BMO Real Estate Partners (BMO REP) has completed the first close of its UK housing strategy fund, the BMO UK Housing Fund. 

The fund is targeting £500m, and aiming for a 6% return and 4.5% annual distribution yield. Investors in the fund include Big Society Capital.

The BMO UK Housing Fund will work alongside Home Group, the housing association, to deliver purpose built, high quality rental properties targeted at low to middle income households.

“This fund enables us to provide a much-needed housing solution to low and middle income earners while generating sustainable, inflation-linked long term income returns for investors,” said Angus Henderson, head of business development at BMO REP.

“To achieve this, Home Group was very carefully selected as BMO REP’s development and operating partner thanks to its long term track record and deep seated experience in building and managing large scale housing solutions, with an emphasis on improving the private rented sector with a management responsible approach. We have identified a significant pipeline of short to medium term opportunities which we are hoping to imminently take advantage of.”

Mark Henderson, chief executive, Home Group added: “As a country, we aren’t going to be able to build the homes we need without innovative approaches. A larger, professionally managed private rented sector will have a positive impact in driving up standards. Making private renting better is crucial to ensuring everyone has a safe and affordable home to live in.”

BMO Real Estate Partners will act as the investment advisor to the fund, responsible for capital raising and governance as well as the underwriting and purchase of sites and assets, forward funding any construction. Home Group will be responsible for sourcing sites with appropriate planning consent, as well as forming part of the platform for property management and leasing.

BMO Real Estate Partners is part of Bank of Montreal’s Global Asset Management Business.