Genesis enters into £125 million investment agreement
Published by Max Salsbury for 24dash.com in Housing and also in Development, Finance
Genesis enter into £125 million investment agreement
Genesis Housing Association is entering into a £125 million agreement with an investment manager - the largest initiative of its kind and the first in London.
The social landlord's deal with M&G Investments is for its Halo development in East London, and is the first institutional investment in residential real estate for M&G’s Secured Property Income Fund (SPIF).
Genesis - which manages around 33,000 homes in London and the South East - says that the venture will provide it with a greater capacity to invest in regenerating balanced communities and in good quality naffordable housing.
The landlord sought the deal in response to last August's Montague Report, which identified the potential of financial institutions as providers of funds for build-to-let properties to satisfy demand for new housing.
Genesis also anticipated the Future Homes Commission's recommendations that the shortage of quality housing could be solved by a "major overhaul" of the way the UK funds, builds and markets new housing.
M&G has agreed to acquire a portfolio of 401 market rented units at Stratford Halo, a 43-floor residential development at the main entrance to the Olympic Park in East London.
Robert Kerse, Genesis’ executive director of resources, said: "This timely initiative is an innovative and far-sighted response to current circumstances in which government assistance is no longer available.
"Genesis is recouping its investments and focusing on regenerating communities by building a diverse range of good quality rental housing in London at a time when young professionals and families on modest incomes are finding it harder than ever to secure homes. As a regulated and reputable landlord, we will retain the management of these properties so ensuring a professional service and avoiding the problems which can arise under multiple or absentee landlords."
Ben Jones, fund manager of M&G's SPIF, said: "This is a high quality investment with a 35 year RPI linked lease that will help us to deliver inflation-linked returns, with good security, to our pension fund clients for a generation. The innovative transaction also provides our investors with much sought after exposure to the long term capital growth potential of London residential real estate but within an institutional investment framework.
"There is significant demand from pension funds for investment into housing and social infrastructure provided it is delivered on a transparent basis and directly assists with their desire for long term inflation linked cash flows to match their liabilities. With the addition of Stratford Halo, the M&G Secured Property Income Fund will have a £1.35bn portfolio of 32 assets across the UK. Over the past three years, this portfolio has delivered an annualised return of 7% over inflation. We have significant additional capital to invest and remain interested in acquiring similar assets on both a completed and development funding basis for the right assets."
Jonathan Clarke, Genesis’ director of corporate finance, added: "This transaction is a strategic response providing Genesis with greater investment capacity in the future when the level of public subsidy for new affordable housing in expected to fall further. Genesis has a history of innovation in terms of providing housing in appropriate tenures to meet the needs of communities and, unlike many housing associations, has extensive experience in managing market rent properties."