Bouwinvest invests in enabled living segment in Australia

Bouwinvest has stepped into specialist disability accommodation (SDA), a niche residential sector, with Macquarie Asset Management. In total, Bouwinvest is investing $A 65 million (€42 million) in the new venture, 40% of which will contribute to a seed portfolio of 239 high-quality SDA units which Macquarie has financed in Australia’s mainland capital cities over the last three years. The remaining equity will be used to expand the portfolio over the next two years.

Tjarko Edzes, Director Asia-Pacific Investments, said: “We are longstanding investors in the residential sector in its various forms and particularly like the positive societal and environmental contribution we are delivering through this new venture. This form of impact investing is completely in line with our own focus on real value for life and gives us exposure to a sector which has experienced a chronic shortage of high-quality accommodation. It’s a good fit for us, especially as we also expect cap rates in this sub-segment to compress in coming years. Another benefit is that the rental streams are secure.” 

Demand is twice as high as supply
The Australian federal government estimates demand for SDA places at 28,000, double the amount available. This means the Australian market faces a supply shortfall of 14,000 places which will take another 10 years to build, based on current annual construction volume estimates. The main players are predominantly smaller providers and Macquarie’s seed portfolio is the largest of its type.

The portfolio comprises one-to-two-bedroom apartments measuring between 66 and 121 sqm, which are typically part of a larger mixed-use project, including regular residential accommodation, retail and other amenities with a view to enabling people with disabilities to participate in broader society as easily as possible. A support worker is available on-site at each of the properties to provide around-the-clock care and assistance to residents. The accommodation is designed for people aged between 20 and 65 with ‘extreme functional impairment,’ or ‘very high support needs,’ who are eligible for government support for their accommodation under the National Disability Insurance Scheme (NDIS).

The Australian federal government endorsed SDA as part of the NDIS in 2016 with the intention to mobilise institutional capital to build modified dwellings, which increases construction costs by circa 15% compared to regular housing.

Well-connected locations around Australia
The assets in the seed portfolio are located primarily in well-connected inner-city and middle-ring suburbs in Australian mainland capital cities. The venture also has a pipeline of properties around Australia and the aim is to increase the number and deliver additional dwelling types that cater for other forms of disability across the main cities around the country.

Macquarie’s SDA professionals have been working on this portfolio since 2017, in response to government identifying a chronic shortage in accommodation. The platform will provide housing for vulnerable people, who are not only physically but often also socially disadvantaged. The accommodation enables people with a disability who may have been former residents of care homes to live in and contribute to their communities, exercising choice and control over their lives.

To be eligible for the NDIS scheme, the apartments must comply with government standards for specialist accommodation. Facilities on site can include pools with mobility hosts, communal dining areas, yoga rooms, libraries and cinemas.

The platform aims to source high-quality, modifiable accommodation in locations that are, or could become, a destination for the local community, for example, due to a nearby beach, shopping centre, transport hub or by virtue of the amenity on site. Location is paramount to social inclusion and ensuring these homes achieve their goal of providing a long-term solution for the housing needs of people with a disability.

Focus on newbuilds
All the properties, to date, are new builds as extensive modifications are needed to provide larger-than-average bedrooms and bathrooms with wheelchair access and extensive wiring for assistive technology. While Macquarie’s initial developments aimed to provide housing to people primarily affected by physical disabilities, in future projects will also provide accommodation for people with cognitive impairment and include shared accommodation and family units.

Also investing in the platform is the Clean Energy Finance Cooperation (CEFC) - an Australian government-backed entity with an A$10 billion investment mandate that has a strong track record of investing in a range of emission-reducing sectors, including green home loan financing, energy-efficient community housing, build-to-rent accommodation for various groups including students, families and seniors as well as master-planned communities. CEFC CEO Ian Learmonth said: “This investment is about making low-emission housing more widely available to more Australians. Building more sustainable specialist disability accommodation means lower energy bills and more comfortable homes, improving financial, health and social outcomes for residents, as well as reducing carbon emissions. Through our investment in the SDA platform, we are ensuring that both energy-efficiency measures and disability needs are considered in the housing design.”

Houses to be developed by the platform will target an average of at least 7.5 stars under the Nationwide Housing Energy Rating System (NatHERS), with location-specific features that will include high-performing glass, insulated floors, walls and ceilings, window shading, energy-efficient air conditioning, ceiling fans and solar panels. The social and environmental impact of the outcomes generated by the platform is consistent with six of the United Nations’ Sustainable Development Goals (SDGs) and impact reporting on the social side of the investment will be an integral part of overall financial reporting.

The venture will also take part in the Global Real Estate Sustainability Benchmark (GRESB). “Australia is a leader in ESG investments and is often seen as an example for other markets. We are really happy to be part of this longer-term investment that we think offers a very good solution to people with special needs and are confident this partnership with Macquarie will help us grow our Asia-Pacific portfolio to €1.73 billion by the end of 2023,” Tjarko Edzes concluded.