Legal & General and the pension fund of NatWest bank have entered a 15-year joint venture to invest £500m (€585m) in “later living” residential assets in the UK.
Inspired Villages, the later-living business acquired by L&G from Helical in 2017, will develop and operate approximately 5,100 net-zero-carbon homes.
L&G and NatWest Pension Trustee Limited, the defined benefit pension scheme of NatWest Group, are seeking to take advantage of growing demand for specialist accommodation designed for the UK’s ageeing population.
“With an ageing society, we will soon have more people over 65 than under 18 but do not have the infrastructure, health-spend or social care to support this long-term demographic shift, exacerbated by a shortage of suitable later living options,” L&G stated.
There are now more than 12 million over-65s in the UK and the figure is expected to increase by 41% to nearly 18 million by 2040, L&G said. Meanwhile, there are currently only 78,000 later-living homes in the UK and only around 7,000 new units delivered each year.
The UK later living sector lags significantly behind international comparisons, accounting for only 0.6% of over-65s living in later living communities in contrast to around 5% to 6% in the US, New Zealand and Australia, L&G added.
As part of the new joint venture, L&G has sold a 50% stake in Inspired Villages’ first 11 sites to NatWest’s pension fund based on an enterprise value of more than £300m, allowing it to reinvest equity back into the business and support a pipeline of future developments.
Inspired Villages has six operational villages with 919 residents and four sites under construction, and is committed to backing a portfolio of 34 sites – equating to around 5,100 homes, 8,000 residents and an estimated gross development value of £4bn.
The pension fund has also committed to acquiring all of the fully-occupied villages, placing them in a fund. The developed villages will continue to be managed by Inspired Villages to provide ongoing resident services.
The investment platform could be opened up to other institutional investors in the future, allowing UK pension money to be deployed at scale to match long-term liabilities and increase the stock of later-living villages in the UK, L&G said.
Robert Waugh, CEO of NatWest Pension Trustee Limited, said: “The investment potential of the later-living sector is substantial as the need to support our ageing population increases.
“This new partnership with Legal & General and Inspired Villages aligns perfectly with our ambitions to invest in areas that present strong social and environment credentials, whilst offering a good match for our long-dated liabilities.”
Laura Mason, CEO of Legal & General Capital, said: “This transaction is unique as it sees one of the largest UK pension funds investing directly into UK private social infrastructure.
”Broadening the range of growth assets that pension money can access is an important step forward for the UK’s growth agenda and economic future, allowing our country’s savings to support the UK in building back better, address climate change and tackle the major issues society is facing. We hope to see further deals like this follow.”