Legal & General Group’s Retirement Institutional business is seeking to deploy around £500m of funds into build-to-rent projects across the UK this year, ending a pause on its investment activity in the sector.
LGIM Real Assets, which last year secured a mandate with LGRI to commit £2.5bn in BTR schemes over a five-year period, said £1bn of capital was invested between August 2021 and October 2022. No further funds have been deployed since, but LGIM RA has now resumed its search. The five-year strategy is aiming to deliver more than 7,000 new homes.
Dan Batterton, head of residential at LGIM, told EG the BTR market has displayed strong rental growth dynamics amid the wider macroeconomic woes that took hold in H2 last year. He said its strategy was underpinned by “a huge number of deals under offer” in the BTR sector that are expected to close in Q1 this year.
“We could be close to a record Q1 if they all get over the line,” said Batterton. “I think the opportunity is there. The market is active. We haven’t seen yields hugely move out. So, suddenly, everybody is calm and comfortable again and wants to get the market moving.”
Batterton said he expects build cost inflation to slow down this year, creating more certainty when entering new-build contracts.
He said the business was targeting expansion to new city locations, with Oxford, Cambridge, Bournemouth and York on the wishlist.
“There are some cities we haven’t invested in yet, which we are actively looking at. Oxford and Cambridge would be nice, but very difficult to invest into,” said Batterton.
“Oxford and Cambridge have got fairly young populations with that post-university desire to stay, and they are very constrained markets. Because they are so tightly controlled, with lots of land controlled by specific organisations or by the university, it becomes quite a safe, long-term investment.”
Batterton added the business was “agnostic” on finding development partners for any new schemes. “We just want to end up with the best asset,” he said.
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