L&G kicks off £1bn UK private rented strategy

The principal investment division of UK insurer Legal & General has acquired a developments site in London for £25m in what is expected to be the first of many private rented residential deals it undertakes.

Legal & General Capital, the principal investment division of UK insurer Legal & General, has kick-started a £1 billion (€1.37 billion; $1.55 billion) program of investments in the UK private rented residential sector with a first acquisition.

L&G Capital announced today it had acquired a regeneration site in Walthamstow in east London for £25 million. It plans to develop and rent more than 300 apartments on the site. It will be built and managed by L&G’s property arm, Legal & General Property.

The firm said in the announcement: “On completion the rent from the flats will provide an attractive long-term institutional investment return.”

“By investing in projects such as Walthamstow, Legal & General can access a supply of PRS assets and achieve a better match to long-term annuity liabilities than existing fixed income assets, enhance returns across the group, and provide real economic growth for the UK by creating much needed new housing.”

Laura Mason, director of investment at L&G Capital outlined how the UK in general had a chronic shortage of housing. She said: “Today’s investment and our future plans for the PRS sector should help address the structural issues which have contributed to the shortage.”

L&G Capital invests capital from L&G’s balance sheet. The firm has invested £4.6 billion in direct investments and infrastructure “over the last couple of years”, it said.

L&G is one of a number of real estate investment management houses keen to take advantage of a lack of housing supply in the UK and the absence of an institutional private rented housing sector. While such a sector has existed for a while in the US, the UK has long lagged behind and only in the last few years have investment managers recognized and attempted to seize the opportunity.