It is an exciting time for CBRE Investment Management (IM). Last week, Inside Housing Living revealed that the US property group had completed the registration of its for-profit affordable housing provider in England. The new provider is currently named AHF FPRP, but we’re assured this will change to something catchier in future.
Meanwhile, its £400m suburban build-to-rent partnership with developer and operator Moda Living is now taking on its first tenants, having launched in May.
Inside Housing Living met Andrew Davey, managing director, and Ann Xu, portfolio manager at CBRE IM, in their St Paul’s office to learn what is next for both strategies and how they intertwine.
The new for-profit provider
CBRE IM has been looking at setting up a for-profit affordable housing provider for a couple of years. It wanted to scale its affordable housing fund first, Mr Davey says, and make sure that the costs of running the for-profit – which include a board of non-executive directors – weren’t “burdensome” for investors.
“Now is the time, at the scale we’ve reached, to do so,” he says.
Registration with the Regulator of Social Housing (RSH) is compulsory only for local authorities; it is voluntary for new entrants to the social housing sector. CBRE IM has been active in UK affordable housing since 2018 and amassed a portfolio of 3,200 affordable homes, 70% of which are operational and 30% of which are in development. In that time, it engaged with the RSH on standards, so the transition to a registered provider “isn’t a difficult one”, Mr Davey says.
“Our residents will not see anything different, our investors won’t. What it means is we can be a bit more flexible in relation to the way we procure grant [and] the way we position ourselves in the market.”
The affordable housing fund has allocated £700m of capital to date, mostly from local government pension schemes (LGPSs). There are 24 investors in total, including some impact funds and a defined contribution pension scheme. Around 60% of the fund’s homes are social or affordable rent, 20% are discounted market rent and 20% are shared ownership.
The affordable housing portfolio is spread across the UK, including several schemes of flats in London and houses across Oxfordshire, Hertfordshire and Wiltshire.
“We’re really trying to diversify and do more in the regions,” Ms Xu says. CBRE IM is looking at buying homes in the Midlands and North East England, as well as Scotland. (For-profit providers cannot operate in Scotland, but investors can target mid-market rent, a form of discounted housing that falls within the private rented sector.)
“[These locations] have really interesting microdynamics in terms of the waiting list… but also the capital doesn’t go to those areas quite as much, and there’s some interesting equity opportunities there as well for us,” she says.
“Our residents will not see anything different, our investors won’t. What it means is we can be a bit more flexible in relation to the way we procure grant [and] the way we position ourselves in the market”
The team is particularly excited about a new project in Canary Wharf, east London, which will be CBRE IM’s largest affordable housing asset. It has forward-funded two buildings with nearly 300 affordable rent homes developed by Canary Wharf Group. The first building was handed over to the fund earlier this month and it will receive the bigger tower at the end of the year.
Many for-profit providers have avoided investing in London, preferring the simplicity of low-rise houses in the suburbs. Ms Xu admits that the Canary Wharf deal took six times as long to complete as an average suburban deal, but says “there is an investment case”. Tower Hamlets has 28,852 families on its waiting list, but the borough started just 1,484 grant-funded affordable homes between 2023 and 2026. “You can see there is such an urgent need for it,” she says.
Even so, 55% of the affordable housing portfolio are low-rise houses, and Mr Davey suggests that this might be where the fund continues to grow. “We’re coming up with solutions for investors that incorporate our affordable housing expertise alongside our [private rented sector] expertise on the single-family side, to deliver bespoke solutions in an LGPS local area,” he says.
