Aware Super continues to build its affordable housing portfolio with the addition of a new development in Greater Western Sydney.
The $135 billion superannuation fund will construct 300 affordable housing units and 8750 square metres of office and retail space close to Liverpool Hospital.
The development, which has an estimated value of $300 million, will cater to housing essential workers in Liverpool, such as teachers, nurses, aged care and disability support workers, law enforcement and emergency-services workers, and childcare employees.
Damien Webb, the head of income and real assets at Aware, told Financial Standard that the units will be offered at a 20% discount.
During the pandemic, one area of concern Aware heard from its members was the issue of housing affordability.
"We felt it was important to devise a program where the fund can make good investments and returns, but at the same time do our bit to address the shortage of quality affordable housing," he said.
Aware's property investment targets a return of 5% above inflation.
Webb added that the units will help essential workers reduce their work commute time, and ultimately spend more time with their families.
Aware Super's pledge to such projects nationally has ticked over $450 million, out of an overall $8 billion that the fund owns in direct property . The project is the fund's second major essential-worker affordable housing venture. Some 100 essential-worker affordable housing units, which are part of the Alphington development in Melbourne, are underway.
Aware's affordable housing strategy was built over a period of time and the fund has been approached to make allocations to the sector a number of times, Webb said.
"We were certainly approached a number of times, given the heft of the organisation and whose money we represent," he said. "We were asked, is there something to address where capital markets aren't working as efficiently as possible with a market solution. It's always a challenge to make the economics stack up. Buying or developing apartments, leasing at 80% of market rent of the area is a relatively standard benchmark for affordable housing for essential workers. What it meant was us developing a strategy and finding the right opportunities to get the hurdle rates of return."
Both initiatives are supported by real estate fund manager Altis Property Partners and community affordable housing provider Evolve and real estate agency Echo. Evolve is a specialist in the social housing space,
Webb told FS Sustainability the fund will apply its impact measurement framework to the affordable housing developments.
"We do measure the impact of this portfolio, and we've started to baseline it from last year," Webb said. "It applies to other assets as well, in that we look at energy efficiency, how many kilometres in transport resident have to take in their commute. Affordable housing is something we're measuring, because this is something that we need to make the commercial rate of return as well as address a social issue and at Aware Super we believe the two can co-exist."
The super fund's other affordable-housing investments include: Epping, Waterloo, Hurstville, Northmead, Miranda (NSW); Moonee Ponds (Victoria) and Claremont (Western Australia).
Aware Super chief investment officer Damian Graham said the Liverpool development would also support jobs through critical retail and commercial services.
"Through investments like this, we have delivered top-10 returns to our members, while responding to the housing affordability challenges so many essential workers face," Graham said.
Additional comment from Webb by Rachel Alembakis