Two BAE Systems pension funds are investing in UK affordable housing provider Rentplus, with their in-house manager having approved an initial £35m investment (€44m) that may be followed by a further commitment of the same size.
According to Rentplus, the funding is the first to contribute to a target of £1bn of institutional and pension fund investment that the company requires to deliver a national pipeline of 8,500 rent-to-buy homes.
The investment of up to £75m was approved by BAE Systems Pension Funds Investment Management (BAPFIM), which manages three defined benefit schemes for the corporate plans’ trustees and has £16bn of assets under management.
The Rentplus investment is from two of the pension funds and will go towards helping the provider deliver 580 homes out of an initial target to build 5,000 affordable homes by 2020.
Plymouth-based Rentplus has already agreed to deliver 500 homes in partnership with Plymouth City Council in Dorset.
An initial £35m has been approved for a privately placed inflation-linked bond, with the possibility of an additional £35m commitment.
No further information about the terms of the bond or the criteria for the further commitment was available at the time of publication.
The funding structure was developed over 18 months, according to a statement.
David Cryer, portfolio manager at BAE Pension Fund, said: “Rentplus offers a great solution for local authorities and housing associations to provide an affordable housing product – we have a strong commitment to both sectors, and, therefore, this is an excellent fit for the pension fund.”
Rentplus said it was in talks with a number of other potential funding partners to secure the remainder of the £1bn target investment.
Its chairman, John Gildersleeve, said affordable housing was an “increasingly desirable” investment vehicle for institutional investors and pension funds.
Intermediate rent-to-buy, the model operated by Rentplus, is expected to become increasingly popular as “housing associations and local authorities explore new solutions to the affordable housing crisis,” said Gildersleeve.
The announcement of the BAE Systems pension fund investment in Rentplus comes after Lancashire County Pension Fund, a UK local government pension scheme, increased its investment in affordable-housing provider Heylo Housing from £180m to £300m.
Pension Insurance Corporation has in the past provided funding for a UK housing association, having in 2012 bought a £50m bound issued by Raglan; Raglan later merged with Jephson to become Stonewater.
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