UK as its population growth is so great that housing supply needs to be more than doubled in an unachievable time frame.

[Related reading: Build-To-Rent: A $300 Billion Proposition?]

In 2016, approximately 28 per cent of all households in London lived in the private rented sector. By 2025, this figure is projected to rise to just under 40 per cent and to overtake owner occupation as the most common form of housing in London for the first time since the 1960s.

In Australia, the build-to-rent sector remains a markedly smaller-scale operation, with only a handful of build-to-rent initiatives being investigated by the likes of Mirvac, Grocon and Stockland.

The Elephant Park development has already received £800 million in investment and Lendlease has already commenced construction to accelerate the delivery of private rental and affordable homes. The project was planned to provide around 2,500 homes and expected to be completed in 2020.