Legal & General in £4bn housing deal with Oxford university
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Legal & General has entered into a £4bn partnership with the University of Oxford to develop thousands of new homes in the city.
The move is the latest sign of growing commercial interest in UK universities after billions of pounds have flowed into the sector over the past decade to fuel a construction boom in higher education.
“You’re going to see a lot more of this in the next few years,” said Nigel Wilson, chief executive of L&G. “If you look at it on a global scale, the UK really punches above its weight in universities.”
The University of Oxford will provide land for the arrangement, which is expected to include “science and innovation districts”, while L&G will deploy funding over the next decades from a range of its funds.
Mr Wilson said the insurer, which manages around £1tn globally, will embark on similar projects around the UK.
“Between the university, the council and the colleges, they own an enormous amount of land — and this is true everywhere,” he said. “You almost have to have a helicopter to go over these cities to see all the areas that are not built on, or are run down.”
In 2017, Oxford borrowed £750m in a 100-year bond, the largest of its kind from a British university.
This year, Manchester university unveiled a £1.5bn real estate project on land it owns close to the city centre, which it aims to transform from a faded 1960s campus into a modern innovation district. The plans draw on a model pioneered in the US, where higher education institutions act as anchors for private sector investment.
The company is involved in regeneration schemes in Cardiff, Leeds and Salford. In 2016 it teamed up with Newcastle City Council and Newcastle University on Newcastle Helix, a 24-acre site that includes building plots, space for tech businesses and space for academic research.
The insurer’s move also reflects the appetite of major investors to find alternative sources of income, especially from commercial and residential rents, at a time when yields in conventional fixed income markets remain near record lows.
The business has been investing heavily in housing and other types of infrastructure in recent years. As a life insurer, it makes long-term promises to its customers and so needs long-term assets to enable it to meet those promises.
The partnership with Oxford also aims to ease a perceived housing shortage in a city where prices have spiralled, and will include 1,000 subsidised homes for staff.
Louise Richardson, vice-chancellor of the University of Oxford, said: “My colleagues and I are delighted to have formed this partnership with Legal & General. We look forward to working together to address some of the most pressing challenges facing the university today.”
The University of Cambridge is building a new town to provide housing for its staff against the backdrop of a similar affordability crisis in the city. The £1bn project ran into difficulties and cost overruns in 2015, leading to a review from PwC.
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