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London landlord secures £250m PRS issue to fund development

By 01/10/2020No Comments

Notting Hill Genesis (NHG) has secured a £250m, seven-year securitisation of its private rented sector (PRS) assets to fund its development programme.

Picture: Getty

Picture: Getty


Notting Hill Genesis has issued a £250m, seven-year securitisation of its private rented sector assets to fund its development programme #UKhousing #SocialHousingFinance

The housing association said it had appointed Barclays to arrange a series of fixed-income investor calls earlier this month, resulting in a Reg S bearer senior secured transaction backed by 1,523 private rental homes, mostly in London, and held in its private rented subsidiary Folio London.

Folio London represents the majority of the private rental sector business of NHG, with almost 3,000 units located across Greater London and Chelmsford.

The bond was issued on 21 September by Folio Residential Funding No 1, a separate PLC vehicle, rather than the housing association’s usual treasury vehicles, allowing NHG to raise additional funds specifically for its non-social housing business.

It was priced at 128 basis points above the seven-year gilt, giving an all inclusive figure of 1.248 per cent. The expected maturity is 31 October 2027.

The housing association said that while the funds raised by the issue would provide additional housing, it would not necessarily be for market rent through Folio London.

The seven-year tenor will allow the company to maintain flexibility over the future use of its market rent properties and align with the repayment profile of the group’s existing debt, it said.

As of March 2020, the company had just over £3.5bn of drawn debt and £475m of undrawn facilities, as well as £1.8bn of bonds in issue.

A note from Moody’s said: “Positive features of the transaction include the high-quality collateral portfolio with a Moody’s property grade of 1.5, low leverage with a Moody’s loan to value (LTV) of 52 per cent, low default risk and experienced sponsorship.

“Partially offsetting these strengths are the lack of amortisation, flexibility granted under the substitution criteria which allows 30 per cent of the initial property portfolio to change and the short-term negative macroeconomic impact of the coronavirus pandemic.”

NHG – which owns 65,000 homes, making it one of the UK’s largest social landlords – slowed down its development programme following a review in 2018.

Last year, the group completed 1,962 new homes, compared with 2,111 the prior year. Of these, 720 were for “low-cost” rent and 390 were for shared ownership. A total of 459 were for market sale, up from 121 completions of this tenure the previous year.

Earlier this month it also warned that a potential fall in house prices in London could hit its income from its homes for sale.

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