Blackoak Capital  announced the launch of Lumenate SDA Investment Trust II (“the Fund”), which will deploy $100 million into the construction of new Specialist Disability Accommodation (SDA) for National Disability Insurance Scheme (NDIS) participants.

The country faces a critical shortage of housing that is suitable for the most vulnerable NDIS participants. Around 15,000 Australians living with a serious disability are waiting for housing despite having funding for accommodation approved in their NDIS plans.

While on the waitlist, many of these participants are living in aged care facilities, hospitals, and outdated “group home” facilities, which have been highly criticised by disability rights experts.

The $100 million raised by the Fund will be utilised to enhance the quality of life for individuals living with disabilities by providing them with access to high-quality, purpose-built housing options that promote independence.

Cushman & Wakefield has been appointed as the capital advisor for the process. 

Blackoak Capital’s Chief Executive Officer David Zimmermann highlighted Western Australia’s severe SDA undersupply and explained that the Fund’s first investments will be made in the state.

“Our first priority will be to expand the supply of single-storey houses and villas in WA, before broadening the portfolio to other states. The Fund has an overall objective to develop 50 projects, which will provide best-in-class accommodation for 220 NDIS participants,” Zimmermann remarked.

Over 25% of the country’s SA4 regions have no SDA accommodation supply, despite having residents with SDA funding approved in their NDIS plans.
 

SDA is an investment opportunity, but not all SDA is created equal

“The investment thesis for SDA is simple and clear — we have bipartisan support for the Commonwealth’s commitment to funding accommodation for the most vulnerable over a long-time frame. This guarantees ongoing demand from people with government-guaranteed purchasing power, for a resource that is undersupplied.

“We also know the Federal Government is committed to improving the NDIS and recognises that well-constructed SDA is ultimately a cost saver because it reduces dependency on support services,” Zimmermann said.

The Fund aims to provide a projected equity Internal Rate of Return (IRR) of over 13.0% over a 10-year investment term (calculated pre-tax and before performance fees), with quarterly distributions of 10% per annum and targeting very low levels of third-party debt.

Alan Herrman, Partner, Advisory+ at Cushman & Wakefield emphasised the importance of distinguishing meticulously considered SDA investments from less appealing projects promising unachievable returns.

“From an investor perspective, not all SDA projects are created equal. Over the last few years, inexperienced developers have entered this space, assuming that SDA projects would be simple and promising in some cases unsupported return expectations. This has unfortunately been a disservice to the disability community, by undermining the Commonwealth government’s policy of making private capital available to improve disability housing provision,” Herrman said. 

“While there is real opportunity in SDA, investors need to dig into the details to avoid any pitfalls. These details include detailed location and demand data, build quality, whether the developer has a relationship with reputable SILs and operators, and whether the developer is building the specific housing typologies that NDIS participants say they are looking for,” Herrman remarked. 

Real estate market trends

David Curtis, Co-Head Alternatives, Capital Markets at Cushman & Wakefield commented, “Over the last five years, the Australian commercial real estate industry has experienced multiple structural shifts with investors and fund managers rapidly increasing capital allocation to the alternatives sectors characterised by essential service nature with strong underlying thematic drivers. Specialist Disability Accommodation (SDA) sits well within this investment landscape, bridging the gap between the living sectors and social infrastructure asset classes.

SDA investments offers attractive core plus return whilst boasting the key drivers of a core investment asset class, such as government-backed income stream, inflation-index cash flow and diversification advantages.”

The Lumenate SDA Investment Trust II provides investors with a unique opportunity to contribute to the social fabric of Australia while benefiting from stable and attractive returns. 

As the government continues to focus on improving the NDIS and increasing access to high-quality housing for people with disabilities, the Fund is poised to deliver significant value to both investors and participants.

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$100 million deal to build much-needed specialist disability accommodation | The ASEAN Developer