UK insurer Legal & General and Dutch pension fund asset manager PGGM have expanded their build-to-rent (BTR) residential joint venture, agreeing to fund a £100m (€109m) project in Birmingham.
Access Development Partnership, a joint venture between PGGM and Legal & General’s BTR fund, will invest in a development site at Hockley Mills in the Jewellery Quarter Conservation Area of the English city.
It is the 16th site and second in Birmingham for the Legal & General BTR Fund and takes its total investment in the sector to £2.1bn.
Legal & General said BTR rent collection levels remained high despite COVID-19 and cited Knight Frank estimates of 95% during the second quarter.
BTR assets like the site at Hockley Mills are well placed to benefit from the growing need for homes with functional space to work, alongside convenient access to local cultural and leisure amenities, it added.
The scheme will include 395 apartments, a new entrance to the Jewellery Quarter train station, 116 car parking spaces and 28,000sqft of flexible commercial space for retail, leisure and offices.
Dan Batterton, senior fund manager for BTR at LGIM Real Assets, said: “In the space of the last few years, the BTR sector has really come into its own. It has cemented its position in the UK as an asset class and successfully evolved away from the private-rented sector.
“Showing its resilience and relative counter-cyclical nature of the residential sector, BTR has remained largely unaffected throughout the coronavirus pandemic, as occupancy, rent collection and demand has remained high.
“The Hockley Mills development further strengthens our existing portfolio, bringing our total number of schemes to 16 in 11 cities providing more than 5,300 apartments. The scheme will deliver high-quality, professionally-managed rental accommodation that can help to address the supply demand imbalance in Birmingham.”
Legal & General was advised by global property consultancy Knight Frank.
Hannah Badger, associate in the residential capital markets team at Knight Frank, said: “Our view remains that, long-term, the current COVID-19 crisis may well act as a catalyst for an acceleration of institutional capital into the UK’s residential investment sector.
“Since March activity has remained strong as investors seek to increase their exposure in the UK market – indeed, recent Knight Frank research found that 77% of investors are looking to maintain or increase their investment plans in the near future.
“As the UK’s largest city outside of London, investment in Birmingham’s BTR market has always been strong; however, thanks to the regeneration of the city centre and the upcoming HS2 [high-speed train] line enabling even quicker links into the capital, demand by investors for high quality rental assets is certainly on the rise and is showing no signs of slowing down, despite the current wider market headwinds.”