Opportunist property fund London & Stamford has bought a large apartment complex in Chelsea for its new joint venture in London housing, a move that could pave the way for the eventual flotation of Britain's first residential real-estate investment trust (Reit).
Raymond Mould and Patrick Vaughan - the veteran property investors who set up London & Stamford after selling Pillar to British Land in 2005 - announced last month that they had formed a joint venture with Green Park, their regular equity partner, and another unnamed investor to buy rental accommodation in Central London. The three partners pledged £200m of equity, to which debt will also be added.
This acquisition is the venture's first. Called Moore House, the building contains 149 flats in a prime location behind the Chelsea Barracks development. The price tag of £147m, giving a price per square foot of £1,247, looks reasonable for the area - though the building's rental value, which would give another perspective on value, is not disclosed.
Mr Mould and Mr Vaughan initially said housing was the one property sector they would not touch, but were converted when they bought the historic home of Arsenal Football Club in Islington from a distressed developer in September 2009. They followed that deal up with two others, one on the river near Clapham Junction and another near the Oval cricket ground in South London.
The Chelsea deal is different from these in two crucial respects. First, it is in a prime location that is attractive to foreigners as well as locals, with a correspondingly higher value. Second, the seller is not a cash-hungry developer but the real-estate arm of the Qatari sovereign wealth fund, which is developing the adjacent Chelsea Barracks site and financing the Shard tower by London Bridge.
Such a move may reflect London & Stamford's aspiration to draw further capital into the sector by turning the joint venture into a stand-alone Reit - a move they are still discussing with the tax authorities. Institutional investors have been mulling housing ever since the commercial property crash, but are notoriously reluctant to stray beyond their central-London comfort zone.
The deal is a controversial vote of confidence in prime London property, which has recently slowed. Mr Mould, who has a reputation as a canny market timer, last month singled the sector out (alongside distribution warehouses) as a rare area of the property market where "the potential for rental growth persists".
