$40 million investment target met to build 118 new homes

Nov 3, 2020

An investment platform launched late last year has raised $40 million to build affordable homes for Kiwi families.

Community Finance brings together impact investors and philanthropists with Community Housing Providers to build homes for those in need.

The company provides finance at lower cost than banks to organisations such as The Salvation Army to address homelessness and New Zealand’s ongoing housing crisis.

Community Finance’s first project started in December 2019, raising a $40 million Salvation Army Community Bond to build 118 new homes in Royal Oak, Westgate and Flat Bush.

The $40 million Community Bond, paying investors 2.30% pa, was successfully closed on Friday 23 October, the first of its kind in New Zealand. There were 12 investors involved, made up of impact investors, community foundations and a cornerstone $20 million investment by Generate KiwiSaver.

It makes Community Finance New Zealand’s largest open impact investment platform with $43 million of loans advanced already.

The $40 million Salvation Army Community Bond was kick-started by a $5 million investment from the Lindsay Foundation, created by Sistema founder Brendan Lindsay and his wife Jo. The Tindall Foundation also invested $5 million, as well as $2 million from both Foundation North and the Matua Foundation.

Economist and Community Finance director, Shamubeel Eaqub, says the Salvation Army Community Bond delivers sound investment returns for a fixed interest product, given it is backed by secure income from Income Related Rent Subsidies, and comparable government bond yield is 0.05% pa and bank deposit rate of just over 1% pa.

“The investment returns a good yield, and it delivers desperately needed homes amid a record waitlist for social housing. The investors in this first Community Bond have set an example for fund managers, KiwiSaver providers and other investors to follow.”

James Palmer, Community Finance Chief Executive, says Kiwis need to work together to support and supplement the work of the likes of Kāinga Ora and Community Housing Providers in addressing the housing crisis.

“No one can solve this on their own, so it requires business, fund managers, charities and the Government to step up together.

“Generate KiwiSaver supporting the Salvation Army Community Bond is a tipping point. It leverages the large pool of savings by everyday Kiwis to bring positive and transformational change for the community and those in need.

“Reaching the $40 million Community Bond milestone two months ahead of target, in what has been a challenging and uncertain year for everyone, is testament to the strength of the Community Finance model and its purpose of getting people well housed. This is just the beginning.”

He says that with the Royal Oak and Westgate projects completed and Flat Bush well underway, the benefit is already being felt by more than 70 households. The benefits will multiply in the future, as many will graduate to housing independence.

“We are accelerating our work with community housing groups, government, iwi, and local councils to launch new Community Bonds across the country to deliver positive impact. Collaboration and partnership are essential for solving the housing crisis Aotearoa faces – He waka eke noa. We are all in this together.”

Sam Goldwater, Executive Director and Lead Portfolio Manager at Generate KiwiSaver, says this type of investment was right for its KiwiSaver investors because it made financial sense and supports New Zealand at a time of great need.

“With this first impact investment into community housing, Generate is proving how large institutional investors can balance achieving competitive returns and enabling positive social outcomes. We hope others will follow our lead.”

Brendan Lindsay says the Lindsay Foundation was established to support Kiwis and organisations who aspire to make a positive difference in New Zealand.

“We helped kick-start Community Finance and invest in its first project because there is nothing more important than ensuring all Kiwis have a well-built, warm, affordable and safe home.”

Sir Stephen Tindall, co-founder of the Tindall Foundation, says: “After working for more than 15 years in the community housing area we have seen first-hand the on-going benefits of ensuring every family in New Zealand has a safe and affordable place to live.”

“We are delighted to be backing Community Finance and we encourage other impact investors to do the same to help increase affordable housing supply. Impact investment like this delivers financial returns and positive outcomes for New Zealand. The time is now for genuine impact investment.”

The Community Bond is a fixed interest, five-year investment yielding 2.30% per annum, as well as making a positive social impact. This is achieved by Community Finance operating on a lower margin, enabling a higher return for investors and a lower cost loan for the Community Housing Provider.

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