PSP Investments and OTPP Invest in Build to Rent UK Platform
Poised to seize exciting growth opportunities in the residential rental sector, Long Harbour has brought together international investors PSP Investments and Cadillac Fairview (CF), the real estate arm of the Ontario Teachers’ Pension Plan, to create a £1.5 billion Build to Rent platform with significant fresh capital for acquisitions. The joint venture will incorporate Way of Life, Long Harbour’s residential management business, to combine investment, development, and operations capability within a single market-leading new platform.
The Long Harbour Multi Family (LHMF) joint venture was established in 2019 between Long Harbour and PSP Investments, one of Canada’s largest pension investment managers, with £500 million of initial capital which is now almost fully committed.
Two years on, Long Harbour and PSP Investments have welcomed CF into the partnership to support the growth of the platform as it scales up its pipeline and operations. CF is a globally focused owner, operator, investor, and developer of best-in-class real estate across office, residential, life sciences, industrial, retail and mixed-use asset classes. CF manages $35 billion of assets across the Americas and the United Kingdom, with further expansion planned into Europe and Asia.
In total, LHMF now has over £1.5 billion of capital to invest into Build to Rent assets, which will include both forward funding of projects and direct development. All assets in the portfolio will be managed by Way of Life, Long Harbour’s dedicated residential management business, which has over 2,800 units in operation and under development.
LHMF’s portfolio of assets includes a development of over 480 homes for rent at Ashley Road, Tottenham Hale, which LHMF has forward funded with a total investment of £226 million across two phases of development. The project is due to complete in 2023, with the first phase to launch in August 2021.
William Astor, Chief Executive at Long Harbour, said: “This latest round of investment brings LHMF’s total capital to in excess of £1.5 billion, which, combined with our Way of Life operational capabilities, creates one of the UK’s largest and most compelling Build to Rent platforms. Our priority for new sites will be London and the South East, where we have a strong pipeline of potential assets in addition to our existing projects.
“Way of Life, which is already delivering an innovative, community-focused experience across LHMF’s assets, will be an integral part of the design and delivery of our pipeline of new projects. Directly managing our assets provides greater control over the end-user experience and, ultimately, even stronger long-term performance for investors.
“We are very pleased to be welcoming Cadillac Fairview to the LHMF platform alongside PSP. This is a long-term, strategic partnership and a strong endorsement for Long Harbour’s vertically integrated model, and our investment, asset management, development and operations capability.”
Stéphane Jalbert, Managing Director, Real Estate Investments – Europe and Asia Pacific at PSP Investments, said: “We are pleased to continue growing our established and successful partnership with Long Harbour and now Cadillac Fairview, accelerating the scale and diversification potential of the venture. UK Build to Rent is a conviction sector for PSP and complements our global residential portfolio. Together, we aim to provide high quality housing that will have a positive impact on local communities while providing stable investment returns.”
Jenny Hammarlund, Head of Europe, Managing Director at Cadillac Fairview, said:
“The residential sector is a key area of focus for Cadillac Fairview globally, and we are pleased to be investing in the sector at scale in the UK alongside Long Harbour, an innovative Build to Rent operator, and PSP Investments, a strong JV partner with a shared vision. This investment aligns with our strategic objective of expanding our investment portfolio in Europe by forming partnerships with best-in-class operators and developers in attractive asset classes, such as residential, life sciences, office and logistics. It also complements our global residential portfolio, which includes, large active pipelines across the US and Canada.”
About Long Harbour
Long Harbour is a specialist real estate investment, development and management firm. Uniting market leading expertise across a range of assets classes, Long Harbour generates attractive returns for investors whilst seeking to create buildings of lasting value through thoughtful design and exemplary stewardship. Long Harbour has a proven track record of AUM growth across its three investment programmes; Secured Income, Multi-Family and Opportunistic.
Long Harbour’s approach to asset management is to make a positive impact in the communities in which it operates, whilst delivering long-term value to its investors through platform based, thematic strategies.
Long Harbour currently employs over 180 staff across its offices in the UK, Europe, and the US.
About PSP Investments
The Public Sector Pension Investment Board (PSP Investments) is one of Canada’s largest pension investment managers with $204.5 billion of net assets under management as of March 31, 2021. It manages a diversified global portfolio composed of investments in public financial markets, private equity, real estate, infrastructure, natural resources and credit investments. Established in 1999, PSP Investments manages and invests amounts transferred to it by the Government of Canada for the pension plans of the federal Public Service, the Canadian Forces, the Royal Canadian Mounted Police and the Reserve Force. Headquartered in Ottawa, PSP Investments has its principal business office in Montréal and offices in New York, London and Hong Kong. For more information, visit investpsp.com or follow us on Twitter and LinkedIn.
About Cadillac Fairview
Cadillac Fairview is a globally focused owner, operator, investor, and developer of best-in-class real estate across office, residential, life sciences, industrial, retail and mixed-use asset classes. Wholly owned by the Ontario Teachers’ Pension Plan (Ontario Teachers’), which has $221.2 billion in net assets and administers the pensions of over 330,000 teachers, CF acts as the direct real estate investing arm of Ontario Teachers’ and manages $35 billion of real estate assets across the Americas and the United Kingdom, with significant expansion planned into the UK, Europe and Asia.
The company’s Canadian portfolio comprises 68 landmark properties in major urban centres.
Continually striving to make a positive impact in communities where it operates by promoting social connection, growth, and a sustainable future, CF’s Purpose is Transforming Communities for a Vibrant Tomorrow. For more information, please visit cadillacfairview.com.
A brief background on the Long Harbour Multi-Family ("LHMF") can be found in the initial (2019) press release:
The new Long Harbour Multi-Family ("LHMF") investment programme, the third in its series, has an initial £500m of capital to deploy into the Built to Rent sector in the next 24 months. The first investment from the new venture will be the £70m forward-funding of a 166-unit scheme at Tottenham Hale.
PSP Investments funded the £500 million of initial capital which is now almost fully committed.
Cadillac Fairview is now part of the joint venture to create a £1.5 billion Build to Rent platform with significant fresh capital for acquisitions.
Go back to read my detailed coverage of OTPP's 2020 results where I explained why Cadillac Fairview needs to diversify its portfolio geographically and by sector.
The pandemic exposed some diversification weakness in this portfolio but rest assured, these assets will come back strong even if the pandemic isn't over yet.
Still, Cadillac Fairview is rightfully committed to diversifying its portfolio, especially in Europe, and partnering up with PSP Investments on this joint venture makes perfect sense.
First, a little background on Long Harbour:
The firm was established in 2009 to help bridge the gap between illiquid asset classes, often with high barriers to entry, and institutional investors seeking to deploy capital into investment grade, income-generating assets. Our role is to overcome these barriers, facilitating investment through transparent structures with strong corporate governance.
Long Harbour is majority owned by management, however in 2012, CK Hutchison Holdings Limited (CKH) (formerly Hutchison Whampoa Ltd) became a significant minority stakeholder. CKH is among the largest companies listed on the main board of The Hong Kong Stock Exchange (www.ckh.com.hk).
And about its investors:
Long Harbour arranges, manages and executes opportunities on behalf of its limited partners which are typically academic endowments, charities, family offices, pension funds, corporates and other institutional and private investors.
As Long Harbour expands its investment products within its focus areas, we are looking to raise additional capital from new limited partners as well as existing.
The bulk of its investors are insurance companies but roughly 12% are pension assets (but growing).
In any case, if PSP Investments established a joint venture in 2019, you can be certain they did their due diligence on this firm before committing a sizable amount to create this build to rent platform.
Two key areas in real estate that have done well during the pandemic are logistics (e-commerce) and multi-family. There are others like life sciences properties but in terms of scale, the two I mentioned are where the capital is going.
People need to live somewhere, preferably somewhere nice.
Many people can't afford to buy or they just prefer renting.
And of course, the general trend of private funds on both sides of the Atlantic encroaching on areas where they weren't that active in the past is garnering more scrutiny and criticism from critics who see see this as the new "feudalism":
What’s REALLY behind the war on home ownership? – OffGuardian https://t.co/vtX3qxhwc3— Leo Kolivakis (@PensionPulse) August 3, 2021
You can also argue that private capital is building affordable homes for people to rent and live in a nice community.
Again, people need to live somewhere, you need developers to build these properties and operators to operate them.
By partnering up with a best in class partner, PSP Investments and Cadillac Fairview are now going to benefit from a long-term trend which focuses on demand for nice, affordable housing.
Stéphane Jalbert, Managing Director, Real Estate Investments – Europe and Asia Pacific at PSP Investments, said it clearly: "UK Build to Rent is a conviction sector for PSP and complements our global residential portfolio. Together, we aim to provide high quality housing that will have a positive impact on local communities while providing stable investment returns.”
And now PSP has a great partner, Cadillac Fairview, to grow this and potentially other platforms in Europe.
Below, a clip on the rise of multi-family as an asset class. Good discussion, I wish I could find more specific clips on the UK but you get the idea.
Update: On Wednesday, PSP announced another real estate deal with Aviva Investors to acquire Hoxton Campus in central London:
Aviva Investors, the global asset management business of Aviva plc (‘Aviva’), and the Public Sector Pension Investment Board (‘PSP Investments’), one of Canada's largest pension investment managers, have announced the acquisition of the ‘Hoxton Campus’, which consists of four offices located around Hoxton Square in the Shoreditch area of London, N1.
Hoxton Square sits at the east end of London’s Tech City, the most established tech cluster in Europe, and a London sub-market that Aviva Investors believes is likely to experience strong future demand for office space given its scale and ability to attract and nurture talent in the era of knowledge capitalism.
The four office buildings included in the transaction together represent 55,974 sq ft (5,200 sq m) of lettable office space, creating a ‘campus’ of complementary assets. Floor space ranges from 1,105 sq ft to 5,276 sq ft, with two-thirds of the net internal area having been subject to complete redevelopment behind the retained facades, and the remaining accommodation significantly refurbished. Three of the acquired assets sit directly on Hoxton Square with the fourth located on Old Street.
The deal represents the fifth investment that Aviva Investors and PSP Investments have made together since 2015, originally investing in a portfolio of commercial properties in central London. In 2019, Aviva Investors and PSP Investments announced the intention to invest up to £250 million in commercial property across the CB1 Estate of Cambridge, a master-planned sustainable, mixed-use development spanning 26 acres in the Station Road area of the city.
Last year Aviva Investors and PSP Investments extended their relationship into continental Europe by acquiring Galleri K, a mixed-use retail, leisure and office asset located in the centre of Copenhagen’s retail district. Copenhagen is one of 12 European hubs Aviva Investors expects to thrive as a ‘city of the future’ due to its pool of talent, culture and connectivity, combined with a highly-developed approach to sustainable living.
Daniel McHugh, CIO, Real Assets, at Aviva Investors, said:
“Our partnership with PSP Investments continues to go from strength to strength and we are delighted to expand the relationship further into an exciting and dynamic subset of the London market. London continues to represent the richest market of workers employed in knowledge-intensive sectors, with the tech cluster being of significant scale and importance in the global market.”
Stéphane Jalbert, Managing Director, Real Estate Investments - Europe and Asia Pacific, PSP Investments, said:
“Building on our existing partnership with Aviva, PSP Investments is continuing its strategy of investing in dynamic markets while ensuring best-in-class sustainability standards. Hoxton is one of the most creative hubs in London, as well as an important centre of technology which we believe will outperform in the long term.”
George Fraser-Harding, Fund Manager at Aviva Investors, said:
“Despite the challenging environment faced over the last 12 months, we expect London to be a stand-out performer relative to other global knowledge hubs, given its talent pool, connectivity, corporate clusters and scalability. This particular sub-market should fair especially well with a dynamic occupier base beginning to return to offices. These buildings are well-located and offer the quality and character of space that we’re seeing significant demand from tenants for, positioning them well to deliver long-term growth and, ultimately, positive performance within our portfolio.”
Another great deal for PSP investing in a knowledge hub in central London alongside another great partner.