LGPS Central has made a £40m (€48m) commitment to PGIM Real Estate’s open-ended UK affordable housing fund.
The asset pool for eight UK local government pension schemes (LGPS) based in the Midlands said the commitment is the first investment made by its UK Residential Indirect Property Partnership.
LGPS Central said three of its partner funds – Cheshire, Derbyshire and Staffordshire pension funds – contributed to the seed funding.
The LGPS Central UK Residential Indirect Property Fund was established to invest indirectly across all of the sub-sectors of residential property including social housing, affordable housing and the private-rented sector.
In December last year, LGPS Central also launched LGPS Central UK Direct Property Fund, a £500m fund to invest directly in a range of real estate assets in the UK.
PGIM Real Estate’s UK Affordable Housing strategy typically targets properties located on the outskirts of towns and cities across the UK. The strategy prioritises new build and low-rise housing near schools, employment centres and leisure facilities.
The latest investment brings the fund’s total size to over £400m, with a target of £1bn.
As previously reported, Northern LGPS and Brunel Pension Partnership invested £190m in the UK affordable housing fund.
Mike Hardwick, investment director for property at LGPS Central, said: “We are thrilled to confirm our first investment from the UK Residential Indirect Property Partnership into the PGIM Real Estate’s UK Affordable Housing strategy. This investment underscores our commitment to achieving robust investment returns for our partner funds whilst also addressing the critical need for affordable housing in the UK.
“PGIM were chosen due to their investment approach aligning with our own in ensuring that the investments contribute positively to society and the environment.”
Oscar Kingsbury, portfolio manager of PGIM Real Estate’s UK Affordable Housing strategy, said: “We feel that the market is at an important inflection point. Whilst there remains significant demand for affordably let single-family housing, there is continued uncertainty in the wider new-build sales market which is creating buying opportunities, at a time when borrowing costs are falling. Therefore, we welcome LGPS Central’s important commitment, to enable the strategy to grow at this time.”
Spokespersons for Cheshire, Derbyshire and Staffordshire pension funds, said: “We are delighted to have been involved in the development of LGPS Central’s UK Residential Indirect Property Partnership as seed investors and to support the increased supply of much needed affordable housing across the UK.
“We welcome the announcement of the commitment to PGIM Real Estate’s UK Affordable Housing strategy, with its focus on delivering affordable homes to families across the UK with strong social and environmental objectives.”
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