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Large housing association and asset management giant launch £500m housing fund to deliver new build to rent homes
Home Group has today launched in partnership with property giant BMO Real Estate Partners (BMOREP) a new £500m housing fund designed to accelerate the delivery of a new build-to-rent product.
The fund is intended to attract private investment into Home Group’s ‘flexible rent’ product, which allows homes to be rented out at different rates depending on residents’ incomes, locations and other circumstances.
Earlier this month, Inside Housing revealed the partnership between the 55,000-home association and BMOREP, a subsidiary of BMO Global Asset Management, a North American asset management firm that manages funds worth $263bn (£200bn).
BMOREP will act as the investment advisor to the fund, which currently has an investment pipeline of £250m, with the aim of raising around £500m of equity.
Home Group will be responsible for sourcing sites and providing part of the platform for the ongoing property management and leasing operations.
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The 55,000-home landlord first announced plans to introduce a ‘flexible rent’ model, which does not require government grant, in 2015.
Under the model, developers agree with planners a set rental income for an entire scheme; however, the rental incomes for individual flats would be flexible and change depending on the tenants’ circumstances.
The partners have said the fund will be governed by a “robust social agenda” aligning with rigorous environmental, social and governance objectives.
Several impact investors have already provided money to the fund. One of these is Big Society Capital, an independent social investment institution established by the Cabinet Office in 2012, which has invested more than £1.7bn into organisations with a social mission.
Earlier this month, Inside Housing reported that Homes England supported the idea, and had recommended that the government take an equity investment in the fund.
Mark Henderson, chief executive of Home Group, said: “As a country, we aren’t going to be able to build the homes we need without innovative approaches.
“A larger, professionally managed private rented sector (PRS) will have a positive impact in driving up standards.
“Making private renting better is crucial to ensuring everyone has a safe and affordable home to live in.
“By expanding Home Group’s housing delivery model into the PRS, through the relationship with the BMO UK Housing Fund and with the utilisation of the Flexible Rent leasing mechanism, we’re able to offer the sector the potential to provide more of the homes we need at an affordable level with funding coming from the private sector.
“It does not need government grant – yet can operate at scale.”
Angus Henderson, head of business development at BMO REP, said: “This fund enables us to provide a much-needed housing solution to lower and middle income earners, with the added opportunity to deliver a robust social agenda while generating sustainable income-based returns with inflation-linkage for investors.
“To achieve this, Home Group was very carefully selected as BMO REP’s development and operating partner, thanks to its long-term track record and deep-seated experience in building and managing large-scale housing solutions, with an emphasis on improving the private rented sector with a management-responsible approach.”
Update: at 09:38 22/01/20 This story has been amended. It initially called the fund a £250m fund. This has now been changed to £500m, as this reflects the investment aim of the fund and the £250m relates to the current investment pipeline.
