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London housing association maintains AA- credit rating
East London housing association Local Space has retained its AA- credit rating from a major rating agency.
East London housing association Local Space has retained its AA- credit rating from a major rating agency #UKhousingS&P Global said the landlord’s financial indicators remained solid despite cost increases, with “very strong” liquidity.
It said Local Space kept a relatively small portfolio of over 3,000 homes compared with its peers, with no exposure to market sales and very low vacancy rates.
“We expect Local Space will continue to assume the direct management of units across its portfolio, which should enhance its control over the quality of stock and the customer experience, albeit contribute to higher costs at the outset,” S&P said.
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Local Space is aiming to gradually take back control of the homes it currently leases to Newham Council. Repairs spending rose 50.3% from 2022-23 to 2023-24, in part due to this.
S&P said rent increases were expected to outpace inflation, while “recently updated survey data and reprofiled investments in existing homes will support stable financial metrics”.
Although Local Space is targeting growth through acquisitions and the expansion of its short-term lease programme, the rating agency said it felt the landlord had the flexibility to scale back if required.
“We forecast Local Space’s S&P Global Ratings-adjusted EBITDA [earnings before interest, tax, depreciation and amortisation] margins will stabilise at closer to 50% over our forecast horizon and remain comfortably above that of sector peers.”
S&P said it could upgrade the rating if Local Space had “materially stronger debt metrics”, or lower it if the London specialist altered its strategy so that it had “materially weaker financial indicators”.
The landlord said the rating happened at a “crucial time”. It is putting in place a new strategy for customer focus and service delivery, while also taking on further landlord responsibilities for stock it currently leases to the London Borough of Newham.
Josie Parsons, chief executive of Local Space, said: “We have achieved an AA- credit rating from S&P for the ninth year, along with a stable outlook from the global ratings agency. This is due to our very strong liquidity and stable debt levels, which, given the ongoing challenging economic environment, is a real achievement.
“Crucially, it means we’re able to continue to deliver high-quality settled accommodation and help those facing homelessness in east London, working with our partner organisations.”
Local Space owns and manages more than 3,000 homes in east London and Essex. It specialises in providing accommodation for key workers and those facing homelessness.
Last year, Local Space raised £120m by agreeing its second private placement with major investment firm MetLife Investment Management.
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