Singapore-based Strawberry Star to offer ‘end-to-end’ services for international investors
By Cecilia Chow and Angela Teo
/ EdgeProp Singapore |
Santhosh Gowda, founder and chairman of Strawberry Star Group, spends 15 days in Singapore each month, and another 15 days in London. He now calls Singapore home, and has even established his headquarters here.
Strawberry Star first opened its office in Singapore in March 2015. It started as a London real estate agency. However, Gowda’s ambition was to create “an integrated, end-to-end services platform” for international investors, primarily from Asia and the Middle East, to invest in the UK.
Initially, there was confusion about Strawberry Star’s business, says Gowda. “People would ask if we’re a developer or a property agent, and then they would ask about our track record. It was a chicken-and-egg situation.”
Gowda: Most of the equity will be deployed in developing housing schemes around London where the gap between demand and supply is widening, creating business opportunities (Credit: Samuel Isaac Chua/EdgeProp Singapore)
When Gowda started the company in 2007, his intention was to pool together the capital of overseas investors to acquire assets in the UK. His maiden acquisition was a block of 33 apartments in London, purchased in the depths of the global financial crisis in 2008.
At the time, there were only two staff in the company, including Gowda. He had to rely on external consultants and advisers — from property agents to legal advisers and lending partners — to complete the transaction within 30 days. He also had to engage letting agents to help lease out the units, as well as a property management firm to manage the building.
‘Fragmented market’
“The UK real estate market is very fragmented,” he says. “For an overseas investor, it’s especially challenging because there’s no coordination, no follow-up. It’s not just when it comes to acquisition, but rental and sale as well.”
Aerial view of Sky Gardens (tower in the foreground) Nine Elms, a mixed-use development with 196 apartments and commercial space (Credit: Strawberry Star Group)
Ten years on, Gowda feels he has finally put in place an “end-to-end” services platform — from acquisition to development, property management, leasing and selling. He even enrolled himself in a three-year programme at Harvard Business School to ensure that he had implemented the right structures, processes and business culture. “I’m graduating this year,” he says.
Gowda believes it is equally important to hire the right people to head each business line — “those with at least 15 to 20 years’ experience in their fields”, he says. The team has grown from just two to more than 50 today.
In Singapore, Doris Tan, a veteran in international residential project marketing, joined Strawberry Star in 2017 as regional director for Singapore and Hong Kong. She was previously with JLL and prior to that, the founder and managing director of her own boutique firm, DST International.
Two-storey sky gardens located on the eighth floor and rooftop of Sky Gardens Nine Elms (Credit: Strawberry Star Group)
At the beginning of 2018, Tracy Wun joined Strawberry Star as director of capital in Singapore. Wun was previously the chief investment officer of Pollux Properties and prior to that, with Singapore-listed property developer Hiap Hoe Ltd. “The capital division works with its London counterpart to secure interest from early-stage investors from Singapore in various London schemes,” says Wun.
While Wun and Tan are based in Singapore, the other heads of Strawberry Star’s businesses are based in London. They include Robert Hepworth, Strawberry Star’s commercial investment director, who was previously with PNB Paribas Real Estate and prior to that, Colliers International. Matthew Leitch, who was previously senior director at CBRE Residential and Savills, came on board as Strawberry Star’s sales director.
Play on London, Guernsey-listed investment structure
Joining Strawberry Star as managing director of developments in London was Nick Stonley, who was managing director of United Housing Developments for seven years. He had also spent 13 years at Berkeley Homes, where he was managing director for several of its London divisions.
Steve Peters, Strawberry Star’s development director, was the operations director of United House Developments for seven years. There are two development teams within the firm: one to handle small developments with shorter turnaround times, and the other to handle big, mixed-use schemes.
Heading Strawberry Star’s acquisitions is managing director Sathvik Sathish, while Kekul Shah is director of fund management. Kekul worked for flagship real estate projects such as the Heron Tower and prime residential schemes in Central London developed by Ronson Capital Partners.
Gowda has also listed an investment structure called Strawberry Star Real Estate PCC Ltd on the International Stock Exchange in Guernsey. The structure currently holds £40 million ($74 million) in equity. The intention is to raise £150 million in equity in 2018 from global investors to tap the London housing market, and to hit £500 million by 2020.
“Most of this equity will be deployed in developing housing schemes around London, where the gap between demand and supply is widening, creating business opportunities, especially with the sterling yet to regain its strength,” Gowda says.
Under the listed entity are different special purpose vehicles that investors can participate in — either a development project or an asset to be acquired for future redevelopment or as an investment. “With these structures in place, we can get investors on board easily,” explains Gowda.
Hoola at Royal Docks, which contains 360 apartments in twin residential towers of 23- and 24-storeys as well as a commercial development (Credit: Strawberry Star Group)
Catering for first-time buyers
Over the last three years, Strawberry Star’s primary focus has been on the housing market in Greater London. According to Gowda, there is an acute shortage of affordable homes, particularly those priced below £300,000, or £600 psf. Residential properties in this price range appeal to first-time homebuyers. Since last November, first-time buyers of homes below £300,000 will not be subject to buyer’s stamp duty.
To help first-time homebuyers get on the first rung of the property ladder, the London Help to Buy scheme allows them to purchase a new-build home with as little as 5% equity. They are also entitled to a government equity loan of up to 40% of the purchase price and eligible for a mortgage of up to 55% of the purchase price.
Strawberry Star therefore intends to build a pipeline of 3,000 to 5,000 of such homes in commuter towns outside Zone 3, which are a 45-minute to one-hour commute from London.
For example, in February, Strawberry Star secured a contract to develop a £260 million mixed-use development with a residential component in Luton in Bedfordshire, which is a 40-minute commute to London. The 6.9-acre site at Luton will comprise 685 homes, a 200- room hotel, retail and leisure facilities, a state-of- the-art medical and wellness centre as well as high-quality public spaces.
The development has received planning approval, and construction is expected to start in autumn, with the first phase to be completed by 2H2021. Prices of apartments at the development will start from £210,000.
The site is located near Luton Airport, where there will be a new light rail link to the nearest train station. With the Crossrail, the journey from Luton to London St Pancras will take just 30 minutes. The Luton Airport is also spending £110 million to redevelop its terminals to increase its passenger capacity to 18 million by 2020.
Strawberry Star secured a contract to develop a £260 million mixed-use development with residential scheme in Luton in Bedfordshire (Credit: Strawberry Star Group)
Developments and investments
According to Gowda, Strawberry Star has developed projects in areas that are undergoing regeneration and massive investments, such as Nine Elms, Royal Docks in Docklands and Southall. Over the past 11 years, the company has developed projects with a gross development value of close to £1 billion.
So far, six projects have been completed and delivered, including Chelsea Bridge Wharf in Wandsworth and Riverlight and Embassy Gardens in Nine Elms. Other projects include Hoola at Royal Docks, which comprises 360 apartments in twin residential towers of 23 and 24 storeys as well as a commercial development; and Sky Gardens in Nine Elms, which was developed in a joint venture with the UK arm of Singapore-listed Frasers Property. Sky Gardens is a mixed-use project with 196 apartments and commercial space. About 80% of the investors in Hoola and Sky Gardens are Asian investors, primarily from Singapore and Hong Kong, says Gowda.
Under development is Bronze in Wandsworth, which comprises a mix of one- to three-bedroom apartments as well as duplex penthouses. The project is located on Buckhold Road, adjacent to the popular King George’s Park. Prices start from £465,000. The project is scheduled for completion by 4Q2019.
Last November, Strawberry Star announced a £47 million investment in Greenview Court, a project by UK developer Galliard Homes. The residential development in Southall is located near the upgraded Southall Station, with access to the Elizabeth Line, which is part of the Crossrail project and scheduled to open this year. Greenview Court is slated for completion by 2020. Units in the development are priced from £340,000.
Completed projects by Strawberry Star include Riverlight in Nine Elms (Credit: Bloomberg)
Last November, Strawberry Star also committed to purchasing five Grade-A office buildings in the first phase of Asian Business Port (ABP), in London’s Royal Albert Dock. The topping-out ceremony for the first phase of the £1.7 billion, 35-acre development was held on April 12, with completion scheduled for March 2019.
The first phase will have 28 commercial buildings with a gross floor area of 635,000 sq ft across eight acres. The buildings are predominantly Grade-A office space with accompanying retail space, according to the developer, ABP London, the UK arm of ABP (China) Holding Group.
Strawberry Star’s Gowda intends to hold the five Grade-A office buildings at ABP London as a long-term investment. When completed, they will be leased out for rental income, he says. “I think demand for commercial property is growing.”
‘Robust demand’ for new build
Gowda is optimistic about the UK housing market, particularly the segment targeting first-time homebuyers in the Greater London area. According to the Bank of England’s Agents’ Summary Report in 1Q2018, housing market activity remained subdued. UK house prices grew 4.4% in the year to February 2018.
However, the UK Residential Market Survey for February 2018 reported that new buyer enquiries fell for the 11th consecutive month. “Lack of stock in the secondary market was depressing demand by limiting choice for prospective buyers,” says the Agents’ Summary Report. “However, demand for new-build property was robust, supported by the Help to Buy scheme.”
Meanwhile, in its prime UK residential report for Spring 2018, Savills Research says the prime central London market is not expected to see further significant falls in value. “But we don’t expect a return to growth until there is greater Brexit clarity,” the report says.
Economic uncertainty also means the market will remain “discretionary”, according to Savills, “while international buyers will be reluctant to take advantage of the currency play, given the high tax environment”. The price gap between London and the rest of the country remains, says Savills. “This will drive a flow of wealth into the commuter belt and beyond, so the prospects for house price growth over the next five years remain positive.”
Reading these trends, Gowda therefore plans to develop a pipeline of 5,000 new homes worth an estimated £3 billion. “Over the long term, we will be able to create value for our shareholders,” he says. “We may then look at an IPO.
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