The EG Interview: EcoWorld London’s capital ambitions

Property typically turns to football pitches as a frame of reference to explain large, complex schemes. For EcoWorld London, the matter is rather more literal – a 17,250-seat stadium at the heart of its first major regeneration was the crux of its challenge. The new Brentford Community Stadium required the bulk of the project’s financing but provided the lowest security to banks. The developer was able to unlock the scheme with help from its network of Asian lenders, with UOB and Bangkok Bank adding to the band of institutions financing the broader, 900-home regeneration. “I remember when I first set foot there less than three years ago there was nothing but a platform and some shrubs,” says EcoWorld London chief executive Heng Leong Cheong. “To see people actually playing a competitive football match was amazing.” The stadium was completed just in time for the start of the season last autumn, and EcoWorld London sponsored the shirts of Brentford FC. The project hasn’t been easy but Cheong never expected it to be. “Complex schemes don’t scare us. Interfacing and partnering with another party doesn’t faze us. It is what we do,” he says. Brentford is a prime example of this, showing off EcoWorld London’s hybrid model of private market sale and build-to-rent homes. Now, from Barking to Woking to Poplar, the company is seeking to replicate this at scale, balancing international development finance with BTR funding and challenging community assets. Tapping the network When Malaysian giant EcoWorld International Berhad took a 70% stake in Willmott Dixon’s residential business Be Living in 2017, a  Woking site caught the eye of new boss Cheong. It was “the best-connected”, he says, just a 30-minute train journey from London Victoria. The developer has since bought out the previous landowner, armed with a £17.5m funding facility from Bangkok Bank – a benefit of the group-wide relationship with regional lenders. “They are our backers in Malaysia,” Cheong says. “When they found out that we were setting up this platform, EcoWorld London, they were very keen to participate.” EcoWorld London is now trying to secure consent for 929 market-sale and affordable flats and a homeless shelter, while negotiating further backing from Bangkok Bank to finance the build, following on from the £94m development facility in Brentford. “We have a bank-lined-up development fund – they are going to take that conversation forward once we have planning on it,” says Cheong. On the other side of Greater London, in Barking, the developer is courting a former investment partner as it eyes its next big BTR deal. In 2018, Invesco inked the largest BTR deal to date with a £400m forward-funding agreement to take 1,100 homes at EcoWorld’s Brentford and Barking schemes. Now the US pension fund manager is circling the next opportunity, with 1,000 further flats at phase two in Barking. EcoWorld London, aided by its newly launched BTR platform, Apo, is in talks with several investors exploring options to sell one block, a scheme or a wider portfolio. It has whittled down a shortlist and hopes to secure a buyer this year. “We are tapping into all these relationships that we have with the banks and fund managers and institutions from Asia as well,” adds Cheong. “Right now, Asia has also been set back by the Covid restrictions but I’m confident that there will come a time that Asian investors start looking very seriously into the UK market again.” BTR boom With BTR investors undeterred by the downturn, EcoWorld London launched Apo mid-pandemic last year, led by former EcoWorld London chief operating officer Matthew Pullen. “Apo comes in at two important angles,” says Cheong. “The first is managing the apartments, but it also acts as a very important conduit and interface with financial institutions looking at opportunities in the UK.” The end-to-end service lets funders source investment opportunities and support design and development, as well as leasing and longer-term management of assets. Apo can source BTR deals from EcoWorld London’s pipeline and other developers, and has a goal to grow to 10,000 homes under management across the UK in 10 years. “London will definitely be the immediate focus but a lot of developers have a presence in the regions,” says Cheong. “The first question I asked Matthew was: ‘Are you prepared to travel to Birmingham or base yourself in Birmingham?’” Cheong says Apo has already attracted interest from investors both in the UK and from overseas, including those eyeing up an entrance to the BTR market and established developers seeking finance for schemes. “People are paying a lot more attention to BTR,” he adds. “In the past it was more of a default position – if you can’t sell it on the open market then you switch to BTR. The focus is now very much on designing a BTR product because anything else would be less efficient and not as attractive.” Cheong anticipates further evolution of BTR as investors start to trade larger portfolios. “There was previously a lot of interest to secure a portfolio but maybe because of Covid or Brexit the industry as a whole hasn’t yet matured to that stage” he says. “But it is inevitable that it’s bound to come – and that’s why we set up the Apo platform.” A new story For Cheong and colleagues, the resilience of BTR guarantees a capital receipt to accelerate development in London. “We have always said we have ambitions to grow both BTR and open-market sale. We are looking at tweaking that approach by building stable, recurring [revenue] through our ability to do BTR with scale and multiple projects at a time,” says Cheong. “It gives us a very stable revenue base for us to build and then we bolt on the private sale elements to give us a bit more excitement when the market is up.” This BTR-first approach could see the business grow rental to around half the homes delivered. Cheong sees potential in other rental developments too – including senior living in Woking and single family housing elsewhere. “There is an opportunity there,” he says. “We don’t have any projects currently to test that but I would not be surprised if that is the new story behind BTR going forwards.” But despite a longer-term ambition to expand to cities including Manchester and Birmingham, for now the focus is still big regenerations in and around London and the developer is on the lookout for new acquisitions. “Certainly throughout the Covid period you have international investors that constantly say they still see London as a global city and a very important investment destination,” says Cheong. “That’s our sweet spot. We have done a lot of soul searching during this period and we have identified our strengths. We are very good at partnerships.” To emphasise this, he points to a joint venture with Poplar Harca. The partnership with the housing association will complete the first 600 flats in its masterplan this year and EcoWorld London expects to commit to the next stage of the Aberfeldy development. “We are now talking about a brand new masterplan. Phases four to six could potentially double the number of units,” says Cheong. He is also quick to highlight the community benefits of affordable housing and repurposing under-utilised retail space to create a social hub on the high street, recognisable by its colourful Bangladeshi murals. “It is very difficult to do that when you are just delivering a tower scheme of 100 units – there is less opportunity to give back to the community,” he says. “When we are doing projects across multiple phases and multiple schemes, the ability for us to do that is tremendous.” To send feedback, e-mail emma.rosser@egi.co.uk or tweet @EmmaARosser or @estatesgazette Pictures © EcoWorld London