UK: Pension scheme Nest has partnered with Legal & General (L&G) and PGGM to invest up to £1 billion into new BTR homes across the UK.
The partnership is initially backed by £350 million of combined investment and has been launched to support the government’s target of delivering 1.5 million more homes, amid the increased demand for new housing and rental homes.
Elizabeth Fernando, chief investment officer at Nest, said: “We’ve been carefully considering the UK market and where best to invest so that we can help boost our members’ pensions and support economic growth. We can see there’s a critical shortage of housing supply, coupled with increasing demand for high-quality rental homes. By building more properties, we can extend to our members a great investment opportunity while helping to meet this demand and bolster the rental market. After working with L&G for many years, we’re delighted to extend our partnership into this new area.”
“L&G and PGGM have already been successfully investing in UK Build to Rent sites, giving us confidence that this is a tried and tested approach we’ll now be extending to Nest members. This is a great deal for our 13 million members and the UK. By also drawing in international investment from PGGM, we’re amplifying our impact and providing much needed residential properties across the UK,” she added.
L&G and Dutch pension fund PGGM have been investing together in UK BTR schemes through their joint venture – Access Development Partnership (ADP) – which launched in 2016.
The ADP was established to expedite the delivery of high-quality rental homes across the UK, whilst aiming to drive stable returns for institutional investors.
António Simões, group chief executive officer at Legal & General, said: “Today’s announcement and focused growth of our residential platform marks an important milestone for L&G’s ambitions in private markets and crowding in third-party capital. We’re proud to have facilitated investment from domestic pension schemes as well as international private capital – underpinning the UK Government’s push to boost investment into productive assets, accelerate growth, and deliver pensions savings.
“With an inherent supply and demand imbalance, there is a big gap to fill – and thus a need to drive up the delivery of all homes, across all tenures. Institutional investment has an important role to play, and we expect investor demand in the UK’s Build to Rent sector to continue to grow. The launch of ADP in 2016 was the catalyst that has enabled L&G to deliver 10,000 high-quality rental homes across the UK’s city centres. We’re therefore delighted to re-capitalise with PGGM and welcome a new co-investor in Nest. Thanks to this commitment, we are not only accelerating delivery but also unlocking DC pensions access to the investment opportunity within the residential sector. It’s a strong step forward in putting pensions to work, he added.
Since ADP’s establishment, L&G has deployed more than £3 billion of capital into the BTR sector, delivering more than 10,000 rental homes. The new partnership is for the second phase of the ADP, in which Nest will also now co-invest.
Dirk Bootsma, senior investment manager, private real estate at PGGM, said: “This new partnership with renowned investors L&G and Nest fits perfectly in our PGGM strategy to realise sustainable, high-quality mid-segment rental homes in the UK. This investment not only generates stable financial returns for our client PFZW, the Dutch pension scheme for healthcare workers, it also contributes to relieve a stressed housing market which poses a huge challenge to key workers. For PFZW, investments in sustainable real estate contribute to reaching its climate impact goal to reduce the equivalent of 15 Mega ton CO2 by 2030 through measurable impact investments.”
With locations already lined up, all new rental schemes will be targeting net zero in operation by 2030 and will be built on brownfield sites in city centres.
