Asset manager BMO to raise £250m by listing new housing provider

Asset management giant BMO has announced plans to raise £250m to invest in to the provision of supported housing with the setting up of a new listed business, named Responsible Housing.

BMO said the idea was that Responsible Housing, set up as a listed real estate investment trust (REIT), will float on the stock exchange in a bid to raise the cash to invest in a portfolio of supported housing.

BMO’s plan for Responsible Housing, thought up following dialogue with the social housing regulator, will include forward funding the development of new supported housing units, in order to increase supply of supported housing.

The plan comes just days after asset managers Schroders Capital and Civitas Investment Management announced they had raised £192m to invest in building new supported housing.

The firm will target a minimum 5% yield on its investment, with the proposition providing investors with a “peer leading” focus on ethical, sustainability and governance (ESG) goals.

Supported housing is a regulated form of affordable housing provided for adults and young people with a range of additional support needs such as those with disabilities and mental health issues, as well as the elderly and vulnerable individuals.

The homes owned by Responsible Housing are to be let on leases to be run by charities, housing associations and other care providers with a track record in the area, and which meet “minimum screening requirements”.

It said it would do this where it had an agreement to lease the property upon completion, and where both planning permission and local authority care commissioner support had already been received.

Responsible Housing REIT plc will launch an initial public offering on the main market of the London Stock Exchange in due course, with the business due to be managed by BMO Real Estate Partners, part of the BMO Global Asset Management group, which boasts over £229bn of assets under management.

Robin Minter Kemp, the chairman of Responsible Housing REIT plc, said the business offered an opportunity to invest in a much-needed social resource, given projections that the overall number of supported homes needs to increase by 30% from around 650,000 units in 2015 to approximately 845,000 units in 2030. “We believe that we can help meet this growing requirement with a leasing model that meets the specific needs of the sector aligned to the aims of the Social Housing Regulator,” he said.

Guy Glover, Lead Manager at BMO said: “While local authorities have a statutory duty to provide for those in need of Supported Housing, the UK faces a shortage of suitable accommodation, underpinning our conviction in a strategy delivering a balance between all stakeholders to create a truly sustainable model.”

The announcement from BMO came as another housing-focused listed investment trust, Home REIT, announced plans for a £262m fund raising effort to finance the next stage of its growth. Home REIT, which launched to provide housing for homeless people in October 2020, has already invested its initial £240m in 3,800 beds, and said the new money will be used to “acquire further homes in line with the Company’s strict investment criteria”.

It added it had identified a £400m pipeline of investment opportunities, with an average yield of 5.95%.