Affordable Housing under the National Rental Affordability Scheme gaining traction after slow start from institutional investors.
This is serious when In Australia there are rental vacancy rates sitting as low as .8% in some capital cities, according to the Real Estate Institute of Australia. The has created significant hikes in rents for properties. When the great white hope like the National Rental Affordability Scheme has not seen the uptake in dwellings being released in to the market questions have to be asked about why.
However, this is changing due to Ethan Affordable Housing's creative and diligent response to financial modeling issues being requested by large investors.
"Ethan Affordable Housing has had a significant amount of experience in not only attracting serious investment but also on delivering our projects," said Mr. Ashley Fenn, CEO Ethan Affordable Housing.
"To this date we have attracted over $120 million dollars in investment and with more to come.
"It took the American financial market over 10 years to become comfortable with an Affordable Housing tax incentive. I believe the Australian markets will adopt the concept within half of that time in both a REIT and with a Bond issue," Fenn said.
"Australian Institutional investors are comfortable in investing in the development of residential property but when they understand how the Government's NRAS incentive can be maximized I think it will become a defensive investment with solid returns of 8 to 12%," he said.
Ethan Affordable Housing has entered into a collaborative arrangement with Grace Mutual to raise capital to deliver Affordable Housing across Australia. Utlising the Federal Governments NRAS initiative the companies have implemented a financial and housing model that can deliver large numbers of housing stock to families on the rental affordability waiting list.
Grace Mutual has been working with institutional investors for more than 6 months on an innovative approach to attracting wholesale capital into NRAS.
The investment banking background of the team has enabled Grace Mutual to design attractive investment Products for aggregated NRAS projects with Ethan.
One of the investment options is a debt product with a return profile akin to a bond or RMBS, but with Government support. Another offers access to a diversified national portfolio of residential real estate, with enhanced yield and lower occupancy and yield risk.
Fenn goes on to say "We are finding interest among superannuation funds, but the obvious investors are the Industry Funds, where their members including teachers, health care workers, police, fireies are the direct beneficiaries of this 'essential workers' initiative,"
Andrew Tyndale, Principal Director of Grace Mutual states "Grace Mutual has attracted support from some of the major investment banks, offshore investors and private investment funds,"
From interest already expressed Tyndale anticipates Grace Mutual will have the initial fund structures in place by the end of May 2011 and would like to see the first $500 million placed within the next 6 to 12 months.
"Ethan has a number of exciting CBD opportunities that we would like to take advantage of and feel that the timing is right, given the poor returns from other asset classes," said Tyndale.
Institutional investment in the NRAS scheme will give it the significant boost that it needs.