Tuesday, September 29, 2020
Real Estate

Home Group and BMO Real Estate Partners launch £250m housing fund

Real Estate

Housing association, Home Group, and property giant BMO Real Estate Partners (BMOREP), have launched a new £250m housing fund to deliver a new build-to-rent product

Home Group, in partnership with property giant BMO Real Estate Partners (BMOREP), has launched a new £250m housing fund to deliver a new build-to-rent product.

The fund is targeting £500m, and aiming for a 6% return and 4.5% annual distribution yield. Investors in the fund include Big Society Capital.

The fund is intended to attract private investment into Home Group’s ‘flexible rent’ product, which allows homes to be rented out at different rates depending on residents’ incomes, locations and other circumstances.

Earlier this month, Inside Housing revealed the partnership between the 55,000-home association and BMOREP, a subsidiary of BMO Global Asset Management, a North American asset management firm that manages funds worth $263bn (£200bn).

BMOREP will act as the investment advisor to the fund, responsible for capital raising and governance as well as the underwriting and purchase of sites and assets, forward funding any construction. Home Group will be responsible for sourcing sites and providing part of the platform for the ongoing property management and leasing operations.

BMO Real Estate Partners is part of Bank of Montreal’s Global Asset Management Business.

Under the ‘flexible rent’ model, does not require government grant, developers agree with planners a set rental income for an entire scheme; however, the rental incomes for individual flats would be flexible and change depending on the tenants’ circumstances.

The partners have said the fund will be governed by a “robust social agenda” aligning with rigorous environmental, social and governance objectives.

Several impact investors have already provided money to the fund. One of these is Big Society Capital, an independent social investment institution established by the Cabinet Office in 2012, which has invested more than £1.7bn into organisations with a social mission.

Chief executive of Home Group, Mark Henderson, said that as a country, the UK is not going to be able to build the homes that are needed, without innovative approaches.

Henderson said that a larger, professionally managed private rented sector (PRS) 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.

By expanding Home Group’s housing delivery model into the PRS, through the relationship with the BMO UK Housing Fund and with the utilisation of the Flexible Rent leasing mechanism, they are able to offer the sector the potential to provide more of the homes that are need at an affordable level with funding coming from the private sector. It does not need government grant – yet can operate at scale.

Important:
This article is for information purposes only.
Please remember that financial investments may rise or fall and past performance does not guarantee future performance in respect of income or capital growth; you may not get back the amount you invested.
There is no obligation to purchase anything but, if you decide to do so, you are strongly advised to consult a professional adviser before making any investment decisions.

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