LGC and PGGM team up to invest €790m in UK rental housing

UK-based investor Legal & General Capital (LGC) and Dutch pension fund manager PGGM are investing £600 mln (€790 mln) in a new joint venture to build private rental housing in the UK.

The partners said the initial investment would create 3,000 new homes and address the UK’s housing shortage. An estimated 974,000 new homes were needed between 2011 and 2014 but only 47% of these were built, according to the National Housing Federation.

LGC said PGGM would bring ‘substantial intellectual property’ to the joint venture with its 40 years of experience in the build-to-let sector. PGGM currently owns nearly €4 bn of residential investment property through strategic partnerships in the Netherlands and US.

LGC is the main investment division of UK insurance group Legal & General, which is responsible for investing £728 bn worldwide on behalf of investors, policyholders and shareholders.

PGGM is a co-operative Dutch pension fund service provider with approximately 700,000 members and €183 bn of assets under management.

Paul Stanworth, managing director of LGC, said an institutional private rental market was needed to improve the quality of housing stock. ‘The UK rental market, compared to the US and Europe, is dysfunctional, with ever increasing rents and increasingly poor accommodation,' he said. 'For this to change, and renting to become more affordable, we need to invest in the new and build new homes to rent, and just stop inflating the prices of old housing stock.’

Mathieu Elshout, investment director real estate at PGGM, added: ‘Investing in residential is the perfect long-term real estate investment, as it provides a relatively high income security and diversification relative to other sectors. This partnership allows us to build and own good quality residential assets in the UK at scale, with a high degree of control over our investments.’