Thursday, 19 January 2017

Equity funder completes first HA deal

A housing fund established by a merchant bank has closed its first deal with a major housing association after providing £17m to build extra housing in Essex.

Funding Affordable Homes (FAH), a fund manager established last year by merchant bank the Salamanca Group, has provided the cash to build retirement and care accommodation which will be leased by One Housing Group (OHG).

The 130 units of extra care housing will be built by developer Ashley House with the funding from FAH, which will then own the properties.  

OHG has signed a management lease which will see it take over the accommodation, and pay rent to FAH for an undisclosed fee which rises linked to inflation.

FAH hopes to deliver a return of between 7% and 8% for its investors through this rental income, interest on the development finance it provides and the growth in the value of the homes.

The fund manager provides cash from institutional investors and high-net-worth individuals to fund socially beneficial housing schemes.

All the schemes it funds must first pass a rigorous test of social benefit before being recommended to the board for approval.

Paul Munday, chief executive of SHA which advises FAH, said: “This scheme really meets all of our social criteria, and it’s got good long-term capital appreciation and no issues around demand.”

FAH has also progressed its plans to register as a housing association, and is waiting for the Homes and Communities Agency (HCA) to assess its bid.

This will allow it to own homes built through Section 106 planning agreements and with government grants, but it has no plans to manage these homes.

FAH made an exclusive funding and partnering agreement with Ashley House in December, and has also signed a ‘co-operation agreement’ with 7,500-home Housing Solutions to seek opportunities.

The agreement with OHG, which will fund one scheme in Harwich and one in Walton-on-the-Naze, is its first completed deal with a major housing association.   

Under the lease deal, housing associations agree to pay a fee to FAH which they collect from rents. The group says it is prepared to share the risk posed by further statutory changes to rent setting in particular circumstances.

The government announced it will force landlords to decrease rents by 1% a year in the Budget this summer.

Essex County Council also provided £4m of grant for the scheme, for which it will gain nomination rights.

Kevin Beirne, group director of housing care and support at One Housing Group,said: “This innovative funding strategy… will help us deliver these fantastic new apartments that form part of One Housing’s new Season Extra Care offer.”

UPDATE: At 9.30am on 16.2.2015

This article was expanded from an earlier version.

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