Pocket, the leading developer of homes for first-time buyers in London, today announced a landmark deal with Related Companies, one of the largest owners and developers of affordable housing in the U.S. Related’s strategic investment in Pocket, acquiring a 50% stake in the company, marks the first transaction of its kind where a U.S. real estate firm has invested in the UK’s affordable housing market to help working people into homeownership. It also coincides with the launch of a suite of initiatives by the government to attract more first-time buyers into the market.
Related is one of America’s most prominent real estate firms. It owns and operates a premier portfolio of high-quality global assets valued at over $20 billion. Last year, Related created a partnership with Argent, one of the UK’s leading mixed-use regeneration specialists. Through this transaction, Pocket and Argent Related will become strategically affiliated.
Pocket builds compact one-bedroom homes for first-time buyers at a discount of at least 20% to the open market. The homes are reserved for those who earn less than the GLA’s income cap for affordable housing, live or work in the borough of the development and don’t own another property. As demand for affordable homes skyrockets, Pocket has doubled its pipeline year-on-year since 2013 and will aim to complete 4,000 homes by 2023.
Marc Vlessing, co-founder and CEO of Pocket, said, “This transaction is a huge vote of confidence in Pocket. Our aspiration is to help ordinary hard-working Londoners into long-term affordable housing. There is currently no end to the demand for our product, and with Related’s support, we believe that we can deliver access to a wider range of for-sale and rental homes for this valuable audience.
“2016 is the year of the first-time buyer with the government’s launch of the Starter Homes initiative and London Help to Buy, which will sit alongside the already active Help to Buy ISA. We are really excited about partnering with Stephen Ross, Ken Wong and his colleagues at Related to enable as many people as possible into homeownership.”
Prime Minister David Cameron's mission to "turn generation rent into generation buy" will help transform the first-time buyer market. Today’s investment shows that high-profile international businesses are beginning to look more closely at UK housing, and seeking strategic partnerships to help deliver on the government’s ambitions.
Stephen Ross, chairman and founder, Related Companies, said, “I founded Related Companies in 1972 with a focus on developing, operating and preserving affordable housing across the United States and it remains at the core of our diversified company today. Great cities must provide housing for the full range of its workforce and we believe Pocket provides a smart solution—well-designed, quality-built, affordable housing in the parts of London where its knowledge workers want to live and work. Marc Vlessing and Paul Harbard have created a great company and culture and we look forward to helping them grow.”
Affordable housing laid the foundations for Related Companies and Related has developed or acquired over 55,000 affordable homes in the U.S. and has a long history of partnering with innovative organizations committed to constructing or preserving affordable housing. The strategic investment in Pocket reflects this approach and will draw upon Related’s access to capital, scale and expertise in delivering affordable homes for rent as well as Pocket’s proven innovation in the UK affordable housing market.
Pocket is already working with Argent at King’s Cross and worked with Argent Related on its successful bid to partner the London Borough of Barnet at Brent Cross South. This affiliation offers the ability to provide a full spectrum of housing solutions.
Kenneth P. Wong, Related chief operating officer and Pocket board member, said, “We have ambitious plans in London and Pocket is a perfect strategic fit with our ongoing initiatives. As a Related portfolio company, Pocket will now have a broader resource base, greater access to capital and our shared best practices. We look forward to enhancing Pocket’s pipeline and providing affordable housing solutions to governments, landowners, local communities and other developers.”
Pocket’s business model is to build affordable housing, without direct public subsidy, sold outright to buyers at a discount to the local market of at least 20%. In 2013, the GLA awarded Pocket a 10 year loan worth £21.7 million (recently increased to £26.4 million) from the Mayor’s Housing Covenant Fund with which to buy land to deliver affordable units for London.
David Lunts, executive director housing and land, said of the Related deal, “We recognized some time ago what a valuable innovation Pocket’s product would be to London’s intermediate market and we are very pleased to see them attract such an experienced affordable housing provider from America to the capital.”
The company already works closely with half of London’s local authorities to develop sites on brownfield land where a market developer would normally not provide much, if any, affordable housing. Pocket buyers are singles and couples, and the average household income in the company’s latest scheme is around £36,000.
To ensure these homes reach the people they're intended for, each year the mayor sets the maximum household income for eligible buyers and the maximum price of a flat. Buy-to-let investors are excluded, and Pocket leases ensure that on resale the homes remain affordable, as they can only be sold to eligible buyers. Buyers of Pocket homes own 100% of the property from day one, so they have no extra rent to pay and no uncertainty. Pocket is innovating in the use of public land and modern methods of construction to deliver homes quickly for local authority partners. By 2019 Pocket aims to be the largest builder of intermediate affordable housing for sale in London. For more information, please visit www.pocketliving.com.
Related Companies is the most prominent privately-owned real estate firm in the United States. Formed over 40 years ago, Related is a fully-integrated, highly diversified industry leader with experience in virtually every aspect of development, acquisitions, management, finance, marketing and sales. Headquartered in New York City, Related has offices and major developments in Boston, Chicago, Los Angeles, San Francisco, South Florida, Washington D.C., Abu Dhabi, London, São Paolo and Shanghai and an existing portfolio of real estate assets, valued at over $20 billion, made up of best-in-class mixed-use, residential, retail, office, trade show and affordable properties. In London, Argent Related focuses on high-quality, intelligently designed mixed-use projects encompassing residential, office, retail and leisure space and hotels. Argent Related will be capitalizing on both firm’s track record of significant urban placemaking and are pursuing opportunities in London and the UK. Current projects include Brent Cross South and Tottenham Hale. Related also owns Equinox® Fitness Clubs, further expanding the company's capabilities into the health and fitness arena and enhancing the value of its properties through an exclusive, branded amenity and lifestyle offering. Related is a partner in Union Square Events, the catering, culture, sports, and events business of Danny Meyer’s Union Square Hospitality Group and CORE, a boutique residential brokerage. For more information about Related Companies please visit www.related.com.
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