Joint venture to forward-fund purpose-built specialist housing units in £300m plan

Global asset managers Schroders Capital and Civitas Investment Management (CIM) have closed their Social Supporting Housing Fund (SoHO) after raising £192m from investors.

The pair formed the SoHo joint venture to forward-fund the development of new supported housing for vulnerable adults with care needs. The £192m in equity commitments will be leveraged to create a £300m fund to invest in purpose-built specialist units.

Capital was raised from investors, including pension funds, insurance companies and charitable foundations, in the UK, the US and Singapore.

CIM, an impact investment manager with £2.5bn of committed capital for social impact projects, will oversee the development of the properties. The homes will then be leased on a long-term basis to specialist housing associations. The SoHo fund has 11 supported housing schemes operational and another 50 in the pipeline.

CIM also founded the publicly listed real estate investment trust (REIT) Civitas Social Housing in 2016. The REIT holds investment property worth more than £900m.

Its portfolio of specialist housing includes 619 properties providing homes to more than 4,200 residents. Civitas Social Housing has properties in 164 local authority areas in England and Wales, leased to 16 housing associations with support provided by 118 care providers.

According to the Regulator of Social Housing’s (RSH) global accounts of private registered providers, leases for supported housing across the sector totalled around £500m as of 31 March 2020.

It has acknowledged that the new lease-based funding model allows “a rapid expansion” of supported housing supply.

However, the RSH has also raised concerns about the concentration of risk to housing associations using lease-based funding models, particularly if they are thinly capitalised or are over-relying on long-term, low-margin, inflation-linked leases as a source of finance. It has placed several registered providers operating lease-based funding models on its list of non-compliant organisations.

Earlier this month, the RSH found provider Auckland Home Solutions (AHS), which leases properties from Civitas, to be non-compliant with its governance and financial viability standard. The RSH cited concerns about AHS’s risk management under its lease-based funding model.

However, Ian Ramshaw, chief operating officer at AHS, told Housing Today that its model is sustainable, is often backed by ethical investment and meets the needs of care providers and local authorities by offering greater choice and a range of services.

He added that AHS has committed to work with the regulator to address the issues.

Civitas, in a statement to the stock market, said: “Auckland remains fully up to date with all lease payments due to Civitas and this is expected to continue to be the case.

“Auckland has committed to continue to engage with the RSH and in turn Civitas will continue its supportive relationship with Auckland and all other counterparties with the shared objective of further enhancing standards across the sector.”