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By Iain Withers
LONDON (Reuters) - One of Japan's largest property developers has struck a deal with Legal & General to build more than 1,000 homes in Britain's rental housing market, where demand for properties far exceeds supply.
It's Nomura Real Estate's first foray into the UK rental home market, which has seen increasing foreign interest in recent years, with U.S. firms Blackstone and PGIM among those that have been pouring in cash.
Britain's rental market offers the prospect of long-term returns and institutional investment is playing catch-up compared to markets like Germany and the United States where bigger landlords are more common.
The partnership has acquired its first site in south London to build more than 200 homes, with the remainder of the 1,000-plus homes to be delivered across other sites over five years, an executive at L&G told Reuters.
"This is a significantly under-supplied market," said Bill Hughes, global head of private markets at L&G. "We expect we'll learn things from Nomura due to their experience," he added, citing its focus on design efficiency and developing at scale in Japan.
Nomura Real Estate, which is backed by Japanese banking giant Nomura, will invest hundreds of millions of pounds initially in the venture, providing most of the capital, with the British firm providing the remainder, an L&G spokesperson said, declining to give further details.
The partnership will initially target sites in central London, focusing on brownfield and underutilised land, L&G said, with the homes to be developed and operated by the British firm.
The deal deepens L&G's ties to Japan, after it separately struck a unit sale and U.S. insurance tie-up with Meiji Yasuda last month. L&G has also previously worked with Mitsubishi Estate on several UK property projects.
L&G wants to expand its rental homes business, and has 23 complete or under development schemes across 15 UK cities. Last year it sold UK housebuilder arm CALA, which specialises in building homes for sale.
(Reporting by Iain Withers; Editing by Tommy Reggiori Wilkes and Sharon Singleton)
