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New REIT warns ‘there will be another First Priority’

A newly launched social housing real estate investment trust (REIT) has predicted at least one more organisation will run into difficulties like First Priority. 

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Picture: Getty
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Speaking to Inside Housing, Christian Forbes, managing director of Fundamentum Property, said he believed another housing association would end up in the same situation as First Priority.

That association has had two board members replaced by appointees of the Regulator of Social Housing, which criticised it for a “fundamental failure of governance”.

According to the regulator, First Priority does not have “sufficient working capital” or the capacity to meet its debts when they fall due. Inside Housing revealed last week that the association has hired a corporate rescue firm to review its finances.


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Mr Forbes told Inside Housing: “Do I think there will be another First Priority? Another board seized? Yes, absolutely.

“We know the government is trying to regulate housing associations better. It wants to make sure they’re financially viable. As an investment adviser, it would be foolish to think that because it’s happened once in very recent history that it won’t happen again.”

Fundamentum is the latest organisation to launch a social housing REIT, an organisation to buy properties and rent them to associations. Like most others, it will focus on supported housing.

It made its initial public offering to the London stock market on Tuesday, seeking £150m, and will aim to deliver yields on this investment of between 5.75% and 6.75%.

Fundamentum has previous experience in the sector, completing similar deals to a REIT, but on a smaller scale. Mr Forbes said it would still seek to buy smaller portfolios than other REITs, to limit exposure in any one area.

He added: “The rental level has to be sustainable. It cannot be the private sector dictating it.”

Despite the previous popularity of social housing REITs, they have experienced issues in recent months.

Triple Point, whose chair is also the chair of the large housing association Places for People, raised less than a quarter of the £200m it was seeking from the stock market last month.

Many others have seen their share prices fall, with the issues with First Priority identified as a driver.

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