The settlement in recent days of the first handful of loans for members of Police Bank, aided by partner HOPE Housing, is a milestone for co-investment or shared equity to support home ownership in Australia.
HOPE is a ‘for purpose, not-for-profit’ seeking to forge new pathways to home ownership via a fresh variant of a specialised funding mechanism that has had a chequered history in Australia (outside of a handful of public-sector schemes).
The firm’s co-funding model is elegant and simple for prospective customers to understand, with capital gains, and losses, split 50:50.
The firm has rustled up funding commitments from a slender number of strategic backers, all high net worth investors, to bring the product to market.
“We bundled commitments of A$30 million, and we’re on our way to increasing that to $100 million,” Tim Buskens, CEO of HOPE told Banking Day yesterday.
“We’re starting to draw down on those. We’re continuing to raise the funds with partners and at the same time deploy them,” he said.
For now, this form of housing finance is available only to essential workers (broadly-defined), and the co-investment is offered only to home purchases in the greater Sydney region.
“You’ve got to start somewhere,” Buskens said.
For now, the fund is seeking to support purchases in the $1 million to $2 million or so range, given government schemes are targeted to lower-priced housing seekers.
The essential workers target market, explains, in part, the initial lending alliance between HOPE and NSW-based Police Bank.
“We’ve been working to develop this with them to bring this to fruition for two and a half years,” Greg McKenna, CEO of Police Bank said.
“We were the first to get CEO and board endorsement.
“HOPE is a not-for-profit looking to do a genuine social good. They are a passive owner with the home owner. The owner gets the right to quiet enjoyment of the home.”
Asked about bringing on board additional lending partners, Buskens said “we’ve got a couple more in the queue,” suggesting these are likely to be mutual banks also.
“They [Police Bank] have got a capacity where we can deploy our first fund, $100 million, and we’re very happy to have them as our first partner.
“Demand is increasing but I don’t think it will increase to the point where the bank can’t easily swallow it.”
Meditating on the idea that HOPE will work its way to, say, $1 billion in funding commitments, Buskens said he was seeking “investors who want to make a difference, leave a legacy and want to be remembered for something.
“Our solution has had to be commercial, and deliver a good enough return to sit alongside other investments in their portfolio.”
HOPE is targeting returns of 10 per cent per annum, net of fees and expenses, before tax.