US affordable housing investment firm Jonathan Rose Companies is to make its international debut in the UK with the launch of a fund and the hire of former Legal & General managing director Ben Denton to lead its expansion.
Announcing the move at a government-led housing and investment event aimed at attracting capital and partnerships to the UK, the New York-based firm said it plans to establish a dedicated Rose UK Social and Affordable Housing Fund, initially focused on financing new homes in urban areas across England and Scotland.
“Our goal is to reach £100m [€120m] at first close and grow the fund to £350m to £500m over time, delivering roughly 3,000 homes,” Jonathan Rose, president of Jonathan Rose Companies, told IPE Real Assets.
The expansion comes as the UK faces a significant shortage of affordable and social housing. Non-profit registered providers (RPs), which have historically acquired, developed and managed much of this housing, face growing financial pressures from ageing housing stock, building safety requirements, decarbonisation mandates and limited balance sheet capacity. As a result, addressing the housing shortage will require solutions that bring together private capital, public-sector expertise and subsidy, according to Rose.
“The affordable housing challenges facing the UK are shaped by some of the same underlying forces we see in the US and many parts of the western world: rising costs, insufficient supply, ageing stock and the need for long-term capital partners,” said Rose, who established the firm in 1989.
Jonathan Rose Companies has a portfolio of nearly 20,000 apartment homes in the US and most recently closed its $660m Rose Affordable Housing Preservation Fund VI, focused on improving affordable housing communities across the country.
“We’ve been watching the UK market, trying to figure out when was the right time to enter, and it’s got to that moment,” Rose added.
He pointed to the regulatory changes introduced following the 2017 Grenfell Tower fire as one of the factors creating opportunities for new investors. “All the local RPs are now required to reinvest capital into making buildings fire-safe, getting rid of mould and adapting to climate change, including making their buildings more fossil-fuel-free.”
To lead the expansion, the firm has appointed Denton, who has more than two decades of experience and previously set up the £1.8bn affordable housing platform at Legal & General, one of the UK’s largest investment managers. He will establish the firm’s local presence, support fund formation and build a pipeline of investment opportunities aligned with its long-term affordable housing strategy.
“Affordable housing investing in England has gone through a number of different waves,” Denton noted. “It used to be delivered by the state up until the 1980s and after that it was broadly funded by housing associations through not-for-profits, up until 2015. Then the doors opened for institutional funding to come in and today institutional investors are behind between 15% and 20% of all new supply,” Denton said.
“The really exciting thing for us here is about taking affordable housing delivery to the next stage, which means providing high-quality, fossil-fuel-free homes, but also thinking deeply about how we can support and assist the communities that live in our homes.”
Denton will work alongside Jonathan Rose Companies’ Dawn Mottram, who spent much of her career delivering social and affordable housing at two of the UK’s largest registered providers, London&Quadrant Housing Trust and Southern Housing Group.
The firm’s initial strategy will focus on financing new affordable housing developments through agreements with local planning authorities in cities with major regeneration areas such as Bristol, London and Manchester, as well as Edinburgh and Glasgow. The projects are typically part of mixed-income communities and are designed to be fossil-fuel-free, in line with the UK’s Future Homes Standard.
“These are cities with a wider gap between housing need and housing supply, and where market rents are relatively high compared with affordable rents. They are also cities with larger regeneration programmes where there is interest in new investors coming into those sites,” Denton said.
The planned Rose UK Social and Affordable Housing Fund will target core-plus returns, which are typically between 7.5% and 9.5% for the asset class on an unlevered basis. Its investors are expected to include a balanced mix of pension funds, foundations, endowments and high-net-worth families.
“We’re really interested in putting together a portfolio that is as much fossil-fuel-free as possible,” Rose said. “We report quarterly to our investors on our reduction of greenhouse gases, and England is moving towards fossil-fuel-free construction. We really like that, and that’s part of the attraction for us.”
Jonathan Rose Companies is the latest investment manager to announce plans to enter the UK affordable housing market as investors seek to help address the country’s housing delivery gap. Earlier this month, European real estate investor Patrizia unveiled plans to raise and deploy £1bn for UK essential housing by mobilising third-party institutional capital. US investment giant Brookfield has also entered the UK affordable housing sector through its acquisition of for-profit registered provider WH Housing.
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