PGIM Real Estate has launched its UK Affordable Housing Fund, with an initial capital raise totaling £190 million, from the Northern LGPS and Brunel Pension Partnership. PGIM Real Estate is the real estate investment and financing business of PGIM, the US$1.4 trillion global investment management business of Prudential Financial, Inc. (NYSE: PRU).
The open-ended income-focused UK Affordable Housing Fund targets a total return of 6-9% per annum, net of fees and costs, 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 million at launch. The Fund is managed by an experienced team of investment professionals at PGIM Real Estate including Senior Portfolio Manager, Paul Dennis-Jones and Head of UK Transactions, Charles Crowe.
Northern LGPS, combines the assets of Greater Manchester Pension Fund, Merseyside Pension Fund and West Yorkshire Pension Fund. Brunel Pension Partnership brings together circa £30bn investments from ten public pension funds across West and South West England. 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*. This investment will aim to help alleviate the supply and demand imbalance in the affordable housing sector.
PGIM Real Estate has a strong affordable housing track record, making its first investment in UK affordable housing in 2016 – which include portfolios in Hull, Reading, Southampton, Dunbar, Glasgow and South Yorkshire. Since 2010, PGIM Real Estate has committed $5 billion globally into more than 180 properties with ESG components -- including affordable housing and urban regeneration. With PGIM Real Estate’s robust ESG strategy and rigorous risk management framework, this strategy strengthens the firm’s long commitment to sustainability and ESG.
Charles Crowe comments: “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.”
Paul Dennis-Jones comments: “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.”
Councillor Ged Cooney, chair of Northern LGPS commented “Northern LGPS has a strong commitment to use the pensions of its members to seek to help solve societal issues whilst also obtaining appropriate risk adjusted returns. The UK has a severe housing shortage which urgently needs to be addressed. Patient long-term capital such as ours is well placed to help address this issue. We look forward to working with PGIM Real Estate and other investors over the coming years to develop the product and deliver an exceptional housing product to residents whilst also achieving a strong income-based return.”
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.”