BMO Real Estate Partners has reached its first close for its newly developed UK housing strategy.
The first close is understood to have raised under £100m and will be used to demonstrate the concept of the fund, which is aiming to provide purpose-built mid-market rental homes for low- to middle-income households.
It is launching now in order to take advantage of immediate opportunities within its circa £250m investment pipeline.
BMO REP is aiming to raise around £500m for the open-ended fund overall, targeting a circa 6% return and 4.5% annual distribution yield.
It will work alongside its development and operating partner Home Group.
Angus Henderson, head of business development at BMO REP, said: “This fund enables us to provide a much-needed housing solution to low and middle-income earners while generating sustainable, inflation-linked long-term income returns for investors.
“We have identified a significant pipeline of short to medium-term opportunities which we are hoping to imminently take advantage of.”
Mark Henderson, chief executive of Home Group, added: “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 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.
“Expanding Home Group’s housing delivery model into the private rented sector through the relationship with the BMO UK Housing Fund and the utilisation of the flexible rent leasing mechanism, we are 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.”
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