07 Feb More Traditional Real Estate Investors Are Getting Into Social Impact And Affordable Housing Funds
6 February 2019 Mike Phillips, Bisnow London
For years, traditional commercial real estate investors stayed away from investing in residential of any kind, citing low returns and repetitional risk. Then the private rented sector took off and drew them in. Now, they are venturing into a sector that was really out of bounds: affordable housing. Social impact investing is on the up.
CBRE Global Investors last month announced it had raised £250M of equity from 13 investors for the CBRE UK Affordable Housing Fund. The amount of equity exceeded its target.
Hedge fund manager Man Group has poached Shamez Alibhai from Cheyne Capital with a view to raising a fund to invest in social housing and associated sectors. Alibhai ran Cheyne’s £250M Social Property Impact Fund.
Franklin Templeton this month made the first acquisitions for its €158M pan-European Franklin Templeton Social Infrastructure Fund, including a medical clinic in London.
While returns from affordable housing are low, they are also stable and predictable, which is driving the influx of interest.
“It is in the newspapers every day — there is a big structural mismatch between the demand and supply of affordable housing,” CBRE GI Head of UK Funds Hannah Marshall said.
“One of the obstacles holding back delivery is the changes to grants and funding for registered providers [of social and affordable housing] and housing associations. There is an opportunity for the private sector to step in and fill that gap.”
CBRE GI’s fund is open-ended and has a target return of 6%, which Marshall said is appealing to institutional investors because it matches their need for long-term income. CBRE GI is not setting up its own registered provider (the government-regulated entity required to invest in the sector directly in the UK) but instead it will partner with these bodies and housing associations, which will manage the assets.
It will forward fund new developments and invest in standing assets, including social and affordable rented housing, shared ownership and other tenures such as key worker housing and homeless hostels. It will stop short of any assets where the operations include the provision of care.
Marshall said CBRE GI would not be looking for assets with index-linked leases, but instead would share the risk of income linked to government policy.
“The reality is, even in the main commercial sectors, you are not insulated from government policy. But the key thing here is the housing crisis is not going away.”
From the point of view of being good for the world, CBRE GI is working with advisory firm The Good Economy to create a way of measuring the fund’s social impact, both at the point when acquisitions are made and over the course of the life of the fund. Such standards do not exist, and have to be created from scratch.
“The key principle is to help people unable to rent or buy in their local community and to deliver services to that community,” Marshall said. “We will continue to measure the fund’s impact.”
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