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Housing association’s credit outlook downgraded over development risk
Housing association Thrive Homes has had its credit outlook downgraded over the impact of its development programme.
Credit ratings agency Standard & Poor’s (S&P) said in a judgement that the outlook for the 4,000-home landlord was now negative, meaning its financial profile could weaken over the next few years.
The judgement said: “The outlook revision reflects our view that Thrive’s development programme could weigh on the group’s financial performance over the next years.
“Combined with inflationary pressure on operating costs, we think this could result in a sustained weakening of the group’s debt metrics through the financial year 2021.”
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Thrive, which has properties in Bedfordshire, Buckinghamshire and Hertfordshire, plans to deliver 455 new homes between 2019 and 2022, of which about 40% will be for shared ownership, increasing its exposure to the housing market.
Thrive’s rating, however, remained at ‘A’, which S&P said was because it expects solid demand for social housing to remain over the next few years, which will balance risks from the development side of the business.
Shaun McLean, resources director at Thrive, said: “We are pleased to have retained our ‘A’ credit rating, though disappointed that S&P have changed our outlook from stable to negative. Thrive is a local business where we are continuing to see very strong demand for our homes, with prices remaining stable.
“The uncertainty of the London market, which is a key reason for the outlook revision, has not impacted in our operating area.”
According to S&P, Thrive consistently maintains its homes, meaning that they are all compliant with the government’s Decent Homes standards.
The agency pointed out that although rent arrears have generally been low, the roll-out of Universal Credit has precipitated a “trend toward rent losses”.
It added: “Management’s recent initiatives to address this issue are positive, in our view. They include a newly implemented operating model – known as Thrive Deal – to facilitate advance payments.
“That said, we consider that rent losses could deteriorate further as Universal Credit is rolled out more widely.”
Overall, S&P forecasted that Thrive’s average debt will rise to around £165m over the next three years, up from its current level of £130m.
