Carolyn Viney

The HESTA-backed Super Housing Partnerships is calling on other super funds to invest in its affordable and social housing build-to-rent projects as it develops its role as an investment platform for the sector.

Carolyn Viney, the organisation’s CEO and a former chief executive at collapsed property giant Grocon, says Super Housing Partnerships (SHP) has developed a funding model for the social and affordable end of the built-to-rent housing market which seeks to solve the problem of scale and continuity of investments which super funds need to invest in the sector.

The platform, which was launched in November 2022 with the backing of the $74 billion healthcare industry super fund HESTA, is talking with other super funds about committing funds to its projects.

It has been working with AustralianSuper-backed developer and operator, Assemble, for its first projects which are based in Melbourne and says it already has some $5 billion of funds at various stages of capital commitment and deployment for the construction of more than 8,000 dwellings.

Viney took over as CEO in February this year, stepping down from her previous role as chief development officer of ASX-listed Vicinity Centres, a role she took up after her 13 years with Grocon.

“We are an investment management platform specifically designed with the help of HESTA and AustralianSuper to overcome the barriers which have previously prevented the super funds and other large institutional investors from investing in housing,” Viney says in an interview with Investment Magazine. “We have been working over the past three or four years … to put in place a solution to make investment in housing attractive to them.”

While the super fund sector has been sympathetic in principle to the need for more social and affordable housing in Australia, and the government (especially Treasurer Jim Chalmers) has been encouraging them to get involved, there is still some resistance.

The pipeline problem

Viney says the main problem is that affordable housing in Australia has tended to be built on a project-by-project basis, with the viability of many dependent on some form of government assistance.

“There has been a will from the super fund to want to be in housing in Australia but there has never been an easy way for them to do it until recently,” she says. “One of the themes that has come out (of the analysis of the economics of the sector) is the need for scalable, programmatic investment as opposed to a project here, and a project there.”

She says SHP’s goal is to develop a steady pipeline of projects be available for super fund investors, regardless of whether there is government assistance or not.

“While government grant programs can incentivise parts of the market which otherwise would not be serviced, our platform needs to be something that you can operate whether there is grant funding or not.”

This is a different model to the current one for funding community housing providers (CHPs) which are often reliant on land from state governments and financial assistance from the federal government’s Housing Australia (previously known as the National Housing Finance and Investment Corporation), negotiating each deal on a project by project basis.

HESTA has committed some $100 million of equity into SHP’s first project in the inner west Melbourne suburb of Kensington, with ANZ and the Treasury Corporation of Victoria (TCV) providing debt finance.

SHP is standing in the middle as the investment manager between HESTA and lenders, ANZ and TCV, on one side, with Assemble and the landowner working on the delivery of the project, which began in September, on the other.

Assemble and CHP Housing Choices Australia will also oversee its operations once it has been built.

The $205 million project will be made up of 20 per cent social housing, 20 per cent affordable homes, five per cent specialist disability homes and 55 per cent market rental build-to-rent homes.

A veteran of the property industry, Viney says SHP wants to work with “part of the normal housing eco system”, such as landowners to get properties developed.

“There are already large swathes of land which are already held by people who want them developed,” she says. “It’s about seeing if we can partner with landowners and developers and super funds and with the CHPs to fill some of the gaps which currently exist in the market.”

SHP is currently working on five projects in Victoria with HESTA and CHP provider, Housing Choices Australia, with Assemble involved on both the development and operational side.

But Viney sees Super Housing Partnership’s role as working with a broader number of super funds and institutional investors and a broader range of developers.

“Assemble is one developer in Melbourne doing a great job originating projects for AustralianSuper, but the message we are getting from AustralianSuper and some of the other super funds who are doing due diligence is that they want more scale than one development can provide.”

“Partnering with developers around the country gives us access to much more scale which is what is needed for the programmatic deployment of capital.”

“It gives us diversity of counterparty risk, so we’re not just relying on one developer, and gives us a geographical spread.”

The initial HESTA/Assemble group of five projects in Melbourne involves some 3,000 apartments. More projects are in the process of negotiation.

Viney says she had been asked to look at projects involving a total of some 20,000 apartments since taking over as CEO in February.

“Assemble is doing a great job with 3,000 apartments with HESTA, but I have 15 other developments around the country which are saying they have projects which might be good to invest in,” she says. “This is a really efficient way of doing it which gives us scale and diversity.”

With SHP arranging the financing and working with other segments of the market, the developers are not taking the funding risk, she says.

“By us taking on the settlement risk, it takes a piece of the (margin out of it) which makes the project more economically viable.”

Viney sys that SHP is not looking for a large number of investors but for those who shared a similar view of the opportunities ahead. She says she expected it would be the mid to larger sized super funds which would be the ones to consider investing in projects backed by SHP.

“We don’t see ourselves as having 100 investors,” she says. “We see ourselves as having a small number of like- minded people who want to be investors in a large program.”

“It is not something that they are just thinking of doing for a year or two. It is the funds which say they have a clear strategy of investing in housing for low to middle income workers over the next five to ten years.”

The YFYS hurdle

The idea of super funds becoming more involved in funding has been around for some time, with Chalmers regularly citing the social and affordable housing sector as one which could be assisted by funding from super funds.

But funds are also under a strict liability to invest in the best interests of their members with the additional pressure for investment performance with APRA’s Your Future, Your Super performance testing regime. Some funds are too large to look at small scale investments in projects with AustralianSuper generally having a $300 million minimum.

Viney argues that her organisation will provide an important way of bridging the gap – providing investment opportunities at scale and with the continued pipeline needed for super funds to see affordable and social housing as an attractive asset class.

As a newcomer to the super sector, Viney says she was “impressed with the sophistication of the funds who are thinking about these issues (investing in affordable housing) over the long term.”

As she points out, there has been activity in the super fund sector on several fronts recently in the affordable housing area – from super funds such as Cbus investing in NHFIC bonds, to super funds such as the $155 billion Aware setting up its own platform to invest in affordable housing, to the potential new opportunities to be generated by the new Housing Australian Future Fund (HAFF) and now the potential to invest in projects backed by Super Housing Partnerships.

“It is not either or,” she says of the investment options for funding the sector.

“It is ‘and’ and ‘and’ and ‘and.’”

Super Housing Partnerships is part of the small but growing built-to-rent sector in Australia which has been slower to become involved in the sector than other countries such as the US, the UK and Europe.

“Build-to-rent really didn’t exist in Australia until relatively recently,” she says.

But she sees the sector becoming an important asset class for investors in Australia with new investors entering the field.

She says in the past, government housing policies focussed on ways to get more people to own their own home with measures such as first home owner grants.

But she says now there is a general recognition that there is a serious housing problem in Australia which is particularly affecting lower income people, which will need significant investment in the build-to-rent sector.

She says there was also a recognition, particularly by some industry super funds, of the importance of having rental housing available for essential workers close to their place of employment.

“This year we have seen this mainstream acceptance of the housing affordability issue and the fact that many people are finding themselves in housing distress- because of the market, not because they have done something wrong.”

She says moves in recent years to increase the taxes on foreign investors had also discouraged investment in “off the plan” projects which had been a feature of the residential housing market in Australia but had fallen significantly in the wake of disincentives for foreign investors.

Viney says that “a lot of the heavy lifting” around the establishment of Super Housing Partnerships as an investment platform has been done and it is now being able to move ahead with projects.

She says the built-to-rent sector also has to provide a greater level of service for the growing number of Australians who will find themselves as renters for most or all of their lives.

“We need to find ways to make the supply of rental housing more sustainable over the long terms and for landlords to be really good at it because a bigger proportion of Australians are going to be renters and not owners,” she says.

“Build-to-rent has introduced a whole different level of the quality of renter experience (in Australia).

“The way to manage it has to be better, and I think sophisticated investors get that.”

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