LONDON (Alliance News) - Sigma Capital Group PLC saw it shares soar Thursday after it agreed to create a government-backed joint venture with a Shariah compliant bank to build up to 6,600 new homes on land earmarked for regeneration by UK local authorities.
Sigma said it had agreed to create a joint venture with Gatehouse Bank PLC which will support the roll-out of an initial 2,000 new privately-rented residential properties in the UK, with the potential to grow the portfolio to about 6,600 new rental homes once fully developed. It believes the deal is the first of its kind in the UK.
In a statement, the residential and urban regeneration company said the initial 2,000 new rental homes have a development cost of about GBP200 million, with the cost for the whole portfolio estimated at about GBP700 million.
Gatehouse is a London-based Shariah compliant investment bank with a real estate portfolio worth in excess of GBP1 billion across the UK and US. The deal marks its expansion into the UK residential real estate market.
Sigma said the new homes will be built on land that it buys and develops, through partnerships with local authorities.
Under the deal, Gatehouse will deliver the equity for the venture. Both companies are in talks with a number of banks for financing to complete the initial GBP200 million development phase. Once bank finance is in place, construction is expected to take place over 24 months, with the new homes being delivered in phases, Sigma said.
Gatehouse has an option to commit to the equity element for the subsequent GBP500 million financing for the second tranche of 4,600 homes.
The first 2,000 homes are being supported by Sigma's partnerships with Liverpool and Salford City Councils, and will be built in the North West.
"Sigma believes that the c.2,000 new rental homes would comprise one of the largest single new build residential housing portfolios in the UK. The group 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," it said in a statement.
It said the deal is being backed by the government.
"The rental market is a vital asset to this country and this new investment will help to boost local economies, create jobs and deliver more homes for hardworking people," Prime Minister David Cameron said in the statement.
Sigma Capital shares were up 54.1% at 40.44 pence Thursday morning, the second-biggest gainer on AIM.
By Steve McGrath; stevemcgrath@alliancenews.com; @SteveMcGrath1
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