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Real estate giant secures first capital raise with £50m from London LGPS pool
Octopus Real Estate has secured its affordable housing fund’s first capital raise with £50m from the investment pool for 32 London Local Government Pension Schemes (LGPS).
Octopus Investments, part of Octopus Group, said the initial capital will enable more than 500 affordable homes to be built across the UK for families and older people.
The deal was achieved with capital from the LGPS investment pool called London CIV.
The fund provides co-investment opportunities for local authorities, local government pension schemes and other investors.
Octopus said its overall target for the fund is to help the delivery of 5,000 homes over the next few years.
This target seems to have increased from February this year, when the firm’s head of affordable housing told Inside Housing that Octopus Investments “aspires to build and own at least 3,000 homes over the next few years”.
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Jack Burnham said: “We’re going to be offering slow, patient capital that wants to see social impact and stable returns, and increasingly looking at place-based outcomes as well.”
Octopus revealed in January that it was targeting institutional investors with £300m in commitments throughout the year as part of its affordable housing strategy.
Mr Burnham said: “We are excited that this initial capital raise will enable us to start working with housing associations to deliver and manage new affordable homes across the country.
“In creating the fund, we have listened carefully to the needs of the affordable housing sector. We know that housing associations are increasingly comfortable using alternative finance routes to build and operate more homes, with half of CFOs [chief financial officers] in the sector now more likely to work with equity partners compared with just 12 months ago.
“We think that there is potential for these partnerships to have a seismic impact on the delivery of affordable housing across the country.
“Having our own registered provider, NewArch, allows us to speak a common language with housing associations and holds us to the same regulatory standards, meaning we’re in a better position to understand what is important to them in developing fair and long-term partnerships.”
The firm acquired NewArch Homes in May 2022. At the time, Octopus said this will allow it operate a direct let model, rather than a lease-based model with associations, to ensure fair risk-sharing with partners.
Ed Clough, managing director at Octopus Real Estate, said: “Strong social outcomes are critical to the fund’s success, from the energy-efficient homes we are looking to build to our focus on true affordability of the fund’s homes.
“This is an evergreen fund that we will continue to scale for years to come. This means we can support our housing association partners in providing affordable homes for the long term, creating stability for both residents and investors.”
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