Hilltop Credit Partners to deploy up to £300m to fund UK house building
Hilltop Credit Partners (“Hilltop”), a UK-based specialist development funding partner, has secured investment from Metropolitan Real Estate (“Metropolitan”), the global real estate multi-manager platform. As part of this, Hilltop will target to deploy up to £300m over the next three years to finance the construction of over 1,000 new residential units across the UK, with a focus on affordable regional markets with strong supply-demand fundamentals.
The investment provides Hilltop with an immediate opportunity to grow its existing UK residential development finance platform. An investment of this type is critical to achieving the UK government’s target of delivering 300,000 new homes per year.
Hilltop believes that UK residential development lending has fallen up to 40% since 2008, as high-street banks have withdrawn from the market due to new regulatory capital requirements and the impact of Covid-19. The UK could therefore face a funding gap of c. £200bn that will need to be covered over the next decade in order to achieve the government’s housebuilding targets.
Hilltop is backed by global real estate investment firm, Round Hill Capital, and the firms’ combined expertise, industry knowledge and access to capital has facilitated the construction of 250 residential units across the UK to date.
The partnership with Metropolitan brings further institutional validation of Hilltop’s strategy and track record. Metropolitan committed c. £60m in 2021 to purchase a portfolio of existing development loans across five regions and to continue funding the active pipeline. This commitment also demonstrates the strong appetite among institutional investors for the attractive risk-adjusted returns offered by residential real estate credit strategies.
Despite the challenging economic backdrop in 2020, UK residential property prices rose at their fastest rate in six years, as strong pent-up demand coincided with a slowdown in the supply of new housing, with more affordable regions outside of London showing the strongest performance.
Paul Oberschneider, founder and CEO of Hilltop Credit Partners, said: “I’m delighted to announce this partnership, which further establishes Hilltop as a leading player in the UK development lending market. Working with Metropolitan Real Estate will bring together our collective experience in real estate and credit to support proven housebuilders in the UK, and to promote greater housing supply. This partnership is a validation and recognition of our work so far, and we look forward to growing our lending portfolio across Britain this year.”
Cherine Aboulzelof, managing director and head of Europe at Metropolitan Real Estate, said: “We are delighted to partner with Hilltop Credit Partners and Round Hill on this transaction. We are investing with an experienced team in an already seeded, and growing, portfolio of affordable residential loans that provides visibility and proof of concept in attractive locations with quality local sponsors. This opportunity provides our investors with access to the UK residential sector with an attractive risk-return profile for our fund.”