Regulator slams private equity-linked association which ‘put tenants at risk’

It said: “The fact the board has failed to manage its significant risks, has ceded control to third parties and has allowed tenants to potentially be put at risk is a fundamental failure of governance."

Trinity and First Priority are both part of a new sub-class of housing associations which do not own many of their own homes, but rather lease them from private investors and listed funds.

Typically, these associations lease specialist supported housing for people with mental health issues and pay index-linked returns to the funds.

According to the regulator, Trinity owns or manages 1,309 homes in 56 local authorities containing 2,345 bed spaces aimed at “vulnerable adults with complex learning and physical disabilities”.

Documents submitted to the stock market reveal that Trinity leases homes from the real estate investment trust (REIT) Civitas. As of September, payments from Trinity to the fund accounted for 6.9% of Civitas’ annual income.

Inside Housing understands that the housing association also leases homes from the investment fund Henley SIPUT.

The regulator’s judgement stated that Trinity has in the past breached “certain lease terms due to its inability to make payments as they fell due”.

It added: “Cash flow projections presented to the regulator demonstrated it had not been able to secure access to sufficient liquidity to meet future lease payments.”

According to the judgement, the regulator, in conjunction with investors, has “solved the immediate cash crisis and bought the provider time”. It noted, however, that recovery will be “challenging”.

The judgement also stated: “There had been long standing, inherent conflicts of interest at board and management level which Trinity was unable to demonstrate it was managing effectively.

“The regulator has therefore concluded the board and management of Trinity have failed to ensure that its affairs are managed with an appropriate degree of skill and independence.”

The regulator said that in response to its engagement, Trinity has appointed five new board members. They are: Matt Cooney, chief operating officer of PA Housing; Joe Chambers, chief executive of B3 Living; Azmat Mir, head of development and regeneration; Ian Hughes, former chief executive of Rooftop Housing; and the investor Rupert Cottrell.

A spokesperson for Trinity said: “Trinity has been working closely with the Regulator of Social Housing since early 2018 and more intensively since being placed on its gradings under review list in September. We have proactively taken a number of steps to ensure compliance with the governance and financial viability standards.

“The association is grateful for the support of the regulator, our landlords and other stakeholders during what has been a challenging time for the association.”

The regulator is still expected to issue judgements on three other private equity-linked housing associations it has placed on its Grading Under Review list: Westmoreland, Encircle and Inclusion.

A spokesperson for Civitas Social Housing said: “As part of our overall engagement with all our housing association partners we are working closely with Trinity and its team, including the newly appointed directors.

“We are encouraged by the steps that have been and are being taken to move Trinity forward in a positive manner and by its commitment to working with the regulator to achieve enhanced regulatory gradings as soon as possible.

“Trinity provides a very valuable service of accommodation for people with care needs within a community setting, and this includes the Civitas properties which continue to meet our expectations both socially and economically.”

Inside Housing has contacted Henley for comment.

Update: at 15.17 on 8.11.18 a comment from Civitas Social Housing was added to the story.

Update: at 11.13 on 9.11.18 a comment from Trinity was added to the story.