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Investing in our own backyard

19 January 2023

Aerial view of whole  site

At Wiltshire Pension Fund, we are always keen to learn more about our investments, and what better way to do it than visit them in person? 

Through our impact affordable housing portfolio, we have exposure to a fantastic site in our own backyard - Fugglestone development in Salisbury, managed through our investment in the CBRE Affordable Housing Fund.  This site tells a story, all the way through from the foundations being laid, past the houses and flats with roofs going on, to the finished and occupied homes.

Fugglestone Red; building with scaffolding
Fugglestone Red; street of built homes

We were met at the site by Dan Sadler and Ben Fruhman from CBRE, who were waiting for us with hard hats and high vis vests, excited to show us around.  It was a cold day, and we took refuge in one of the completed homes to learn more about the site.  The home we visited had been sold, but was yet to be occupied, and we were pleased to find it was incredibly warm and cosy.  Ben told us that the EPC (Energy Performance Certificate) of the homes in this development is a B rating, which is significantly better than those generally found in the private rental sector.  Privately rented homes are currently only required to have an E rating, although there are plans to raise this to a C rating in a few years' time.  

The site at Fugglestone is a large development, which is adding 185 new affordable homes to Salisbury.  This is an area where access to homes and affordability is a challenge to local residents.  The average house price to earnings ratio in the local area was reported to be 10.32 in 2021 by the Office for National Statistics, above the national average, and there are thousands of families on the local authority waiting list.  We met the site manager for the whole development, who told us that a recently available flat had received hundreds of applicants.

The site is a mixture of affordable rented properties, shared ownership units, and open-market homes, all in a mix of sizes from 1-4 bed properties.  This mix delivers a real positive impact by promoting social cohesion, as well as broadening the market of potential occupants for the homes.

Fugglestone red; Team in hi-vis on site

Now suitably attired, Ben took us on a tour of the development, where it was incredible to see the Fund's money being put to work building new homes, all while earning returns to pay the pensions.  Ben explained that the Fund's investment was returning around 6% on an annualised basis, primarily driven by rental income, with inflation-linked uplifts.  A lot of the positive impacts we were seeing helped to boost this - for example, energy efficient homes are more attractive to buyers, and this can help get homes sold quicker.  Additionally, making homes energy efficient today saves the costs of retrofitting improvements later, when the required standards become higher.

We were also keen to understand how the current cost-of-living crisis was affecting the residents, and how this could in turn affect our returns, as there is a fine line between continuing to collect inflation-linked rents, and pricing tenants out of the market.  The UK Government has just put in place a cap in rent rises of a maximum of 7% in 2023-24.  Ben reassured us that CBRE's strong affordability criteria meant they were supportive of this cap, and that only a minimal impact on projected returns was expected.  We were pleased to learn that so far, tenants have been able to continue making rental payments, and that this would be closely monitored and tenants would be supported.


Fugglestone Red; site facts
This investment clearly demonstrates that we can earn a competitive return through investing in assets which deliver a positive impact, and that those positive impacts themselves form part of the investment case.  Our affordable housing portfolio is invested across the UK, and having the opportunity to learn more from visiting a local site was a valuable experience.

Find out more in our Affordable Housing Article

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