Royal Mail sells Nine Elms plots to Greystar, Telford Homes to build

Royal Mail has agreed to sell two of the seven plots on the site of its former south London mail centre at Nine Elms site to US-based developer Greystar for £101m cash, which has appointed AIM-listed Telford Homes to deliver 894 build-to-rent homes.

The combined 2.67-acres of plots B and D of the Battersea site, which will be used for "high specification private rental apartment buildings", for which Greystar has agreed a pre-construction development agreement with Telford.

Royal Mail has received a £3m deposit following the exchange of contracts, with the remaining £98m conditional on Greystar getting planning consent from the London Borough of Wandsworth for its detailed designs for the two plots, which is expected before the end of Royal Mail's 2017-18 financial year.

The FTSE 100 company plans to reinvest around £30m of the proceeds into the Nine Elms site to improve infrastructure for plots B and D and to support future plot developments, which it said should benefit future sales values.

As at 26 March, plots B and D were valued on Royal Mail's balance sheet at £12.9m.

"We believe that Greystar's strategy of developing private rental accommodation will help the ongoing transformation of Nine Elms and will benefit the other plots on the Royal Mail site," said Martin Gafsen, group director of property and facilities solutions.

"The opening of the US Embassy and the new Northern Line Extension - along with the delivery of this first phase of development and the associated park on the Royal Mail site - will see the emergence of a residential community in this exciting new area of the capital."

Telford said once planning consent has been secured, it will enter a full design and build contract with Greystar to deliver the development for a fixed price.

"This represents an exciting opportunity for the group to significantly expand its existing build to rent portfolio and commence a partnership with a major worldwide investor in rental housing," it said, adding that the contract terms include regular payments during the course of construction and profit paid on practical completion so it will invest limited equity and no debt.

Telford is not taking any sales or rental risk but the margin earned will account for full construction risk and therefore is in line with the group's target margin for build-to-rent developments.

CEO Jon Di-Stefano said: "Telford Homes is becoming established as a significant developer of build to rent housing in London. This increasing reputation is helping the group to secure major opportunities such as this and we are looking forward to assisting Greystar and building a strong partnership with them."