Southampton student accommodation forward funding agreed
JV partners Osborne and Terrace Hill have completed the forward funding agreement of the Mayflower Halls student accommodation development in Southampton with Legal & General Property.
Terrace Hill has also sold the development site to Legal & General Property.
The scheme has been pre-let in its entirety to the University of Southampton on a 38 year lease without breaks and with RPI linked rental uplifts. Construction has already started on site with handover to the university programmed for August 2014. Osborne’s construction arm is the main contractor for the development.
The 1,104 unit development comprises three towers ranging in height from eight to sixteen storeys positioned around a central piazza. In addition to the student accommodation, the scheme includes a shop, gym and learning centre at ground floor level. Its 1.5 acre (0.6 hectare) site is bounded by Havelock Road, Commercial Road and West Park Road, close to Southampton Central station.
David Sarson, Development Director of Osborne and head of the company’s development arm, said: “This is an important project, fulfilling demand from the University of Southampton for student accommodation and bringing back into use a vacant site that should provide a catalyst for further city centre regeneration.”
“Legal & General’s decision to acquire the site and forward funding agreement is testament to both the quality of the project and its future potential and we are looking forward to working with them to deliver the student accommodation as planned.”
Gordon Aitchison, Director of Investment and Development at Legal & General Property, commented: “This represents one of four significant student accommodation fundings, backed by major universities, that have been undertaken by LGP in the last 18 months, with similar deals secured with the University of Arts London, Imperial College and the University of Greenwich. We continue to believe that this sector offers our funds an attractive opportunity to invest in index-linked income on very long leases to strong covenants, whilst also providing relatively higher yields than the traditional real estate sectors. As illustrated by Southampton and the three London deals, our focus remains on funding high quality developments that are backed by premium universities and located in first class locations.”
Philip Leech, Chief Executive of Terrace Hill, commented: “The completion of this substantial and prestigious sale and forward funding agreement with Legal & General Property represents significant progress for Terrace Hill and for this project. We have used part of the proceeds of the sale to immediately reduce the debt secured against a number of our development sites, and the balance will be earmarked for investment in new developments in the foodstore and Central London sectors, where we continue to see low risk and high margin opportunities. The completion of this transaction allows us to substantially reduce our gearing and puts us in a very strong position to exploit our core development strengths in some extremely attractive areas.”
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