UK - Aviva Investors is intending to launch a real estate fund aimed at pension funds and institutional investors that will invest in UK residential assets.
The fund manager is looking to work with a large US residential manager to export American-style mass-produced rental homes and has confirmed it is working with CB Richard Ellis on the initiative, albeit officials are “in the early stages of working to develop a proposal”.
Aviva Investors is working closely with the Homes and Communities Agency (HCA), the UK government’s national housing body, which in May announced it was looking to attract institutional investment to provide a new generation of affordable housing.
“We are a strong advocate of the private rented sector and are encouraged by the HCA initiative,” said Andrew Appleyard, head of specialist funds, real estate at Aviva Investors.
“Given the current market circumstances, we believe that we now have a genuine opportunity to acquire institutional quality investment assets in key locations.”
HCA’s Private Rented Sector Initiative (PRSI) is designed to persuade institutional investors to enter the private rented residential sector for the first time by facilitating the building of new homes for rent, while also considering recently-built properties as seed assets.
There have been a number of barriers to institutional investment in the UK residential sector, including a lack of significant lot sizes and a focus on capital value growth rather than rental income.
But HCA claims sufficiently high-netting yields are now potentially achievable from rental streams, without having to rely on capital appreciation.