L&G funds its first U.S. multifamily development in Concord, Massachusetts

L&G Asset Management's first ground-up apartment project in the United States, a 201-unit building replacing part of an office park in Concord, Massachusetts, was funded in August and began construction last month, according to Bisnow, following earlier U.S. multifamily investments that were existing buildings in Denver and Chicago.

The entry lands in a construction slowdown where elevated interest rates, rising construction costs and stagnant rents have pushed most capital out of new apartment development, a retreat that Tim Watson, L&G's U.S. head of investment and portfolio management, told Bisnow is exactly why the firm is moving now. "We expect to hold these assets for an incredibly long time," he said. "Where we're looking is where fundamentals and multifamily can remain strong for a long period of time, and where demand is going to essentially outweigh the amount of supply that can come on."

That timeline is a liability match as much as a preference. L&G manages pension plans for retirees, and assets held for decades against long-dated obligations can generate a steady stream of returns. The firm runs $1.6 trillion globally, $288 billion of it in the U.S., which makes a 201-unit building a small position — and suggests Concord functions as a test of whether L&G can do ground-up work in a market it does not know.

Concord was reachable because the slow part was already finished: Greater Boston combines strict municipal zoning with too little developable land to make projects pencil, and Bisnow reports the metro's housing construction has lagged while demand held steady. L&G's partners on the deal, Boston-based Taurus Investment Holdings and EcoSmart Solution, had been through the entitlement and permitting process, which Watson cast as a template: "It just paints a broad picture of what we want to do in the U.S. and building partnerships and being in these communities." The project was also proposed under Massachusetts' 40B affordable housing law, which allows a multifamily developer to work around some permitting restrictions in exchange for setting aside 25% of the units as income-restricted.

Watson's pitch rests on supply: "We will deliver Concord into a market with not just no supply in Concord but very little supply, probably in the U.S. and certainly in the Boston area," he told Bisnow. "I certainly think it is absolutely an opportunity," he said of the wider opening.

The part of the plan that matters more for allocators comes after Concord, where Watson said he expects L&G to fund more acquisitions of existing apartments than new developments going forward given the hurdles to starting construction. Ground-up work in high-barrier markets depends on a partner who has already cleared entitlement, a state program that shortens the path, or both, and that combination does not scale the way buying does.

The arithmetic behind the slowdown has been moving all year: our report from Bisnow's National Commercial Real Estate Finance event in early October put the 10-year Treasury at 5.3%, the highest since 2002, and the lenders in the room said deals that had penciled a month earlier no longer worked at those yields. Developers without a patient balance sheet step back at that point, which leaves construction capital to buyers who can hold a project through a full debt cycle.

As this publication has argued, apartment ownership is consolidating while the bid clears on absolute rent and replacement cost, and the maturity wall should force seller capitulation before the supply gap later this decade pays off. If that reading holds, the acquisition half of Watson's plan is where the returns sit, and Concord's development risk buys L&G a look at a market where it otherwise has no presence.

For allocators, the form of the capital is the interesting part: the cross-border bid for U.S. housing that this publication has been tracking as living sectors cross from alternative to core has largely arrived as commitments to operators and fund vehicles, while here a pension manager is writing development equity directly and pairing with a local sponsor to do the work. That is a real endorsement of the asset class, though a narrow one: one market, one partner, one building at a time.

Massachusetts has been working the supply side from other directions: this month the state awarded $330 million across 403 projects in its largest One Stop round, a package it estimates will unlock $24.6 billion in private investment and support more than 27,000 homes, as this publication reported. L&G's 201 units sit at a different scale entirely: a state program spreads capital across hundreds of sites while a single institutional development answers to one submarket's rent roll.

The next L&G apartment check will say which side of the plan is real: a broker with a stabilized building, or a partner with an entitled site. Watson has already told Bisnow which he expects to see more often.