APG plans to increase its exposure to the London residential market by redeveloping a shopping centre in the south of the city with Delancey.
The Dutch pension asset manager and UK property developer have entered into a joint venture to acquire the Elephant & Castle Shopping Centre for £80m (€97m) and plan to replace it with homes for rent.
APG and Delancey will build 600 residential units and let them directly to tenants as a part of a wider regeneration of the Elephant & Castle area, situated close to central London.
Delancey said the homes would be “offered for rent rather than for sale … direct to residents, with no fees, a choice of one, two and three-year tenancies and transparent rental pricing”.
The build-to-rent approach differs from a number of high-profile residential developments in London that are being sold unit-by-unit to private buyers.
Robert-Jan Foortse, head of European property investments at APG, said the joint venture would create “a scalable, branded residential-rental platform” that would “fill a need in the undersupplied London residential market”.
He added: “APG is focused on increasing its residential exposure in Europe, particularly in key cities such as London, given its expected population growth.”
Delancey employed a similar approach for the East Village residential development near London’s Olympic Stadium, establishing rental management company Get Living London with joint-venture partner Qatari Diar.
The developer has already acquired Tribeca Square, another residential development close to the Elephant & Castle Shopping Centre, and intends to create a new ‘South Village’ district through the redevelopment of both sites.
The previous owners of the Elephant & Castle Shopping Centre, St Modwen and Salhia Real Estate Company, had originally planned to redevelop the property while retaining its existing structure, but Southwark Council have made it clear it wants a full demolition.
Bill Oliver, chief executive at St Modwen, said the owners had “looked forward to redeveloping the centre to drive a wider-scale regeneration of the area”.
He added: “However, both St Modwen and Salhia believe the price offered fully reflects the potential of the scheme and provides certainty of exit, while crystallising a significant profit for our shareholders.”
Councillor Fiona Colley said: “I welcome Delancey and APG’s purchase of the shopping centre and very much look forward to working with them on our plans to provide a destination town centre.
“We have already publicly expressed our requirement for full demolition for this to happen and spoken about our aspirations for better pedestrian access to the stations and new market square and park.”