PfP Capital secures additional £20 million equity commitment from Strathclyde Pension Fund to accelerate Scottish affordable homes-for-rent strategy
19 April 2023
PfP Capital, the social value and ESG-focused real estate fund manager, has secured a further £20 million equity commitment from Strathclyde Pension Fund, one of the largest LGPS funds in the UK, for its Mid-Market Rent (“MMR”) strategy (“New Avenue Living” or the “Fund”).
Having delivered 511 energy efficient homes to date in major Scottish cities with another 590 under development, this investment will support the delivery of the next phase of high quality, affordable homes-for-rent being delivered by PfP Capital in Scotland. It has been secured against a backdrop of declining new housing delivery, a cost-of-living crisis and the imminent deadline to meet minimum environmental standards.
This latest commitment takes Strathclyde Pension Fund’s total investment in the Fund to £45 million, and reflects the continued appetite from LGPS funds for exposure to critical real estate that delivers a tangible environmental and social difference. Other investors in the Fund include the Scottish Government, Scottish National Investment Bank, Nationwide and Places for People Scotland.
New Avenue Living has a mandate to deliver 1,500 high quality, sustainable and energy efficient affordable homes for rent, let at a discount to open market rents, within close commuting distance of major Scottish city centres. Since launching the Fund in 2019 with a low-cost loan from the Scottish government, PfP Capital has acquired nine sites across Edinburgh, Leith, Glasgow, Paisley, and Midlothian, with additional sites being sought to support the Fund’s 1,500 target.
In line with PfP Capital’s wider commitment to create and regenerate residential-led communities across England and Scotland through both an environmental and social lens, the current investment portfolio aims to deliver EPC B rated or higher homes. Additional social impact and ESG metrics have also been adopted to measure apprenticeships, training, brownfield land regeneration and community contributions.
William Kyle, MMR Fund Director for PfP Capital said: “By bringing together like-minded and highly experienced counterparties, we see affordable, mixed-tenure housing communities with high sustainability credentials providing a blueprint for future housing delivery in the UK. For patient capital, and now more than ever amid the search for returns in today’s changed market environment, this type of real estate investment offers a rare combination of social value alongside competitive and stable long term, day-one returns.
“The continued support of Strathclyde Pension Fund is testament to our strong credentials as a differentiated social value fund manager with a singular strategy, track record of delivering successful schemes and communities, and the not-for-dividend Group status enables PfP Capital’s profits to be recycled onwards for more social value via Places for People. Given our structure and approach, we believe we are uniquely placed to play a major role in helping to alleviate the chronic housing shortage in Scotland alongside our partners, and very much hope more institutional investors will join to accelerate this critical housing provision.”
Ian Jamison, Investment Manager at Strathclyde Pension Fund, added: “We are delighted to be increasing our commitment to PfP Capital’s pioneering New Avenue Living affordable housing strategy, via our Direct Impact Portfolio. The strategy meets our requirement to achieve satisfactory, risk adjusted financial returns alongside realsocial value through the development of additional, highquality affordable homes in Scotland.
“We also recognise the additional benefit our investment has, with profits generated by PfP Capital being recycled to its parent, the large, not-for-dividend social enterprise Places for People Group to further its social objectives. We continue to enjoy working closely with PfP Capital’s knowledgeable and specialist team.”