London, United Kingdom, October 2024: Canada Pension Plan Investment Board CPP Investments has teamed up with global real estate investment company Kennedy Wilson NYSE:KW, to create a new single-family rental housing joint venture in the UK. Initial equity investment for CPP Investments will be £500 million with a £56 million commitment from Kennedy Wilson. This latest initiative targets an initial asset value of approximately £1 billion, leveraging included, but it allows for the possibility of adding incremental capital, contingent on market opportunities. CPP Investments will hold a majority 90% ownership stake, while Kennedy Wilson retains a 10% interest.
The joint venture will collaborate with housebuilders to focus on energy-efficient newly built homes in strong local economies that can boast good connectivity, attractive local amenities, and proximity to strong job opportunities and centres of education.
The investment programme will be initiated with properties from two Kennedy Wilson-sourced developments including units currently under construction by Barratt Redrow in Norwich, where the first phase of completed homes is already being leased, and units at Miller Homes in Stevenage, slated for completion in Q2 2025. Kennedy Wilson has a robust pipeline of opportunities exceeding £360 million and 1,100 units, with the potential to expand to 4,000 units at full capital deployment.
Tom Jackson, Head of Real Estate Europe at CPP Investments, stated in an article on its official website, “Private capital can play an important role in addressing the current undersupply of high-quality rental housing in the UK, particularly where it is professionally managed to provide a great customer experience. Investing into the UK single-family housing sector aligns well with our broader real estate strategy, to undertake scalable investments into high quality assets with growing cash flows. We look forward to launching the JV alongside Kennedy Wilson to deliver strong returns for 22 million contributors and beneficiaries of the CPP fund”.
Kennedy Wilson will act as the general partner of the joint venture and will be entitled to customary fees. Long-term owner, operator, and debt provider for rental housing experience of the company will serve the joint venture. The collective platforms manage in excess of 60,000 units throughout the United States, the UK, and Ireland. As part of its global residential platform, Kennedy Wilson possesses a fully integrated investment, asset management, and development team, and comprehensive operating and reporting systems.
“Residential has long been a crucial part of Kennedy Wilson’s investment strategy, and our JV with CPP Investments, a leading global institutional investor, will propel our efforts to deliver much-needed rental homes for local families,” Mike Pegler, President, Kennedy Wilson Europe commented on the same article. “The structural challenges facing institutionally managed rental housing in the UK provides a clear investment rationale to enter the market and leverage our deep experience in the sector. We are actively seeking opportunities to grow our portfolio, which offers substantial scalability potential in the UK, driving consistent risk adjusted returns in this high-conviction subsector.”
This partnership by CPP Investments and Kennedy Wilson marks a key milestone in the path toward closing the gap in high-quality rental housing in the UK. With its initial investment and solid pipeline, the joint venture is, therefore, better positioned to deliver energy-efficient, newly built homes in the most vibrant local economies. The collaboration will not only ensure an excellent living experience for the residents but also guarantee strong returns on the money for the investors. This will set a base in the UK housing market, as both these companies bring vast experience and a resource base into this venture.
