Jess McCabe

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A business story

Unusually, I have a story in this week’s business section of Inside Housing:

Aviva to launch PRS fund with housing associations as managers

Aviva Investors is intending to launch a fund as part of plans to invest in at least 2,500 private-rented sector (PRS) homes, and wants to employ housing associations to manage the stock on its behalf.

Andrew Appleyard, head of specialist real estate funds at the institutional investor, told Inside Housingthat Aviva is likely to buy its first homes for market rental ‘at the earliest some time next year’. Its investments will initially come from its diversified property funds, but he added: ‘We would like to do something which is a dedicated fund.’

Aviva plans to buy tranches of 50 to 200 homes on new housing developments and regeneration sites, investing equity only once the planning and construction risk is eliminated. The investments will be capital investments, rather than debt, to reduce the risks of the development in any future downturn.

The homes will be aimed at the ‘mass market’ of private renters, rather than ‘high end’, and Aviva will employ third parties, including housing associations, to manage the homes.

Aviva has been examining this model for some time, and approached Hyde Group with the idea about 18 months ago, although that proposal did not go forward, as Hyde did not consider it a priority at the time. Simon Peacock, financial director of Hyde, said that housing associations, with their track record of managing large numbers of properties are ‘obviously attractive’ to Aviva.

‘It’s welcome that institutions are looking at doing direct investment into the sector,’ he added. ‘In terms of the processes that housing associations have got set up, they’re quite advanced in that in comparison to others’, Mr Appleyard said.

Mr Appleyard was tight-lipped on the specifics of Aviva’s plans, such as how much money it will invest and how many homes it intends to buy. However, Mr Appleyard said that Aviva must buy a minimum of about 2,500 homes to achieve the scale to make the investment worthwhile. He said that Aviva expects to generate returns on investment of around 7.5% from its PRS investments over eight to 10 years. ‘We are looking at a number of different opportunities, dominantly London and the south east and also some of the bigger UK cities,’ he added.

An interview with Mr Appleyard will appear in Inside Housing’s private rented sector special issue on 24 October.

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