M&G will provide £25.2m to fund the development of 97 apartments with Crest Nicholson acting as developer and contractor.
The private rented sector (PRS) element will provide a mix of one and two bedroom apartments with units ready for tenancy between February and October 2016.
Alex Greaves, Head of Residential Investment at M&G Real Estate, said: “We very much welcome this initial transaction with Crest Nicholson and look forward to working with them on other schemes.
“We believe this to be the first transaction of its kind between an institutional investor and a listed house builder, marking a major opportunity for institutional investors seeking access to the UK residential sector.
“Our residential strategy provides stable, income-driven returns for investors and, in time, thousands of much-needed, well-managed rental properties.
“As we build on this initial agreement to bring scale to our portfolio of rental properties, it’s vital we continue to champion quality.
“It is our hope that the involvement of institutions like ours will lead to more homes coming on tap and higher standards, just as it has done with the student accommodation market.”
Chris Tinker, Executive Board member for Crest Nicholson, added: “This is an exciting development in Crest Nicholson’s drive to explore new models of housing delivery across the southern half of the UK.
“With housing at the forefront of the political agenda, an institutionally funded private rented model has the potential to underpin a meaningful increase in housing output at a time when the need to sustain growth and meet housing need is at an all-time high.
“This type of partnership agreement could mark a step change and acceleration in the PRS model which will ultimately help unlock land, create jobs and bring wider economic benefit as well as bringing forward the delivery of much needed new homes and mixed tenure communities.”