Sale and Leaseback Feasibility Modelling
Client: Landcom
Industry: Housing
Capabilities: Strategy, Financial evaluation
The Challenge
The NSW Government tasked Landcom with assessing the potential implementation of a Sale and Leaseback Program to increase the supply and reduce the funding gap for social and affordable housing. Sale and leaseback was seen as a funding strategy that could make social housing more attractive as an asset class, enabling retail investors to invest in the social and affordable housing market.
The Action
Polis was tasked with developing a report on the merits of a sale and leaseback model and modelling financial scenarios to compare funding gaps with other delivery approaches. Strategic financial modelling scenarios were analysed for Landcom project to determine the Internal Rate of Return (IRR) and whether it could overcome the hurdle rate for various entities involved, including institutional investors, Landcom, and Community Housing Providers (CHP) operators.
The Results
Polis demonstrated the strategic merits of various development scenarios for the Landcom project. The funding gap per scenario was reported side by side, highlighting the level of supplementary funds required to bridge revenue deficiencies and make investments more attractive for investors. The report also considered recent developments within the HAFF framework and current thinking by CHIA on addressing Affordable Housing within the Regions. This provided Landcom with insights to inform their approach to site development and the viability of a sale and leaseback model.