Information on the Target

Round Hill Capital, a prominent global real estate investor, developer, and manager, has successfully arranged a £115 million development loan with Carlyle (NASDAQ: CG) to facilitate the construction of Fairfax, a luxury build-to-rent (BTR) project located in Manchester, UK. This project represents a significant milestone as it marks the first collaboration between Round Hill Capital and Carlyle.

The Fairfax development features two towers, offering a total of 488 high-quality one-bedroom and two-bedroom apartments. Residents will enjoy premium amenities, including a gym, 24-hour concierge service, co-working spaces, and a rooftop terrace with breathtaking views of the city skyline. The development is strategically placed within the burgeoning Portugal Street East masterplan regeneration area, just a five-minute walk from Manchester Piccadilly station and under a kilometer from the city center.

Industry Overview in Manchester

Manchester's real estate market has witnessed substantial growth in recent years, with the city's population swelling by 10% and employment rates increasing by 28% over the last decade. This demographic surge has led to a persistent demand for housing that outpaces the available supply. In response, rental prices have skyrocketed, marking a remarkable 13% increase year-over-year as of June 2023—the highest growth rate among the UK's major regional cities.

A recent report by CBRE positioned Manchester as the leading growth city for BTR projects in the UK, highlighting significant demographic changes alongside challenges related to housing affordability in the for-sale market. As a result, there is an urgent need for innovative housing solutions that cater to the population influx, particularly among young professionals and students.

Moreover, the current shortage of housing development further intensifies the demand for rental properties in the city. Experts predict that with limited new projects coming to market, the appeal and necessity for well-designed rental accommodations will only continue to rise.

The BTR sector is becoming increasingly vital in Manchester, driven by a shift in consumer preferences towards renting rather than buying. This trend is supported by the city’s evolving economic landscape and cultural vibrancy, cementing Manchester’s reputation as a desirable location for living and working.

The Rationale Behind the Deal

The collaboration between Round Hill Capital and Carlyle is seen as an opportunity to create a landmark residential development in a prime Manchester location. According to Taj Sidhu, Head of Carlyle European and Asian Private Credit, this deal allows for funding a significant scale project alongside a reputable investment manager, making it a unique investment opportunity.

Tom France, Head of UK Round Hill Capital, emphasized that Fairfax serves as their flagship BTR venture in a market segment where they aim to expand substantially. The partnership with Carlyle, recognized as a leading lender, illustrates strong validation of Round Hill Capital’s vision for the scheme, as well as the broader market potential in Manchester.

Information about the Investor

Carlyle Global Credit, the investment arm behind this joint venture, manages a substantial portfolio, reporting $150 billion in assets as of September 30, 2023. The firm is known for providing diverse private credit solutions throughout the capital structure, including senior secured loans, unitranche loans, and junior debt.

Carlyle’s expertise in the industry empowers Round Hill Capital to leverage significant resources and experience, ensuring that the Fairfax project meets its ambitious standards for luxury living. This collaboration is poised to enhance the investor's presence in the high-demand BTR sector.

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The partnership between Round Hill Capital and Carlyle presents a promising investment opportunity in a rapidly growing market. Manchester has established itself as a robust alternative to London, attracting young professionals and students who value quality rental properties in central locations.

The ongoing demographic shifts and the urgent need for rental housing suggest that the Fairfax project is likely to experience high demand upon completion. With the limited development pipeline, this investment is ideally positioned to capitalize on the burgeoning rental market.

Moreover, the luxury amenities and contemporary design offered at Fairfax cater to the preferences of today’s renters, which could enhance occupancy rates and rental yields. Given the strategic location and growing desirability of Manchester, this venture appears to be a sound investment.

Overall, this deal reflects a well-timed response to market demands, as well as a fruitful collaboration between reputable industry players. The Fairfax development is set to become a vital addition to Manchester’s housing landscape, ensuring that both Round Hill Capital and Carlyle stand to benefit significantly.

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