UK’s largest pension fund has partnered with Places for People to form a £330m (€376.1m) joint venture to invest in the UK private rented sector (PRS).
The £60bn Universities Superannuation Scheme will provide the core funding for the partnership.
Places for People’s fund management business PfP Capital will act as asset manager with Touchstone, the group’s specialist property management business, managing the portfolio on a day-to-day basis.
In March last year, Places for People, a former housing association, created PfP Capital. The UK property manager also moved 1,379 units worth around £150m into a new PRS residential fund. The units will seed the new vehicle and aimed to double in size to £300m.
PfP Capital said following dialogue with a range of investors, USS was selected as its preferred partner, funding the whole of the original investment target with Places for People holding a 10% stake in the joint venture.
The joint venture will acquire a seed portfolio of residential assets from Places for People for around £150m, with an option to acquire a further £10m of similar assets post completion.
The portfolio includes a range of modern, mid-market properties, a high occupancy rate and wide geographical spread across the UK.
The remaining commitments will be used for the acquisition of further PRS assets across the UK.
The joint venture will be managed by Tim Saunders, a fund director at PfP Capital.
Saunders said: “The new joint venture reflects the strong levels of interest from the institutional investor community in the UK private rented sector. There is a clear opportunity for experienced investors, developers and managers to take advantage of the significant potential for future growth from PRS.
“Through the seed portfolio, the joint venture will benefit from an attractive income yield from day one and we look forward to working closely with USS to invest the additional capital in strategic opportunities around the UK. Equally, in USS, we are thrilled to partner with such a high-profile investor, whose own experience will be hugely valuable moving forward.”
Alex Turner, the deputy head of property at USS, said: “USS is committed to investing in real estate assets of long-term value, providing a secure income with significant potential for growth for the benefit of our members.
“This new joint venture establishes our foothold in the PRS sector, which has experienced strong growth in recent years with a bright long-term outlook. Our relationship with PfP Capital and their knowledge of the sector will enable the joint venture to identify well-priced assets across the country.”