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Watkin Jones plc (LSE:WJG), the UK's leading developer and manager of residential properties for rent, has announced a significant new project in partnership with the Housing Growth Partnership (HGP), a social impact investor and part of Lloyds Banking Group. The project involves the forward sale of a 397-bed purpose-built student accommodation (PBSA) development in Stratford, East London. This development will also include workspace and commercial units, marking the first collaboration between Watkin Jones and HGP.
Innovative Joint Venture Structure
The project will be delivered through a newly established joint venture, Watkin Jones (Grove Crescent) Holding Limited (the "JV Entity"), which is owned 75% by HGP and 25% by Watkin Jones. This structure is designed to generate approximately £96 million in receipts for Watkin Jones over the three-year development period, aligning with the Group's margin targets. Watkin Jones will manage the project from development through to completion, and its accommodation management business, Fresh, will handle ongoing management.
Funding for the JV Entity will come from HGP and third-party debt finance. The PBSA development is scheduled for completion in time for the 2026/27 academic year, with an initial net cash receipt of around £20 million expected in the current financial year. Further income will be received throughout the construction process.
Potential for Additional Value Creation
Upon completion and stabilization, the JV Entity plans to sell the PBSA development (the "Realisation Sale"). Watkin Jones has the opportunity to earn additional incentives if the sale generates returns above agreed hurdle rates. This potential upside is a key differentiator from the Group's traditional forward fund model, offering Watkin Jones the chance to benefit from future value creation.
Outlook and Financial Impact
Given the construction timeline, any potential sale of the development is not expected before Q4 2026. While the terms of any future Realisation Sale are not yet determined, the innovative joint venture structure provides Watkin Jones with the possibility of additional financial gains beyond the initial project margins.
