Legal & General invests Â£169m in infrastructure Legal & General makes first major care home and hospital investment.
20 December 2013
Legal & General today announced that it has completed the acquisition of 13 care homes from Prestbury Investments, for a total consideration of just over £70m. The homes are let to Methodist Homes (MHA), a leading care home provider.
Legal & General has lowered the current rents for 13 care homes by providing Methodist Homes with long term stable financing, with leases that have annual RPI-linked rent reviews, creating stability and certainty.
Legal & General has also invested £89m over a 32 year term, as part of a consortium to build the new Royal Liverpool University Hospital for £335m. Both investments are from the Legal & General annuity portfolio, matching long-term assets to liabilities, and will be used to pay customers' pension annuities.
Paul Stanworth, MD Legal & General Capital said:
"Legal & General is committed to investing in the fabric of the UK. There is a chronic shortage of housing in the UK, and we want to help to address this problem. This is our first investment into providing care homes for the elderly, we have already invested over £750m in student accommodation, have part acquired CALA Homes, and plan to move into homes to rent. A better infrastructure also includes better healthcare, and the new Royal Liverpool will help improve quality of life in the city and contribute to economic growth in the North West."
Legal & General wants to play a greater role in housing and infrastructure investment in the UK, and plans to provide long-term capital to the energy, education, transport, housing and health sectors.
Legal & General believes infrastructure investment is an attractive asset class because:
It provides an excellent match for our long-term liabilities,
Matching annuities with UK infrastructure increases the returns on our funds, and helps us to continue to offer competitive annuity pricing, and
Investment in UK infrastructure projects drives UK economic growth, and creates roads, schools, and hospitals which benefit the UK population.
Legal & General's investment programme for infrastructure is split broadly into two categories, each reflecting the different underlying policy or investor requirements, and the different types of investment capital available within the Group.
Category ‘A’ Investments: CALA Homes, English Cities Fund, and strategic land bank developments – Crowthorne housing development. Here Legal & General builds and owns the asset, and takes on the construction, debt or equity risk. Many of these investments also help create category 'B' opportunities.
Category ‘B’ Investments: Imperial College and University of Southampton student accommodation, Hyde Housing Group, Methodist Homes, Royal Liverpool University Hospitals. Here Legal & General provides long-term investment capital for asset and liability matching, through secured lending and sale and leaseback arrangements.
Legal & General identified five macro drivers of growth, and five winning strategies. One of the macro drivers was bank retrenchment, leading to a shortage of investment capital. Our strategic response was direct investment, whereby we seek to replace bank and government capital with long-term institutional debt or equity funding.
Legal & General Capital (LGC) is managed by Paul Stanworth, and was set up to achieve this for the benefit of our policy holders and shareholders. LGC are responsible for Legal & General's infrastructure investment, and work with Legal & General Investment Management (LGIM) and Legal & General Property (LGP). LGP is one of the UK's largest investors in property on behalf of external clients, and has £11.6bn assets under management in property funds, and LGIM is the largest investor of institutional pension funds in the UK, and has £443bn assets under management.
Legal & General as a long-term provider of investment capital has £3bn invested in UK infrastructure projects, and is one of the six UK insurers committed to investing £25bn in the UK over the next five years. The successful outcome of the Solvency II negotiations now allows Legal & General to increase the pace and scale of its investment programme in UK infrastructure.
Roger Davies, Chief Executive of Methodist Homes, added: “It is great to see Legal & General Property investing in our sector and in MHA particularly. We foresee a growing need of a range of accommodation, support and care services for Britain’s older people and are committed to playing a full part in meeting this need. LGP and MHA share a long term commitment and a strong values-base and we look forward to a long and successful relationship.”
Legal & General has been working with a number of leading third sector organisations that campaign for better standards of care as part of the due diligence on this deal. Amongst them is Elderly Accommodation Counsel (EAC), a national charity that advises older people and their families on care and housing options in later life. Its service is underpinned by a detailed knowledge of all care homes and specialist housing facilities in the UK, and of their providers and managers.
Commenting on Legal & General’s investment into the Care Sector, John Galvin, EAC’s Chief Executive, said: “Stable and responsible long term funding is crucial to develop both traditional and new models of care for increasing numbers of frail older people, to guarantee continuity and quality of service provision and to enable providers to deliver at a cost that older people can afford.
“For these reasons EAC was delighted to be invited by Legal & General to contribute initial advice as it shaped its financing arrangement with MHA and to then be part of this innovative arrangement which will see L&G taking a hands-on approach to help MHA enhance its reputation for delivering top quality services into the future.”
Aidan Kehoe, chief executive of the Royal Liverpool and Broadgreen University Hospitals Trust, said: “This is a huge moment for all those who have worked so hard, for so many years and we are all delighted to have achieved financial close on the new Royal. This is fantastic news for our patients, our staff and the city of Liverpool. We will have a world class hospital facility designed to provide a whole new approach to healthcare and help us to tackle some of our region’s biggest health issues. The new Royal will improve the health and wealth of the city creating hundreds of construction jobs and training opportunities and paving the way for thousands of hi tech jobs on the BioCampus.”
Notes to editors
Legal & General Property
Legal & General Property (LGP) is a wholly-owned subsidiary of Legal & General Investment Management (LGIM), one of Europe’s largest institutional asset managers and a major global investor. LGIM manages approximately £433bn in assets on behalf of more than 3,100 clients (30 June 2013) and provides products and solutions spanning all asset classes. LGP is the third largest institutional property fund manager in the UK, managing or co-managing 16 separate funds or vehicles and two segregated mandates