PRUPIM, the real estate investment management arm of M&G Investments, has confirmed it has exchanged contracts to acquire the £105.4m residential portfolio owned by The Berkeley Group and partially funded by the Homes and Communities Agency.
This is the first time in more than 10 years that a large institutional investor has ventured into the UK’s £840bn rental market. The move could be the beginning of a return to pre-1945 when insurance firms and other groups had substantial property portfolios.
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.
Alex Jeffrey, chief executive of PRUPIM, said: “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.”
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 and HCA, the national housing and regeneration agency, collaborated on the construction in August 2010, using HCA funding to kick start the development.