There is a chronic shortage of affordable housing in the UK, which severely affects the most vulnerable and disadvantaged people – for example, those experiencing homelessness or in acute housing need, people with learning disabilities and vulnerable older people. This is a challenge for the charities and social enterprises whom housing is often essential to delivery of their services to such individuals. The need for suitable and affordable accommodation is growing, but the amount of grant available for affordable and supported accommodation has been declining, resulting in a market failure.
The Cheyne Social Property Impact Fund’s objective is to invest £900 million to increase the capacity of the charities and social enterprises that delivers services such as supported housing for people with disabilities, affordable housing for those on low incomes, elderly care and specialised housing for people experiencing homelessness. The fund will do this by buying and developing properties suited to the needs of the organisations and their beneficiaries, and leasing them on attractive and extended terms to organisations (such as councils, housing associations, the NHS) to deliver their support services. By doing this, the fund will provide the equity capital for development of social properties, where the market failure is most acute, and help reduce the reliance on falling government grants.
The fund works with New Philanthropy Capital, who sit on the investment committee as the Impact Member. The Impact Member tables an assessment of impact in relation to each proposed investment, which is included in each investment summary to be sent to investors. Cheyne will identify and measure a clear set of social impact goals that the charity or social enterprise should achieve over the term of the investment. Alongside financial covenants will be social covenants, to make sure that those in greatest need are gaining access to the properties first, for example, and that staff members have been properly trained. The fund will provide social audits to investors, with metrics such as who has been helped and whether rents are affordable and properties are well maintained.
The fund will aim for a balanced approach to financial and social return. It seeks to generate stable, long-term, inflation linked returns for investors, while creating positive and measurable social outcomes. Cheyne is an experienced fund manager with a track record of strong returns in real estate. While some modest price appreciation is assumed, the return is not unduly dependent on this.
The fund aims to attract new sources of capital to the social investment market, while tackling a serious and growing social issue which requires a large amount of capital. The fund is seeking to address this market gap by focusing on large pools of capital with limited participation in the social investment market at present. These investors have certain requirements in terms of minimum investment size and returns and Cheyne is planning to raise around £300 million. Our decision to make a seed investment also reflected our desire to bring fund managers with relevant skills into the social investment market.
- Fund size: £100 million (target size £300 million)
- Big Society Capital investment: £12 million investment in a UK Real Estate Investment Trust (“REIT”).
- Co-investors: include high net worth individuals and institutional investors such as pension funds.
- Key partners: Cheyne Capital is a leading alternative investment manager, with approximately £4 billion of assets under management. Cheyne invests across the capital structure from the senior debt to the equity of corporates and real estate.