Stuart Fiertz, co-founder, president and director of research of Cheyne Capital Management, said hedge funds have an opportunity to fund social housing as government spending decreases.
Fiertz said in a briefing: "There is a role for private pools of capital to replace government spending in a time of austerity.”
Last year, for example, US alternatives firm Blackstone Group agreed to buy 18 apartment blocks in Madrid for €125m as the city sold assets to trim a deficit.
When Andy Rose was appointed chief executive of the UK government’s Homes and Communities Agency last year he said: ‘It is clear that continued delivery in the sector depends on the ever closer integration of the public and private sectors.”
In an interview with Social Housing magazine Rose said: “The aim is to work with the private sector efficiently and bring in private sector capital alongside public funding. The pressure to move in this direction is greater when the public sector is constrained although public sector capital should always be seen as a scarce resource.”
Fiertz said: “Social housing could become as fashionable as student housing which is one of the hottest sectors today. Government grants for social housing have dropped from about £3bn a year to zero.”
In the UK there are 1.85 million families waiting to go into social housing according to Fiertz. “At a cost of £100,000 per unit, there is a shortfall of £185bn of property,” he added.
It is understood that Cheyne Capital is launching a social property impact fund. A third-party social auditor will sit on the investment committee to review each transaction for its social benefit.
London-based Cheyne Capital was launched in 2000 and has more than $6.5bn of assets under management. The firm invests in a number of strategies including real estate debt, corporate credit, event driven and equity and equity-linked securities.
In February this year the firm launched a debt-focused opportunity fund, Cheyne Real Estate Credit Holdings Fund III.
The fund will invest in core European real estate opportunities, mainly in UK and Germany, across the debt spectrum. European banks have shrunk their balance sheets since the financial crisis and new capital requirements have forced them to cut lending. As a result banks have reduced loans to the real estate sector, in particular to mid-market borrowers, providing an opportunity to other providers of capital.
Ravi Stickney, head of Cheyne’s real estate debt business, said in a statement: “Cheyne Capital is well placed to source and understand the attractive opportunities arising from the dislocation in the real estate lending and the CMBS market, which continue to suffer from a supply/demand imbalance.”
The Cheyne Real Estate Credit Holdings Fund (CRECH I) returned 12.7% in 2013 from investments in loans and real estate-backed bonds. The value of ordinary shares, including dividend distributions, in Cheyne’s London Stock Exchange listed company, Real Estate Credit Investments, increased 50.1% last year according to the firm.
