Invesco Real Estate has made its first UK private-rented sector (PRS) investment on behalf of a UK local authority pension fund.
Invesco will buy 118 PRS units for 拢32.5m in Hayes, west London, from Willmott Dixon鈥檚 be:here division on behalf of its client. The client will purchase the site鈥檚 freehold and fund the scheme鈥檚 development, due for completion in 2016.
John German, Invesco鈥檚 director of residential investments, told IP Real Estate that the decision to invest in the scheme was aided by the company鈥檚 knowledge of residential property in the US, where it has $6bn of multi-family real estate under management.
German, who joined Invesco last year, said: 鈥淯p until recently, European residential was only part of our strategy and was not part of our core European business.鈥�
Invesco, German said, began monitoring the UK residential sector in 2012 and made its first investments in Europe last year, spending 鈧�130m on two projects in Germany.
鈥淩ents typically track average earnings and, while it鈥檚 not directly RPI, you鈥檙e getting an inflation-linked rental stream,鈥� he said, pointing to the fact that London has a higher proportion of rent-paying residents than the rest of the UK. The London region, he added, was a natural first stop for both Invesco and its client when investing in UK PRS.
鈥淧RS is a new sector for a lot of people and the most obvious choice is greater London,鈥� he said. 鈥淚t could be close to the M25 and not just within the M25.鈥�
Other UK locations, German added, will be considered, with a focus on large conurbations.
鈥淚t鈥檚 about the overall benefits of regional exposure where yields may be higher but rental income lower,鈥� German added.
Having a UK local authority onboard, was, he concluded, 鈥減retty pioneering鈥�.
鈥淭here are a number of similar entities seriously looking at UK PRS as a realistic investment opportunity,鈥� he said. 鈥淩eturns compare favourably with core commercial real estate.鈥�
A sensible hold period for the west London scheme, German said, would be seven to 10 years, but did not rule out keeping the property for longer.
