Housing fund for London’s Local Government Pension Scheme makes its first investment

On 31 March 2023, the fund had two investors, with £150m committed and no funds drawn.

The LGPS in England and Wales is administered locally by 86 local pension funds and currently has 6.1 million members.

CBRE Investment Management (CBRE IM), which has over $148.9bn (£119.9bn) of assets under management, launched its AHF in 2019. At the time, it outlined plans to seek a six per cent target total return, to meet the requirements of investors while delivering social impact.

It has since signed a number of deals in the sector. 

Last year, it struck an agreement with Thrive Homes, the housing association, to deliver 1,000 units over the next five years through a long-term risk-sharing structure.

Within this, Thrive Homes announced two deals in 2022 to lease affordable rent and shared ownership homes, 117 across six schemes and a further 86 over eight sites. All of these homes are being developed by Thrive.

Last summer, CBRE IM also entered a forward funding agreement with Godwin Developments to deliver 184 affordable homes in central Bletchley, Buckinghamshire.

In February this year, CBRE IM secured two new LGPS investors for its AHF, Tyne and Wear Pension Fund and Scottish Borders Council Pension Fund. This brought the total number of LGPS subscribers to nine, with 23 investors overall and total equity commitments of over £500m.

Andrew Davey, head of liability-aware strategies and affordable housing at CBRE IM, said: “It became apparent throughout a comprehensive due diligence process that our approach to impact investment and affordable housing was closely aligned with the values and targets of London CIV, so this partnership is very exciting. 

“We are both committed to addressing key societal and environmental issues, and we hope to build on our track record with existing LGPS investors to work together with London CIV to make a meaningful impact and achieve their financial goals.”

Dean Bowden, chief executive of London CIV, said: “We are excited to have launched the LCIV UK Housing Fund and to have made our first investment alongside CBRE IM.

“Affordable housing offers attractive characteristics, including income that typically tracks inflation, high occupancy and low void rates, and low correlation to other real estate sectors.

“It also offers resilience across market cycles and is less sensitive to changes in the economy, as we saw during the pandemic. With our strong knowledge of the UK housing sector, deep pool of relationships and thorough due diligence process, we are well positioned to enter the market and partner with best-in-class stakeholders such as CBRE IM.”

Christopher Osborne, senior portfolio manager of London CIV, said: “We are delighted to have launched the housing fund and to have invested into CBRE UK AHF. This represents a compelling opportunity to partner with a best-in-class team and experienced manager (CBRE IM) in the affordable housing space.

“Following a robust due diligence process, we look forward to CBRE UK AHF driving resilient returns for our underlying client funds and generating impact through increasing the supply of genuinely affordable and quality homes for some of the most vulnerable members of society.”

In 2021, a government-sponsored report described why institutional investors should be connected with ‘place-based’ impact investment at scale, including social housing.

It focused on the role of the £326bn LGPS and the potential to build and scale a market for investment in local and regional opportunities that delivers tangible benefits for local people and places.