PRUPIM, the real estate investment management arm of M&G Investments, confirms it has exchanged contracts to acquire a £105.4m residential portfolio owned by The Berkeley Group Holdings plc and partially funded by the Homes and Communities Agency (HCA).
The portfolio consists of 534 private rental units in 13 locations across Greater London, the south east and southern England. PRUPIM will take on the management of the portfolio on completion, currently expected to be in June 2013 and Berkeley will become a minority co-investor. On completion of the transaction, the day to day management of the properties will be undertaken by Savills, the global real estate services provider.
Outlining the benefits of the deal, Alex Jeffrey, Chief Executive of PRUPIM, explains: "The expanding residential rental property market, particularly in London and southern England, is gaining in appeal for institutional investors. We believe that returns from the sector - which have historically outpaced commercial real estate - will continue to be attractive as demand increases. We expect the supply and demand dynamics of the residential property market in London and the South East to remain favourable for investors, with continued strong demand for quality properties.
"For institutional investors, the challenge of the residential rental sector has been two-fold: can you acquire property in sufficient scale and how will you ensure the units are managed to a high standard? This deal meets both aspects of that challenge. We're acquiring a diverse portfolio of high quality properties, while Savills contributes its considerable experience of the day-to-day management of rental homes. This is the sort of portfolio that would fit well within a fund dedicated to the rental sector."
The properties were developed under the 2009 Private Rented Sector Initiative, a scheme designed to attract more institutional investment to the UK housing market. Berkeley, the UK housing developer and HCA, the national housing and regeneration agency, collaborated on the construction in August 2010, using HCA funding to kick start the development.
Richard Hill, Interim CEO at the HCA, adds: "This exciting deal, with a company as highly regarded as PRUPIM, demonstrates the long term benefits that can be realised by investing in the private rented sector."
Rob Perrins, Managing Director of the Berkeley Group, comments: "The Private Rented Initiative was a pioneering way to provide high quality, professionally managed and affordable rented homes across London and the South East. This announcement is an excellent example of a public and private partnership working together to deliver against an ambition to attract long term institutional funding into the private rented sector."
PRUPIM was advised by Savills and Berwin Leighton Paisner. HCA was advised by CBRE.
PRUPIM, part of the M&G Group, is one of the world's 20 largest real estate fund managers, managing investments for third party retail and institutional clients and M&G / Prudential Plc.