SHARES in Edinburgh-based property developer Sigma Capital surged by more than 40 per cent yesterday as it unveiled a £700 million joint venture deal with an investment bank to build thousands of homes for rent.
The scale of the deal with Gatehouse, a Kuwaiti-backed investment bank, prompted comments of suport from both Prime Minister David Cameron and Business Secretary Vince Cable.
The agreement will initially see around 2,000 rental properties built in Liverpool and Greater Manchester. Once full bank finance is in place, construction is expected to take place over 24 months.
The first properties that will be developed are being supported by regeneration specialist Sigma’s existing partnerships with Liverpool and Salford city councils. More than 20 sites totalling in excess of 90 acres have already been identified across the north-west of England.
The agreement has the potential to grow to cover a portfolio of 6,600 rental homes once fully developed.
Cameron said the deal tied in with his plans to “build a rebalanced economy across the country”.
“The rental market is a vital asset to this country and this investment will help to boost local economies, create jobs and deliver more homes for hardworking people,” the PM said.
Graham Barnet, chief executive of Sigma, which is also project manager for the planned £1 billion new town development at Winchburgh in West Lothian, said the deal had the potential to transform the company’s rate of growth. “It should help to establish Sigma as a major presence in the delivery of high quality new homes for the rental sector,” he said.
Sigma believes that the 2,000 rental homes will represent one of the largest single new-build residential housing portfolios in the UK.
Sigma will generate revenues from asset management fees during both the construction and investment phases and will also participate in the capital upside of the joint venture vehicle.
Shares in Sigma rocketed on the news, rising by more than 50 per cent at one point but ending the day up 43 per cent – or 11.5p – at 37.75p.
Barnet, Sigma’s largest shareholder with a stake of more than 16 per cent, saw the value of his own holding rise by more than £800,000.
Sir Tom Hunter is the second-largest shareholder through his investment firm, West Coast Capital, although the sale of half of his stake in the firm last month meant he missed out on an additional paper gain of hundreds of thousands of pounds from today’s share price rise.
London-based Shariah-compliant Gatehouse Bank is involved in residential, retail and offices developments and specialises in originating, structuring and funding investments.
The bank, which was launched in 2008, has a global portfolio worth in excess of £1bn.
Barnet said Gatehouse had “substantial knowledge of and expertise in the UK property market and has shared our vision for this project”.
He added: “I am delighted we are now working together to deliver the roll-out of our model, which has the potential to create one of the largest new-build privately rented residential portfolios in the UK.”