Segregated Mandate
Overview
In 2021, Hearthstone was appointed by Swiss Life Asset Managers (SLAM) as advisor for its private residential property allocations for their Property Income Trust for Charities (PITCH).
Hearthstone provides specialist investment resources to source and identify suitable stock, as well as taking responsibility for the day-to-day management of properties and the underlying tenancies. PITCH retains full control over the ownership and liquidity management.
Investment Strategy
The strategy focuses on the acquisition of single-family private rented homes, primarily for lower income households, in response to a national shortage of quality, affordable accommodation where residents’ welfare and high environmental standards will be prioritised.
The Fund committed to invest an initial £30m into a portfolio of c.120 homes with a focus on mainstream residential including new build, modern or recent conversions with an average property value of about £250,000.
The emphasis is on properties with two to four bedrooms, with a limited allocation to smaller unbroken freehold blocks of flats, typically up to 12 units. The strategy is diversified across mainland UK suburban areas, including the outer London commuter belt and the “big six” regional cities, as well as other large urban areas.
In accordance with SLAM’s ESG policy, PITCH ensures its investments make a positive environmental and social impact by adhering to strict criteria, at both the acquisition stage and through ongoing asset management.
Investor Rationale
The strategy increases PITCH’s exposure to alternatives into a sector that will provide diversification from traditional mainstream commercial property.
At the time of the appointment, Simon Martindale, Fund Director of the Property Income Trust for Charities, commented: “The residential housing sector fits well with our thematic strategy and is expected to deliver stable and attractive returns over the long term. We expect the supply/demand fundamentals to remain positive, supported by a rising shift to private rental accommodation from a broad demographic base. Over the last 20 years, the UK residential sector has provided investors with an attractive risk-adjusted return relative to other asset classes. Coupled with inflation-hedged rents and low volatility, the sector has proven to be defensive while also offering attractive returns.”
