The pause on housebuilding, negative variance on valuations and writedowns on retail have pushed Legal & General Capital, L&G’s alternative asset investment arm, into the red.
The division recorded a pretax loss of £184m in the first six months of 2020, down from a profit of £278m a year earlier. Operating profit was more stable, dropping from £173m to £123m. Its direct investments – its residential assets and future cities business – recorded a profit tumble from £99m to £36m.
Despite the impact on the bottom line, L&G said it was continuing to seek opportunities to grow the division and to “deploy patient capital in alternative assets where we see an enduring demand for private long-term investment to support society’s need for residential property, specialist commercial real estate, climate and energy infrastructure, and alternative credit and venture capital”. Over the next three to five years, the group said it expected to build its diversified direct investment assets under management by £2bn to around £5bn.
During the first half of 2020, LGC added £500m of investments to the division, which includes affordable housing, later living, homes for sale, built-to-rent, and its sci-tech partnership with Bruntwood, bringing the total value of its portfolio to £3.3bn.
Its £1.6bn UK housing property platform was the hardest hit by Covid-19 with due to construction operations largely being paused in March. All sites have now reopened, but the group expects sales to fall by 30% across the year, with the majority of the impact experienced in H1. It said it anticipated higher sales in H2 as a result of temporary SDLT reductions.
LGC’s £2bn built-to-rent portfolio, which has more than 5,500 homes in planning, development or operation across 17 schemes, performed robustedly during the period, collecting 98% of rent due.
Legal & General’s investment management real assets business saw assets under management increase modestly in the first six months of 2020 from £30.8bn at the end of 2019 to £32.1bn at 30 June 2020. L&G said it expected the LGIM business to continue to benefit from global trends in retirement saving and structural shifts in demand in the asset management industry, including ESG strategies.
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