M&G Investments finances private and social residential development (UK)

M&G Investments has struck a deal with developer be:here, a subsidiary of Willmott Dixon, and housing association Poplar HARCA, to fund the development of 233 residential units at Aberfeldy New Village, East London. The development will provide a mixture of social, affordable and private rental units.

M&G has acquired a 250 year long leasehold interest in the land at East India Dock and is providing the development funding to be:here. Completion of the development will initiate a 30 year lease to Poplar HARCA, at an initial rent of £2.6 million with annual rent reviews linked to inflation.

On expiry of the 30 year lease, the social and affordable units will revert to Poplar HARCA for £1 and M&G will retain ownership of the private rental units (with Poplar HARCA having the right to renew its lease over those units). The private rental units will be let under the be:here brand with Poplar HARCA responsible for the on-going management of the tenancies, including all outgoings, maintenance and repairs during the lease term.

The capital for the development is provided by the M&G Secured Property Income Fund*. This fund owns real estate on long leases, such as supermarkets, hotels, offices, residential and student accommodation, to provide its pension fund investors with returns linked to inflation.

This deal follows the first residential investment made by the Fund in January, when it acquired 401 market rented units at Stratford Halo in a sale and lease-back transaction with Genesis Housing Association. M&G funds have now invested nearly £300m in residential assets this year alone.

Ben Jones, manager of the M&G Secured Property Income Fund, says: “This landmark transaction provides much needed capital for the development of social, affordable and private rented housing in London. It’s a simple funding model that provides significant benefits to all parties. It provides the developer with an attractively priced total funding solution, the housing association with long term ownership of the affordable and social rented units with no development exposure, and our pension fund clients with an income linked to inflation along with the long term capital upside potential of private rented London housing.”

“The fund has now completed on over £300 million of acquisitions this year alone and has significant capital to invest into further high quality investment and development funding transactions with rental income linked to inflation. In the past 12 months the fund has grown in size by £400 million and will soon reach £1.5 billion, remaining the largest fund of its kind.”

The fund was advised by M&G Real Estate, formerly known as PRUPIM.

Source: Quill PR

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