London fund with negative cash-flow invests in build-to-rent

A London public sector pension fund has invested in a UK build-to-rent property portfolio, saying the assets would “complement” the fund’s investment in European commercial real estate.

The London Borough of Lambeth Pension Fund also said that income from the build-to-rent sector would help the pension scheme to pay benefits, as the fund is “projected to be in negative cash-flow”.

Lambeth has invested £42 million (€47.8 million) into the Invesco Real Estate UK Build-to-Rent strategy.

Andrien Meyers, head of treasury and pensions at the Lambeth fund, said: “The Invesco offering allows the fund to complement its exposure to European commercial property whilst continuing to address its objectives of diversification and inflation protection.

“Further as the fund is projected to be in negative cash-flow over the next six or so years, the need for income to pay benefits will be also be addressed.”

Additionally, Meyers said Lambeth “would like to think it is playing a small part in addressing the country’s housing crisis” via its investment.

Invesco Real Estate said it had managed to amass over £350 million of assets under management since the launch of the UK buy-to-rent strategy in 2014, and this included money from investors in Australia, Canada and Europe.

The firm said the strategy was viable due to Britain’s “growing imbalance in residential supply and demand, the cost of owner occupation and the growing trend for the flexibility of renting”.

To date, the firm has committed to ten investments in the UK for the strategy, with six in regional towns and cities including Exeter, Greater Manchester and Liverpool, and four in London and the South East.

The strategy currently holds 1,700 units in total, including those under construction, for a total investment of around £425 million.

Simon Redman, who heads Invesco Real Estate product development, said the pension fund had shared Invesco Real Estate’s assessment that the UK build-to-rent sector offered low correlation with commercial real estate, equities and gilts. The sector also has a long-term return profile and “relative stability” of income.

©2018 funds europe

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