Specialist impact investment firm Zamo Capital has announced it is investing in the management of Social and Sustainable Capital (SASC), a UK social housing investment manager.
Jim Roth, founder and partner of Zamo Capital, told IPE Real Assets the investment represented a significant part of its overall managed accounts, but declined to put a figure on the deal.
SASC said the investment from Zamo would allow it to respond to the growing demand for social housing in the current crisis by scaling its activities and accelerating fundraising for its fund Social and Sustainable Housing (SASH).
The fund is structured to produce both commercial returns and significant impact, SASC said, providing finance for “high-performing social enterprises who have a strong track record in the management of social housing” to buy properties in geographic areas the borrower knows well, and where it has a close relationship with the local authorities - who are the source of the rental income.
The fund is aiming to provide homes for 10,000 people who are homeless, or at risk of becoming so, whilst generating attractive returns for investors.
Roth said Zamo had been looking to invest in fund managers that offered both good commercial returns and “meaningful” social impact.
“The SASC fund neatly solves a variety of social and commercial challenges,” he said, adding that it enabled housing charities to become owners rather than renters of properties, in the process increasing the stock of social housing.
Commercially it solved three challenges that real estate funds faced, he said.
“It solves credit risk, with the UK government rather than private individuals being responsible for rent. With massive demand for and limited supply of social housing there is limited void risk. And by providing housing charities with a means to obtain a commercial mortgage at the end of the funds term, the model has an inbuilt exit strategy,” he said.
The model has particularly proved its resilience in the COVID-19 crisis, with no rent having been lost so far as a result of it, Roth said.
Ben Rick, SASC’s managing director said the nature of the fund’s borrowers - local housing charities, that are typically long-standing local social housing landlords, who provide their tenants with support services in addition to a home - could dramatically de-risk the real estate investment proposition.
“What it comes down to is our borrowers are in an excellent position to manage tenancies to ensure they don’t break down. We’re also finding that they are trusted partners of the local authorities who make referrals and fund the rental payments,” he said.
The UK’s “Everyone In” scheme to provide immediate temporary accommodation for up to 16,000 homeless people in the COVID-19 lockdown has demonstrated that it is possible to house the majority of homeless people, including rough sleepers, Rick said.
“In addition to the £22bn (€25bn) of regular housing welfare payments, the government has recently committed a further £433m to make sure this group do not return to the streets following the COVID crisis,” Rick said, adding that this was generating significant additional demand for the fund, and had positively impacted the economics of those propositions.
“We believe our fund will play an important role in addressing the problem,” he said.
Other investors in SASH include institutional asset managers, endowments, foundations and family offices such as CCLA Investment Management, Big Society Capital, University of Edinburgh Endowment, and Garfield Weston, the firms said.
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