Octopus Investments expects to initially raise between £200-300m (€227-341m) this year for a newly launched open-ended UK affordable housing investment strategy.
The manager said the initial capital raising target for the strategy is expected to be achieved in a number of closes during the year.
The strategy is targeting resilient, index-linked income from the forward funding, acquisition, and long-term ownership of a portfolio of affordable homes across the country, Octopus said, adding that co-investment opportunities will be available for locally interested investors such as UK local government pension schemes.
Octopus entered the UK affordable housing market in May year with the acquisition of a registered provider of social housing.
The company said last year’s acquisition ensures the newly launched “strategy is subject to appropriate regulatory oversight” and enables the company to draw on grant funding, where appropriate.
The new UK affordable housing strategy will use a fully onshore, unlisted real estate investment trust structure, the managers said.
Jack Burnham, head of affordable housing and the new started at Octopus Real Estate, said: “With housing associations searching for alternative funding routes for their development pipelines in the face of net zero costs and increased cost of debt, and local authorities aiming to move back into large scale social housing provision, there is a real need for trusted partners and private capital to step up.
“This is exactly what we are trying to do with our strategy, by helping institutional investors to channel their money into this area.
Jennifer Ockwell, the head of institutional at Octopus Investments, said: “It has been great to see some initial investors going through the process of due diligence who are passionate about the social impact potential. However, there is a clear financial opportunity too.
“In general, affordable housing has low correlation to other property markets and the wider economy. With this in mind, the strategy is able to offer steady income, supported by government-backed inflation-linked revenues, and long-term capital growth.”
Benjamin Davis, CEO of Octopus Real Estate, said: “Our mission to invest in the people, ideas and industries that will change the world, our B Corp status, and our track record of both purpose-led and specialist real estate investing, means we can go a long way in helping to combat these challenges and deliver affordable housing with a difference.
”We’re here in this market to be a ‘forever landlord’, we plan to build a portfolio that we are proud of, and that investors can be proud of, for decades to come.”
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