Institutional investment in the housing sector

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The appetite of institutional investors for the housing sector is finally growing, attracted by innovative new models and assurance in steady inflation-linked returns. Over the past year, a growing number of schemes have secured investment, some of which are listed below, injecting some much needed confidence into this sector.

In January 2013, Genesis Housing Association sold a 400-home, private-rented portfolio to M&G Investments on a sale and leaseback basis for £125m in a deal that has widely been seen as the turning point in the involvement of institutional investors in this market. Under the sale and leaseback arrangements, Genesis will manage the properties for the 35-year leaseback period and will make inflation-linked payments to M&G. At the end of the leaseback period, the properties are retained by M&G, which has secured a 160-year lease. Genesis will use the £125m to provide up to 3,000 new homes including affordable and shared-ownership homes.

Legal and General (L&G) recently made a debt facility available to two of Hyde Group’s subsidiaries (£61m to Hyde Southbank Homes and £41m to Hillside Housing Trust) — its first deal in the housing sector. The loans have been made on a non-recourse basis at a fixed rate for the 15-year term. L&G has been vocal over recent months in its desire to provide long-term bespoke funding solutions for the housing association sector and is adopting a ‘tell us what you want to achieve and we’ll see how far we can help you’ approach, which is refreshing…

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