If These Walls Could Talk: Going for gold

Qatar won just two bronze medals in the 2012 London Olympics, but the country’s sovereign wealth fund is betting it can find higher returns than its paltry haul of gongs as it redevelops a former Olympic site.

Qatari Diar Real Estate Investment, a subsidiary of the Qatar Investment Authority (QIA), London-based developer Delancey and Dutch pension fund APG said last month that they would create a £1.4 billion (€1.8 billion; $2 billion) residential estate in London. The trio is merging the East Village project in the 2012 Olympic site and the redevelopment of Elephant and Castle town center, two prominent areas within London’s private rented sector.

The deal, which is subject to regulatory approval, includes a portfolio of 4,000 rented homes located in the two sites. Thus far 1,500 of these have already been built, with the majority of those already let, a further 1,000 are under construction and the remaining 1,500 homes have planning consent with construction due to begin shortly.

Qatari Diar and Delancey’s UK development company will work jointly on all the venture’s development activity. The two are currently developing 2,818 homes in the East Village, while Delancy and APG are working on the Elephant & Castle project, which initially comprised 374 homes and 272 student-housing units.

Qatari Diar and Delancey have been working on the East Village site since 2010. It has come with its fair share of controversy, starting when the deal was inked. The government, through the Olympic Delivery Authority (ODA), received bids from property developers across the UK, mainland Europe, North America and Asia to take over the area adjacent to the Olympic Park. In August 2011, the Delancey-Qatari Diar duo won, paying £557 million – a £275 million loss to the ODA, and by extension, critics say, the British taxpayer. At the time of the deal, an ODA spokesperson told The Guardian that the agency supported the joint venture’s plan to convert the 24,000 athletes’ residences into private rentals, despite the hit to the UK’s checkbook.

“It was an entirely empty site, it didn’t have any infrastructure, roads or parks. There was always going to be a public sector contribution to help put those in,” he said. “We weren’t just looking for the highest bidder, but for the best owner with long-term commitment.”

Supporters also point to the benefits of greater redevelopment efforts surrounding the housing conversion efforts, with the joint venture building a new school, bars, parks, public transportation and other amenities, in effect creating a new neighborhood for east London.

The new partners have tall ambitions. They seek to become the leading player in the delivery of professionally managed homes in London and other major UK cities over the next few years, according to a statement last month.

The Olympics redevelopment project is only one of the myriad forward-looking real estate projects the groups have lined up in the UK, both Olympics-related and outside of the games. Through its funds, Delancey owns a diverse portfolio of residential, retail, office, logistics and corporate assets including 185 Park Street on London’s South Bank, private secondary school owners Alpha Plus Group and Here East, the digital and tech hub on the former Olympic site. Apart from the Olympics redevelopment, one of Qatari Diar’s most recent deals was to team up with Toronto-based Brookfield Property Group to complete the acquisition of Canary Wharf’s owner, Songbird Estates for £2.6 billion last April.

With these and other projects, the investors hope to achieve long term, Olympic-size returns.