ao link

Housing association teams up with global fund manager for £250m build-to-rent fund

News20 Jan 2020Gavriel Hollander

National housing association Home Group has launched a specialist build-to-rent equity fund with a global asset management firm to help deliver £250m of new housing.

Linked InXFacebookeCard
Picture: Getty
Picture: Getty
Sharelines
Housing association @homegroup teams up with global fund manager for £250m build-to-rent fund #ukhousing #socialhousingfinance
“Flexible model” of new @homegroup and @BMOGAM_UK build-to-rent equity fund will allow tenants to move between different homes when circumstances change #ukhousing #socialhousingfinance
“This is not about capital receipts but about longevity of income,” head of business development at BMOREP, part of @BMOGAM_UK, on new fund launched with housing association #ukhousing #socialhousingfinance

Home Group has partnered with BMO Real Estate Partners (BMOREP) – a subsidiary of asset management giant BMO Global Asset Management – on the BMO UK Housing Fund.

 

The fund will deliver purpose-built rented schemes for key workers based on what the 55,000-home housing association described as an “innovative and unique” flexible rent model.

 

The model involves the development of mixed-tenure schemes featuring market rent and discounted rent homes, but guarantees that the overall rental income generated will not increase at a rate higher than inflation.

 

The fund hopes to attract institutional investors, such as pension funds, who are “looking for long-term income”, according to Angus Henderson, head of business development at BMOREP.

 

He added that the fund is targeting a six per cent return on investment, with investors expected to be involved for at least five years.

 

“This is not about capital receipts but about longevity of income,” Mr Henderson told Social Housing.

 

A £250m investment pipeline is already in place, and BMOREP is ultimately targeting around £500m of equity investment.

 

The fund says it has already attracted “highly regarded impact investors”, such as Big Society Capital.

Read more

Home Group issues £350m in secured bonds, following £200m bridge-to-loan facilityHome Group issues £350m in secured bonds, following £200m bridge-to-loan facility
L&Q: it’s time for ‘creative solutions’ to fill the funding voidL&Q: it’s time for ‘creative solutions’ to fill the funding void
Former Sage chief joins Home GroupFormer Sage chief joins Home Group

Homes England’s investment committee has recommended that the government housing funding agency should also invest in the new fund, according to minutes of a meeting in October 2019.

 

Although the initial development pipeline has been sourced in its entirety by Home Group, which will manage the units on behalf of the fund, Mr Henderson said that BMOREP could work with other partners in the future.

 

The flexible rent model has been designed to allow tenants to move between different homes on the same development as and when circumstances change.

 

The model was first outlined in a 2015 white paper produced by Home Group in collaboration with the New Economics Foundation.

 

The theory behind the model is that institutional investors will be attracted by a reduced risk profile because income will be defined across a development as a whole rather than by individual market rent properties.

Kitson Keen, head of build-to-rent at Home Group, said that those paying market rent would effectively “subsidise rent for other [tenants]”, who would be offered homes in line with the allocation policy of the relevant local authority.

 

In terms of the tenure mix or rent levels, Mr Keen said Home Group “would work with local authorities to define the rationale for each location”.

 

He added that the landlord hopes to break ground on its first schemes this year, and that the first completions would come in 2022.

DevelopmentFunderHousing Association/RPMarkets
Linked InXFacebookeCard
Add New Comment
You must be logged in to comment.

RELATED