PfP Capital fund on track to hit initial GBP160m target for affordable housing in Scotland
PfP Capital, a fund management business established by Places for People, has secured investments from two major UK pension funds as part of its fund-raising target of GBP160 million for its affordable housing-focused Fund.
Significant investments totalling GBP85 million have been made by the Nationwide Pension Fund and Strathclyde Pension Fund. Due to significant demand for the fund, PfP Capital intends to raise its target fund size to GBP240 million initially, in line with its short term pipeline of development opportunities, before looking to grow beyond GBP400 million in due course.
Nationwide Pension Fund has committed GBP60 million while Strathclyde Pension Fund has committed GBP25 million to the Fund. Together with investment from Castle Rock Edinvar and Scottish Government, the investment from Strathclyde and Nationwide Pension Funds takes total capital committed to the fund to more than GBP140 million.
The PfP Capital Mid-Market Rent (MMR) Fund was launched in June 2018 supported by a GBP47.5 million loan from the Scottish Government. In addition, Castle Rock Edinvar has committed GBP10 million.
The Fund was established to deliver a minimum of 1,000 affordable mid-market rental homes including a mix of apartments and family houses within commuting distance of Scotland’s main cities, as part of the Scottish Government’s commitment to deliver 50,000 affordable homes by 2021. The Fund will provide a range of accommodation options to those for whom the traditional private rental sector remains out of reach and who are not able to access social housing. Housebuilding, particularly in the affordable sector, will have a vital role to play in restarting the economy in the wake of the Covid-19 crisis with each GBP1 invested sustaining GBP2 of economic output in the wider economy as well as generating considerable employment. In addition to being a key driver of economic growth, the delivery of Mid-Market Rent housing plays a key role in addressing the shortage of quality homes available for a range of key workers. Our development locations, close to urban centres and some key healthcare facilities, are ideally placed to offer homes to those who provide vital services to the community.
Data from Rettie & Co indicates that housing demand is set to increase much faster than the population, 12.7 per cent by 2041. The shortage of affordable rental accommodation is an acute problem in Scotland, highlighted by a recent MMR development in Edinburgh which saw more than 3,000 applicants for the 138 homes available.
Since the Fund’s launch, it has acquired eight developments in Scotland including sites in Edinburgh, Glasgow and Paisley which will deliverer a total of 855 homes. A first phase of homes have been completed at the Paisley site with further handovers both there and in Edinburgh scheduled for the second quarter of 2020. These deals highlight the opportunity for institutional investors to support Scotland’s affordable housing programme while securing the CPI-linked income streams and stable returns of MMR.
William Kyle, Fund Director, PfP Capital, says: “This fund has a unique proposition for investors. It has social impact at its core, delivering much needed additional affordable homes in Scotland to those on low and modest incomes who are not able to take advantage of social housing nor can afford traditional private rentals. The Fund will also deliver consistent, CPI-linked returns to investors. We are delighted to be working with Nationwide and Strathclyde Pension Funds to deliver these homes in line with the Scottish Government’s broader housing ambitions and look forward to growing the fund in the coming years.”
Mark Hedges, Nationwide Pension Fund, says: “The Fund is delighted to be investing in this opportunity alongside PfP Capital and Strathclyde Pension Fund and the Scottish Government. The investment delivers much needed long tern affordable housing in Scottish communities whilst providing the Fund with income that will help it to meet the pension benefits due to its members”
Ian Jamison, Strathclyde Pension Fund, says: “we are delighted to participate with the other investors in the PfP MMR Fund, firstly to deliver attractive financial returns to our pension members, but also to be able to contribute towards addressing the shortfall of affordable housing in Scotland’s major cities”
PfP Capital is being advised by Noble & Co.