Greater Manchester Pension Fund is among investors to provide long-term financing for UK housebuilders through a new fund launched by Homes England and Newstead Capital.
The local authority pension fund is committing £30m (€34.3m) in an £80m initial close for the Newstead SME Real Estate Lending Fund, alongside other institutional investors and clients of wealth manager Mattioli Woods.
The fund is designed to help Homes England, the UK government’s housing and regeneration agency, in its efforts to increase the supply of housing in the country. Homes England is also committing £30m.
Ged Cooney, councillor and chair of Greater Manchester Pension Fund (GMPF), said the fund would “allow more new homes to be built, by empowering local small-to-medium-sized builders to develop smaller sites, often overlooked by larger housebuilders”.
He said: “These new homes will help to address the housing shortage, contributing to levelling up and bring environmental benefits. The financial return from our investment will enable GMPF to meet its future pension obligations to its members.”
Peter Denton, CEO of Homes England, said: “This partnership is our latest intervention to offer small-to-medium-sized housebuilders a route to finance that may otherwise be unavailable through traditional means.
“Introducing new sources of institutional capital to support small-to-medium-sized housebuilders is a priority for Homes England. Our cornerstone investment in this fund signals government support for accessible and competitive finance to meet the needs of small-to-medium-sized developers across the country.”
The fund, managed by Newstead Capital, is intended to grow to £300m through subsequent capital raises and to provide £1bn of funding for more than 5,000 homes over its lifetime.
It is designed fill a gap in the market with small-to-medium-sized housebuilders currently underserved by traditional lenders.
Newstead Capital, which specialises in asset-backed direct lending, will work with new and established origination partners to source and help assess opportunities.
The fund’s underwriting will incorporate Newstead’s credit and ESG metrics, factoring in, for example, energy efficiency of projects.
Homes England and Newstead Capital hope to effectively create a new asset class for UK institutional investors.
Simon Champ, CEO at Newstead Capital, said: “This is an exciting step for Newstead. Our fund is the first of its kind. We are providing a conduit for long-term institutional investors to gain access to a market which until now has been out of reach.”
He added: “Regional housebuilding has historically been critical to the economy, providing the country with a diverse range of smaller housing communities. The fund gives pension, insurance and wealth management institutions an appropriate long-term investment platform to support this vital industry.
“By meeting this demand, we will provide an attractive return for investors, including the taxpayer and Manchester retirees, while also empowering local small-to-medium-sized builders to compete with larger housebuilders.”
Capital-B is the institutional placement agent for the fund’s capital raising.
