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Thousands of rental homes to be built through new partnership between Nest, L&G and PGGM
Nest, the UK pension scheme managing £43 billion of assets on behalf of a third of the UK workforce, has today announced a new partnership with Legal & General (L&G) and PGGM, collectively investing up to a billion pounds into building Build to Rent schemes across the UK.
23 Sep 2024
- Partnership will build and manage high-quality UK rental properties
- Expected to grow to a portfolio of £1billion over the coming years, with initial £350 million committed
- New partnership bolstered by international investment from the Dutch pension fund service provider PGGM
- Minister for Pensions: “Today’s announcement highlights the opportunities for our pensions sector to contribute to our communities and grow the economy.”
Initially backed by £350 million of combined investment, this new partnership will build on L&G and PGGM’s existing joint venture and marks an exciting new investment opportunity for Nest’s members.
Amid sustained demand for high-quality rental housing, today’s commitment will also directly support the government’s target of delivering 1.5 million more homes.
Elizabeth Fernando, Nest’s Chief Investment Officer: “We’ve been carefully considering the UK market and where best to invest so that we can help boost our members’ pensions and support economic growth.We can see there’s a critical shortage of housing supply, coupled with increasing demand for high-quality rental homes. By building more properties, we can extend to our members a great investment opportunity while helping to meet this demand and bolster the rental market.
After working with L&G for many years, we’re delighted to extend our partnership into this new area. L&G and PGGM have already been successfully investing in UK Build to Rent sites, giving us confidence that this is a tried and tested approach we’ll now be extending to Nest members.
This is a great deal for our 13 million members and the UK. By also drawing in international investment from PGGM, we’re amplifying our impact and providing much needed residential properties across the UK.”
L&G and PGGM have been investing together in UK Build to Rent schemes through a joint venture called the Access Development Partnership (ADP). Launched in 2016, the ADP was established to expedite the delivery of high-quality rental homes across the UK whilst aiming to drive stable returns for institutional investors.
Since then, L&G has deployed over £3 billion of capital into the Build to Rent sector, delivering more than 10,000 rental homes – forming a key part of its growing residential platform, one of the largest and most diverse in the UK.
Today’s announcement is for the second phase of the ADP partnership, in which Nest will also now co-invest.
António Simões, Group Chief Executive Officer of Legal & General: “Today’s announcement and focused growth of our residential platform marks an important milestone for L&G’s ambitions in private markets and crowding in third-party capital. We’re proud to have facilitated investment from domestic pension schemes as well as international private capital – underpinning the UK Government’s push to boost investment into productive assets, accelerate growth, and deliver pensions savings.With an inherent supply and demand imbalance, there is a big gap to fill – and thus a need to drive up the delivery of all homes, across all tenures. Institutional investment has an important role to play, and we expect investor demand in the UK’s Build to Rent sector to continue to grow.
The launch of ADP in 2016 was the catalyst that has enabled L&G to deliver 10,000 high-quality rental homes across the UK’s city centres. We’re therefore delighted to re-capitalise with PGGM and welcome a new co-investor in Nest. Thanks to this commitment, we are not only accelerating delivery but also unlocking DC pensions access to the investment opportunity within the residential sector. It’s a strong step forward in putting pensions to work.”
With locations already lined up, all new rental schemes will be targeting net zero in operation by 2030 and will be built on brownfield sites in city centres.
Dirk Bootsma, Sr. investment manager Private Real Estate at PGGM: “This new partnership with renowned investors L&G and Nest fits perfectly in our PGGM strategy to realise sustainable, high-quality mid-segment rental homes in the UK. This investment not only generates stable financial returns for our client PFZW, the Dutch pension scheme for healthcare workers, it also contributes to relieve a stressed housing market which poses a huge challenge to key workers. For PFZW, investments in sustainable real estate contribute to reaching its climate impact goal to reduce the equivalent of 15 Mega ton CO2 by 2030 through measurable impact investments.’’
The government has previously called on the UK defined contribution pension industry to consider boosting investment in UK assets to aid UK economic growth.
Emma Reynolds, Minister for Pensions: “Today’s announcement highlights the opportunities for our pensions sector to contribute to our communities and grow the economy.I am delighted that Nest is harnessing the financial power of pensions to deliver more of the homes this government has pledged to build, which also serves as an excellent investment opportunity for future pensioners in their scheme.
The Government’s landmark pensions review seeks to unlock billions of pounds of investment in the UK economy and drive pension capital into long term growth assets to make every part of Britain better off.”
Further information
Jessye Brandon
Senior PR Executive
LGIM Real Assets
T: 07584498775
Notes to editors
Established in 1836, Legal & General is one of the UK’s leading financial services groups and a major global investor, with £1.2 trillion in total assets under management (as at FY23) of which c40% (circa £0.5 trillion) is international.
We have a highly synergistic business model, which continues to drive strong returns. We are a leading international player in Institutional Retirement, in Retail Savings and Protection, and in both public and private markets through our Asset Management division. Across the Group, we are committed to responsible investing and dedicated to serving the long-term savings and investment needs of customers and society.
As at 7 June 2024, we estimate the Group’s Solvency II coverage ratio to be 224%.
As at 11 June 2024, Legal & General has a market capitalisation of £14.6 billion.
L&G’s Asset Management division is one of Europe’s largest and a major global investor across public and private markets, with £1.2 trillion in assets under management1.
The division combines deep expertise in asset management and origination with global distribution capabilities to deliver positive outcomes for our clients, which include individual savers, pension scheme members and global institutions, investing alongside L&G’s own balance sheet. As a global investor, we are present where our clients need us – from Hong Kong and Singapore, to major European financial hubs, to Chicago – operating under the Legal & General and LGIM brands.
We provide investment solutions across the full spectrum of asset classes, ranging from index-tracking and active funds to liquidity and liability-based risk management strategies. Through our private markets platform, we utilise our rich heritage and extensive network of partners to offer access to a wide range of purposeful alternative investment opportunities, including specialist real estate, clean energy, infrastructure, venture capital, unlisted equities and private credit.
Our division is underpinned by our enduring commitment to responsible investment, dedicated to creating long-term, sustainable value for our clients and partners.
1Data as at 31 December 2023.