AEW has launched its first impact investing strategy, seeded with £100 million ($125 million) of assets.
The real estate investment manager’s AEW UK Impact Fund is an open-ended fund seeded with a £100m portfolio of UK assets, comprising specialist supported living, key worker accommodation, care homes and residential-led town centre regeneration projects.
The launch of the new fund follows approval by the Financial Conduct Authority and investors to transform the AEW Real Return Fund into this new strategy using its existing portfolio of impact assets.
AEW is now raising capital for the impact fund, targeting a range of investors, from institutional capital and local government pension schemes to private wealth. It will adopt an active management, core strategy, seeking to generate a sustainable income stream and return for investors.
The fund’s impact framework focuses on providing people in underserved locations with access to real estate; funding developments and refurbishments which service a societal need and ensuring investments are socially and environmentally sustainable.
AEW is working with social advisory and impact measurement firm The Good Economy to align the fund with the best principles of impact investing, the requirements of the Global Impact Investing Network and the UN Sustainable Development Goals.
Nick Winsley, head of AEW UK, said: “The built environment has a huge influence on people’s everyday lives and the launch of our first impact fund provides investors with an opportunity to invest in a way that creates both a tangible positive social and environmental impact, whilst also achieving their return objectives.”
The UK affordable housing sector offers an opportunity for investors to close a funding gap, a new report says.
Octopus Real Estate’s Closing the gap: Unlocking investment to address the UK's affordable housing challenge report found that UK housing associations expect the number of affordable homes built in the UK to fall by 22%, despite being already below target.
Factors identified by providers of affordable housing include the rising cost of labour and materials, as well as the cost of new debt.
The pressures of decarbonising the sector, particularly bringing existing social housing to meet energy performance standards, also weighs heavily on providers. However, addressing this would help institutional investors meet their ESG goals.
The British Property Federation and Legal & General last year produced research which concluded that, without a new funding structure, there will be a shortfall of 95,000 affordable homes each year.
Jack Burnham, head of affordable housing at Octopus Real Estate, said: "Registered providers have historically relied on private finance to support their development ambitions. But changing economic conditions mean that the cost of debt has soared and social landlords must now pay more to access the finance they need to build new homes.
“We believe equity partnerships represent the next wave of innovation in the sector.”
He suggested for-profit providers of social housing and institutional equity partners could work with Housing Associations to deliver more high-quality affordable housing.
Octopus plans to invest £1 billion ($1.27 billion) in UK social housing and has created a for-profit provider NewArch Homes to operate new assets.
Orchard Street Investment Management has completed the first acquisition for its £400 million ($508 million) impact fund.
The UK investment manager’s Orchard Street Social and Environmental Impact Partnership acquired Euroway Trade Park, an 89,000 sq ft multi-let industrial estate in Aylesford, Kent for a reported £14 million ($17.8 million.
Orchard Street said it intends to undertake low-embodied carbon refurbishments, install solar PV panels and EV charging hubs, electrify all units and improve the units’ energy performance certificates to A and A+ ratings from the current C to E ratings. The manager will also improve the air quality and thermal efficiency of the units’ offices, enhance on-site biodiversity, and provide a local apprenticeship programme for each refurbishment.
Barney Rowe, portfolio manager at Orchard Street, said: “This first acquisition made on behalf of our impact fund represents an excellent opportunity to generate strong financial returns alongside a significant positive social and environmental impact on behalf of our investors. We strongly believe assets which offer high quality space and boast strong sustainability credentials will command the best rents and values, and this well-located, multi-let asset provides us with numerous opportunities to reposition the estate into a best-in-class industrial property.”
The fund is targeting value-add investment opportunities with the potential to generate a measurable social and environmental impact through decarbonisation, investing in local communities and improving the health and wellbeing of building users and the local population.
A portion (30%) of the manager’s performance fee is linked to achieving the fund’s impact objectives.
The Urban Land Institute and law firm DLA Piper have published a report on social impact investing, real estate investment where where social value returns are targeted alongside financial returns.
The report claims social impact investing can offer market rate returns, with lower risk and the opportunity for public sector support. It also argues there are opportunities beyond sectors such as affordable housing, education and healthcare.
ULI Europe CEO Lisette van Doorn said: “Real estate and social infrastructure always create an impact on society. The shift now is from unintended consequences to considered outcomes. In many ways, there is nothing new in the social impact model.”
The report includes a number of case studies, looking at projects such as Chinachem Group’s redevelopment of Hong Kong’s Central Market and Nuveen’s affordable housing programmes in the US and Germany.
Susheela Rivers, global co-chair of DLA Piper’s real estate sector, said: “As providers of the built environment where we live, work and play, real estate stakeholders have always had a social impact, both positive and negative, which puts them in a position of huge responsibility. Impact investing not only has the ability to improve lives, it also has a growing commercial imperative whereby net incomes can be improved, costs reduced and certainty provided.”
Nuveen Real Estate has announced the launch of a global impact investing business line.
The investment manager, which has total real estate assets under management of $152 billion plans to build $15 billion of real estate impact AUM by 2026.
The new business line is headed by global head of impact investing Nadir Settles (pictured above), who will also remain in his current role as head of the firm’s New York office.
Pamela West, senior portfolio manager for impact investing, will oversee the framework's strategy, portfolio construction, and client relationships. She will continue to run Nuveen’s US affordable housing portfolio.
Nuveen’s impact mandate will focus on affordable and social housing and regeneration projects. It is designed to “improve communities by providing supportive services, enhancing residents' quality of life and financial outcomes, and ensuring affordable, sustainable and climate safe housing”, while at the same time supporting its 2040 net zero carbon target.
Global head of real estate Chris McGibbon said: "Nuveen is a pioneer in impact investing and we are competitively positioned to deliver a market-leading sector globally and at scale. Under Nadir and Pamela's leadership, I am confident this new sector will address some of the most pressing challenges in real estate across the globe, while creating an avenue for investors to have a significant impact through their capital investment.”
In April, Nuveen launched a German “living impact” platform, led by portfolio manager Tanja Volksheimer, which will focus on affordable housing.
California State Teachers’ Retirement System (CalSTRS) has backed SoLa Impact’s fourth US social impact real estate fund with a $50 million commitment.
The $311 billion US pension fund has invested through its partnership with Belay Investment Group and its investment brings fund-raising for SoLa’s Black Impact Fund to $250 million. The vehicle seeks to raise $300 million to invest in affordable and workforce housing development in California’s minority communities.
The commitment from CalSTRS includes capital from the pension fund’s real estate and sustainable investment and stewardship strategies. Other investors in the fund include PayPal Holdings, Equitable Insurance, the Skoll Foundation, Ally Bank, Potenza Capital, Pacific Premier Bank and Adirondack Capital.
SoLa was founded in 2015 by CEO Martin Muoto (pictured above) and COO Gray Lusk with a mission to “to deliver superior financial returns by driving positive social change in America’s toughest neighbourhoods”. The firm owns and manages a portfolio of 1,500 apartments in Los Angeles and has a similar number in the pipeline. It is also developing a business campus, The Beehive, in an LA Opportunity Zone.
