Invesco Real Estate is the latest fund manager to launch a UK private rented sector fund despite growing concerns over a lack of stock in the sector.
The US investment giant is raising up to £400m of equity for the pooled fund, which has already secured an unnamed cornerstone investor.
The fund will initially target areas of London and the commuter belt where there is a shortage of homes for middle-income buyers, with a view to doing mostly off-market deals with private developers.
The closed-ended vehicle will have a four-year investment period over a seven- to 10-year lifespan, with a total annual return target of 8-9%.
However, Invesco – along with peers such as Hermes with Countrywide, which have recently launched PRS funds – will be grappling with a lack of suitable housing in which to invest.
Speaking at an Aberdeen property PRS conference, Richard Donnell, director at residential research firm Hometrack, said: “Housebuilders are primarily focused on building homes for sale to individual buyers. This may change if the market starts to cool, but at the moment there is no incentive for them to sell in bulk to institutional investors.”
The lack of suitable stock was also singled out as the biggest obstacle for the expansion of the PRS at a breakfast hosted by M&G Real Estate this week by the firm’s residential adviser, Alan Collett.
The firm’s residential fund manager, Alex Greaves, said there were “six to seven new PRS funds” currently in the pipeline which, combined with existing vehicles, could magnify the problem.
The UK private rented sector is valued at around £837bn, according to LaSalle Management Investment.
Track record
Invesco already runs two £200m-plus UK PRS-focused mandates from local authority pension funds. In May it completed its debut UK deal with the £33m forward purchase of 118 homes at the Old Vinyl Factory regeneration in Hayes, West London, from Wilmot Dixon for one of these clients. The firm has a long track record of PRS in the US, where it manages 100,000 homes with a combined value of more than $6bn (£3.8bn).
