A £50m programme to convert vacant city centre office buildings into social housing has been unveiled by real estate, energy and private equity asset management specialist Consensus Capital plc.
The initiative is being spearheaded by its subsidiary, Consensus Capital Property Limited, which will roll out 25 developments across the UK over the next two years, providing 1,200 city centre apartments for leading UK housing associations.
The first development is underway in Perth where Consensus Capital Property Limited is converting a former office block, 1-3 Water Vennel, off Tay Street, into 18 apartments for Caledonia Housing Association.
Consensus Capital Property Limited is now pushing ahead with six similar developments – two in Edinburgh and in Glasgow, Manchester, Birmingham and London.
The social housing initiative will be a major growth platform for Edinburgh-based Consensus Capital plc, launched by CEO Mark Emlick in 2010 as a specialist real estate, energy and private equity asset management company.
Emlick said: “We have identified a niche in the commercial to residential development market which is attracting significant interest from housing associations across the UK who want to develop new stock but have been constrained due to cutbacks and lack of developer activity.
“This is a key development for Consensus Capital plc and our property arm and we see this providing a major platform for growth over the next few years.”
A new investment fund will acquire, develop and lease residential properties to registered social landlords with the aim of providing a secure fixed income return for investors at the rate of 5% per annum plus upside on exit.
Construction on the Perth development will begin in April and is scheduled for completion in the autumn.
Consensus Capital Property managing director Andrew Montague said: “There is a huge under-supply of social housing as a direct consequence of the recession and the banks’ reluctance to provide lending to the property sector.
“We have been able to develop a private equity funding model which does not rely on direct bank finance, to develop empty office buildings in city centres into quality social housing.
“Due to lack of demand from the commercial sector, these office buildings have been lying empty. Now they are getting a new lease of life and providing much-needed homes as well as boosting the construction industry and generating new economic activity in the city locations.”
Julie Cosgrove, chief executive of Caledonia Housing Association, said: “This project will help address two key local priorities – the regeneration of empty properties in Perth city centre, and the provision of much needed affordable housing in the city. We are looking forward to breathing new life into this building which has lain empty for some time now.”
Consensus Capital Property has also been granted planning permission for two sites in Edinburgh and will roll out developments in London, Glasgow, Manchester and Birmingham before the year end.
The model involves securing prime city centre commercial properties, changing use and converting to residential development before leasing to UK housing associations for up to 20 years on full repair and insurance leases.
The residential FRI lease, which has been approved in principle by over 20 UK housing associations, will enable them to meet demand for social, mid and open market rental within their sectors without the requirement for capital.
