Meet The Pension Fund Pledging More Than £2B To Back The Rented Living Sector
The need for domestic pension funds to invest in UK real estate has been a big mantra for 2025. But the £2B deal that closed out the year wasn't the typical vanilla transaction UK pension funds are known for.
In a major collaborative step into the rented living market, a collection of local government organisations came together through their pension funds to pledge more than £2B to the housing market over the next 10 years.
Northern LGPS and Local Pensions Partnership Investments announced in November that they had acquired PRS REIT’s operating arm and existing portfolio for £1.1B, taking private the listed company. They also plan to invest £1B to grow the portfolio to 15,000 homes over the next decade.
“We’ve been actively exploring investments in the living sector for some time, with a particular focus on high-quality rented residential,” LPPI Real Estate Deputy Portfolio Manager Rachel Kwong told Bisnow in an interview outlining the JV's plans.
“The timing and scale of this opportunity aligned closely with that focus. Given the chronic shortage of quality housing and affordability pressures making homeownership challenging, the market fundamentals are strong and support our long-term thesis.”
The deal for PRS REIT’s operating arm saw its entire portfolio of 5,478 single-family homes brought under the ownership of Northern LGPS and LPPI. The homes are spread across 71 sites in England, Scotland and Wales.
Northern LGPS is made up of the Greater Manchester, Merseyside and West Yorkshire local government pension scheme funds, and LPPI manages assets on behalf of Lancashire County Pension Fund, the London Pensions Fund Authority and the Royal County of Berkshire Pension Fund.
“This is one of UK’s largest operational single-family housing portfolios, which gives us immediate scale,” Kwong said. “It also delivers income from Day 1, supported by high in-place occupancy. These attributes, taken together with the sector’s supportive fundamentals, made it a compelling investment for LPPI.”
Kwong said the consortium’s strategy will be to grow the portfolio “in a disciplined way” and to build a geographically diversified footprint across the UK over time. That will involve building another 10,000 homes, taking the total portfolio to 15,000 or so.
The existing portfolio has £427M of investment debt and £33M of development debt, a fact sheet for the listed company says, giving it a loan-to-value ratio of 36%. The investment debt is at an average interest rate of 3.8%.
The portfolio is about 98% occupied, produces rental income of about £67M a year, and like-for-like rental growth in the year to September was 9%. Its greatest concentration of homes is in the Greater Manchester area, where it owns 2,089 homes, and the Midlands, where it owns 1,168.
The average rent at one of its properties is £1,115. Only a third of its homes are rented to households that earn £65K or more, and 13% earn less than £25K.
While the existing assets are weighted toward the north of England, Kwong said the partnership aims to broaden its reach across UK regions as the partners secure future opportunities.
“The mix will be shaped by quality, balance and resident experience at the centre as we scale. We will commit additional capital as investments are agreed, rather than to a fixed timeline,” Kwong said of the additional £1B investment pledge.
She also said that although the first transaction has focused on the burgeoning SFH sector, LPPI and Northern LGPS will consider investment and development across all asset types within the rented living market.
“Our focus is on high-quality rented homes, with the potential for future investments in single-family homes, multifamily build-to-rent homes or both, depending on what best fits the portfolio and the opportunities that are available in the market,” Kwong said.
At the time of the announcement, both parties said the partnership demonstrated what could be achieved when pension funds work together at scale.
“This joint venture, delivered through our LPPI Real Estate Fund, is a great example of the positive impact pension capital can have in the communities of pension fund members, and of the power of cross-pool collaboration,” LPPI Investment Director Louise Warden said at the time of the announcement.
“The undersupply of quality rental properties in the UK is well documented. We want to help tackle this issue while accessing an asset class that offers our members exactly what they need. Our plans to scale the portfolio significantly underline our confidence in this strategy and commitment to long-term investment in UK housing.”
