You are viewing 1 of your 1 free articles
Regulator investigates second REIT-linked association
The Regulator of Social Housing has placed a second housing association linked to real estate investment trusts (REITs) under review, three months after it censured First Priority for a “fundamental failure of governance”.
Inclusion Housing, which has done deals with REITs Civitas and Triple Point as well as a partnership between the universities’ pension scheme and construction company Morgan Sindall, has been told its grading is under review following an in-depth assessment by the regulator.
The regulator said it “is currently investigating a matter regarding Inclusion’s compliance with the governance and financial viability standard”.
In a statement to the stock market, Triple Point said the issue was one of governance, not financial viability. Inside Housing understands that this is correct.
READ MORE
Triple Point’s statement added: “With the number of social housing properties managed by Inclusion now exceeding that 1,000 unit threshold figure, the Regulator is in the process of compiling a regulatory judgement incorporating recommendations and a formal grading, which will give Inclusion both a viability and a governance rating for the first time; and it is as part of that process that the regulatory notice was issued.”
Jonathan Walters, deputy director for performance and strategy at the Regulator of Social Housing, told Inside Housing: “Just because it’s your first in-depth assessment (IDA) because you’ve gone over 1,000 homes, it’s not an automatic part of the process that you go on the grading under review (GUR) list.
“If, having completed the IDA, we think there is a material chance that our final judgement will be non-compliant then we would signal this publicly as soon as possible via the list.
“However, if the IDA provides assurance that the provider is compliant with our governance and viability standards then they would not appear on the GUR and we would issue a final judgement once completed.”
Although statistics from the regulator suggest that Inclusion owned 1,279 homes on 31 March 2017, the association’s own accounts for that period indicate that it owned a relatively small number of freehold properties.
Instead, like First Priority and the other small supported housing associations that have done deals with REITs, Inclusion appears to rely mainly on properties leased from other organisations.
According to its 2016/17 accounts, it had 1,285 homes under management across 68 local authority areas at that time and had paid out £9m in lease payments over the year.
In those accounts, the association stated its intention to grow to over 3,000 homes under management over five years, and it has done several deals with REITs since then.
The accounts also state that £12.2m of minimum lease payments under non-cancellable operating leases would fall due within one year, £48.4m would fall due within between one and five years, and £386.2m would fall due in more than five years.
Inclusion is obliged to pay around £3m in annual rent to Civitas, which recently transferred its properties out of the management of the struggling First Priority.
It has also done deals with the REIT Triple Point and Supported Housing Limited Investment Partnership, a joint venture between Morgan Sindall Investments and the Universities Superannuation Scheme.
A spokesperson for Civitas told Inside Housing: “Civitas has an excellent working relationship with Inclusion Housing and we are looking forward to continuing that for many years to come.”
Inside Housing has contacted Morgan Sindall, Triple Point and Inclusion for comment.
Update: at 9.29 on 1.6.18 This story was updated with a quotation from Jonathan Walters.
Update: at 11.56 on 12.6.18 This story was updated to correct the annual rent figure.
