Legal & General has acquired a new build-to-rent (BTR) tower in Manchester on behalf of its two largest open-ended balanced funds, the UK Property Fund and the Managed Fund.

The investment in North Tower in Deansgate Square, Manchester, will take the £3.4bn (€4.04bn) Managed Fund into the BTR sector for the first time since it was established in 1971.

Legal & General said the Managed Fund, which invests on behalf of UK pension schemes, was making a concerted push into alternative sectors, having recently invested in hotels, healthcare facilities and student accommodation.

North Tower will be owned jointly by the Managed Fund and the £3bn UK Property Fund, which is open to a wider range of investors, including retail investors.

The UK Property Fund recently acquired a 189-unit BTR site in Chelmsford and 14,000sqft of lettable self-storage space across three sites.

North Tower is at the centre of the Deansgate Square development, a cluster of four residential towers surrounded by amenities, and commercial and public-realm spaces.

The building, developed by Renaker, provides 276 luxury apartments and two-storey gym across 37 floors.

Legal & General’s BTR Fund acquired the adjacent West Tower in April 2019.

Michael Barrie, director of real estate fund management at LGIM Real Assets, said: “This acquisition represents the coming together of two of LGIM Real Assets’ largest funds as we continue to diversify our exposure to alternative sectors.

“Alongside hotels, self-storage and student accommodation, BTR will continue to be a preferred subsector, giving us real-time access to occupational markets with a robust growth in rental income.”

Tom Sinclair, residential investment director at CBRE, which advised Legal & General, said: “The North Tower marks CBRE’s second transaction with L&G at Deansgate Square and demonstrates continued confidence in Manchester’s residential market following the strong occupier demand experienced at the West Tower.

“On completion, the North Tower will provide exceptional residential accommodation, providing more renters with the opportunity to experience life at this desirable residential address.”