M&G Investments has become one of the first major financial institutional investors to buy a major portfolio in the private rented sector from a social landlord.
M&G agreed a £125 million sale-and-leaseback deal on 401 rental apartments in the Stratford Halo development on the edge of the Olympic Park, Inside Housing reports.
The initiative is thought to be the biggest single investment of its kind in the private rented sector, and the first in London.
It is also the first institutional investment in residential real estate for M&G’s £1.5 billion Secured Property Income Fund (SPIF).
The agreement with M&G Investments will provide Genesis with greater capacity to invest in regenerating balanced communities and in good quality, affordable housing at a time when public subsidy for the development of new homes is expected to fall further.
The agreement is an early response to the Montague Report, published in August 2012, which identified the potential of financial institutions as providers of funds for ‘build-to-let’ to satisfy demand for new housing.
Robert Kerse, Genesis’ Executive Director of Resources, commented: “This timely initiative is an innovative and far-sighted response to current circumstances in which government assistance is no longer available.
“Genesis is recouping its investments and focusing on regenerating communities by building a diverse range of good quality rental housing in London at a time when young professionals and families on modest incomes are finding it harder than ever to secure homes.
“As a regulated and reputable landlord, we will retain the management of these properties so ensuring a professional services and avoiding the problems which can arise under multiple or absentee landlords.”
Ben Jones, Fund Manager for M&G’s SPIF fund, said: “There is significant demand from pension funds for investment into housing and social infrastructure provided it is delivered on a transparent basis and directly assists with their desire for long term inflation linked cash flows to match their liabilities.”
He added that the fund had more capital to invest and would look to buy similar schemes in the future.
The transaction is a strategic response providing Genesis with greater investment capacity in the future when the level of public subsidy for new affordable housing is expected to fall further.
Kearse hinted that Genesis, the 33,000-home landlord, could enter into other similar deals.
The Stratford Halo development will be completed later in the year and features more than 700 homes, including around 300 that will be available as affordable rent or shared ownership.
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