Hearthstone Residential Fund 1

A ten-year closed-ended private equity vehicle investing into the private rented sector in UK regions.

Overview

Hearthstone Residential Fund 1 (HRF1) is designed for institutional investors seeking a strategic allocation to high quality private rented residential assets in the UK. It seeks to invest at scale in selected areas where strong rental demand is expected to provide the basis for a reliable, stable income stream offering good inflation protection. Our strategy also seeks to identify under-supplied markets where healthy consumer demand is expected to support modest capital growth over the long term.

Launched in 2017, HRF1 achieved its final close at just over £200 million in February 2019, with the backing of seven UK local government pension funds.

HRF1 is the sole focus of Hearthstone Investment Management Limited*, a 50:50 joint venture between the Fund’s senior management team and Hearthstone Investments Plc.

*Hearthstone Investment Management Limited is an appointed representative of Langham Hall Fund Management LLP, an entity which is regulated and authorised by the Financial Conduct Authority of the UK.

Investment Objective

The Fund’s objective is to provide a strong and stable income return (a net distributable income before fees of at least 4.5% on stabilisation), supplemented by modest capital growth over the life of the Fund.

Income is distributed to investors, after deduction of operating costs and expenses.

Fund Size

The Fund achieved its final close in February 2019 exceeding its target with just over £200m committed.

Fund Structure & Governance

The Fund is structured as an English Limited Partnership, a widely used and tax transparent structure. It is closed-ended, with a life of 10 years.

Governance of the Fund is based on industry best practice principles. An independent Investment Committee is mandated to review and approve the Fund’s Investment Plan and all transactions. An investor-led Advisory Committee reviews operational matters and acts as a formal communication forum with the Fund’s management team.

Langham Hall Fund Management LLP operates as the external third-party AIFM.

Investment Strategy

The Fund’s strategy is to acquire and actively manage good quality, market-rented residential stock in areas with strong rental demand across the UK, including a mix of low-rise apartment blocks and clusters of houses.

Acquisitions include bulk purchases of newly-built stock from housebuilders and standing investment assets. Stock selection will focus on efficient-to-manage, readily-lettable flats and houses, typically ranging from one to four bedrooms, particularly suitable for young professionals and families in areas of solid rental demand and good local infrastructure, but where there is a lack of suitable quality rented housing stock.

The appropriate level of diversification is achieved through a combination of the Fund’s scale and strategy to ensure exposure across the UK.

The investment style is core: HRF1 is unleveraged and does not take development risk. Investments are made for the long term to limit turnover costs. Nevertheless, it seeks to exploit opportunities to add value through active asset management and through strategic rebalancing.

Hearthstone Residential Fund 1 media

Hearthstone Investment Management adds over 100 new homes to its UK residential fund

Date 01st July 2019
Source Hearthstone Investment Management
Type Press release
● Acquisitions across UK regions, with combined value of £31 million ● The £200 million fund is backed by seven UK local authority pension funds
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LGPS funds strive to make an impact with build to rent

Date 11th March 2019
Source FT Pensions Expert
Type News article
A minor revolution is taking place in town halls across the country. Local authority pension funds are changing tack, eschewing traditional equities for alternatives, and looking to make a ...
Read more

Hearthstone Investment Management Announces Final Close Of The Hearthstone Residential Fund 1

Date 25th February 2019
Source Hearthstone Investment Management Ltd
Type Press release
• Fund exceeds its target of £200 million • Two new limited partners join in final investment round
Read more

This fund is advised by

Hearthstone Investment Management LTD

Our growing team includes seasoned professionals with both institutional investment and property fund management experience.

Our Team

Andrew Smith

Partner - Chief Investment Officer

Richard Otten

Partner - Director, Asset Management

For more information about Hearthstone Residential Fund 1 please get in touch
Contact us