PGIM Real Estate has launched its UK affordable housing fund with an initial capital raise totalling £190 mln (€216 mln), from the Northern LGPS and Brunel Pension Partnership.
The open-ended, income-focused fund is targeting a total return of 6-9% per annum by investing in and developing affordable homes for working people and families across the UK. The fund is also able to leverage, giving it the potential to deploy up to £250 mln at launch, PGIM said.
The fund is managed by a team including senior portfolio manager, Paul Dennis-Jones, and head of UK transactions, Charles Crowe.
Crowe said: 'We are pleased to unveil our UK affordable housing strategy, which has been supported by the Northern LGPS and Brunel. With a major supply/demand imbalance within UK affordable housing, PGIM Real Estate’s strong track record in this space provides a mutually beneficial opportunity for working people and families in the UK, as well as for income focused investors.'
According to PGIM research, there has been a collapse in supply of UK affordable housing since the 1970s, with lack of affordability exacerbated by the end of local authority housebuilding. In 2018/19, just 57,000 affordable/social homes were built in England, versus an estimated annual need of 145,000.
PGIM made its first investment in UK affordable housing in 2016, and today holds portfolios in Hull, Reading, Southampton, Dunbar, Glasgow and South Yorkshire. It has also committed $5 bn globally into more than 180 properties with ESG components, including affordable housing and urban regeneration.
Northern LGPS combines the assets of Greater Manchester pension fund, Merseyside pension fund and West Yorkshire pension fund. Brunel Pension Partnership brings together circa £30 bn investments from ten public pension funds across West and South West England.
Dennis-Jones added: 'This strategy strengthens our commitment to delivering positive sustainable solutions whilst creating value for our investors. There is a clear social need to be met in the affordable housing sector. Our deep global expertise in ESG, in combination with our long history of investing in this sector means we are able to build safe and quality homes to meet social demand and deliver long-term investment performance.'
Vanessa Jacka, investment principal, Brunel Pension Partnership, said: 'We are delighted our clients will now have access to this emerging but under-represented sector of the UK residential market.
The fund is intent on encouraging better practices, both environmentally and socially, in a housing sector where provision has historically been fragmented. PGIM Real Estate has a strong track record of raising standards in affordable rental and it is an area where the LGPS can provide long-term support whilst achieving appropriate investment returns.'
