EUROPE - Dutch pension fund asset manager PGGM has committed £220m (€262m) in capital to become the principal investor in a joint venture with Lend Lease targeting social infrastructure in the UK.
The limited partnership will invest in concessions for established healthcare, education and accommodation projects currently owned by Lend Lease and provide capital to fund the acquisition of future projects delivered by Lend Lease.
PGGM has a majority co-investment in the fund, with Lend Lease taking a smaller exposure.
The investment is the latest evidence pension funds are seeking to gain direct exposure to the asset class without going through funds that use leverage and employ management fee structures associated with the private equity space.
Henk Huizing, head of infrastructure at PGGM, said: "This investment is a good example of our recent strategic shift for infrastructure investments to focus on direct infrastructure investments alongside strategic or financial partners."
Lend Lease will manage the fund and continue to provide asset and facility management services for its underlying assets.
Dan Labbad, chief executive for Europe, Middle East and Africa at Lend Lease, said:
"The fund will gain exposure to Lend Lease's portfolio of core social infrastructure assets.
"It will also benefit from the fully integrated Lend Lease model, including our established fund management, asset management and facilities management capabilities, and will look to grow the investment with similar assets from our future pipeline."
The fund will immediately acquire approximately £75m in assets from Lend Lease, with a further deferred consideration of close to £30m due on transfer of assets still in construction and commissioning.
The remaining commitments to the fund are likely to be invested over the next five years in additional public private partnership/private finance initiative projects undertaken by Lend Lease, most of which have already been identified.
Lend Lease created the fund's seed portfolio of assets over the past decade, and the lifetime of the vehicle is expected to be 28 years.
It is expected to provide PGGM's pension fund clients, including the €98bn Dutch healthcare scheme PFZW, long-term stable cash flows linked to inflation, while also meeting environment social governance (ESG) ambitions.
Huizing added: "This investment in social infrastructure assets - including schools and hospitals - is aligned with the ESG criteria in the investment policy of our institutional clients. Furthermore the inflation component meets our clients' obligations."