Falkirk pension fund invests in residential property

Falkirk Council Pension Fund has made a £30 million investment with a specialist residential property fund manager, which will use the cash to build social and affordable housing in Scotland.
The fund chose Heathstone Investments from a shortlist of four bidders after launching a tender process seeking investment in a housing scheme aimed at producing a return of RPI plus 2 per cent.
The investment will form the first stage of a new Housing Fund for Scotland, managed by Hearthstone, which will allow pension funds to invest in local housing infrastructure.
FCPF pensions manager Alastair McGirr, told Room151: “We have been keen to look for alternative asset classes given the costs of and returns from bonds at the moment.
“Any investment has to stand on its own two feet but this has a spin-off social benefit and given the huge housing demand that is out there, we are pleased.”
The Housing Fund for Scotland will invest in social housing via fixed rate corporate bonds issued to registered social landlords.
The affordable homes will be deliverd via the purchase of properties from major developers seeking to meet planning obligations. The homes will then be let to a housing association on an operating lease for an initial period of ten years.
McGirr said that its investment would enable Hearthstone to work with housing association Castle Rock Edinvar to deliver the first tranche of 300 homes – half at social rents and half at affordable rents.
He said that the £30 million would come from the pension fund’s cash reserves, which had recently been boosted by cashing in equity investments which had risen sharply over the past two years.
Christopher Down, founder and chief executive of Hearthsone, said: “With over £180 billion of capital in local government pension funds, there is now an opportunity to expand the supply of UK housing while providing a genuine alternative to commercial property holdings.”
Hearthstone was selected by Falkirk following a competitive tender process run by Hymans Robertson LLP, who are advisors to the Falkirk Pension Fund. A large number of UK real-estate managers were involved, highlighting the current interest in the sector. Falkirk is the second local government pension fund to invest with Hearthstone, following a £20m investment by Islington Borough Council’s pension fund in January 2013.