Member Article

North East housing association secures £40 million investment from Canadian insurers

North East housing association, Derwentside Homes has secured a multi-million pound investment which will allow it to build 400 new homes over the next three years.

Derwentside Homes, which owns and manages around 7,000 properties in County Durham, has agreed a £40 million private placement deal with Canada Life Investments.

The landlord is one of a growing number of housing associations applying for funding through private placements rather than traditional bonds. Private placements can be arranged quickly and allow mid-sized providers to access capital from a single investor.

Keith Tallintire, director of Resources at Derwentside Homes, said: “Despite the recent economic conditions we are still very much focused on not only continuing to invest in our communities but also on expanding our stock by building much needed new homes.

“The private placement agreement secures the long term funding of the organisation and provides us with the flexibility required to grow the business.

“The whole process was completed relatively quickly and attracted significant interest from investors.”

David Marchant, who heads up Canada Life Investments, said: “We are delighted to establish a long-term working relationship with Derwentside Homes, a financially strong and prudent housing association.

“We are pleased to support financing alternatives to small to medium sized associations.”

Unlike traditional bonds, private placements are sold directly to a small number of investors rather than being offered publicly.

Derwentside Homes’ £40 million private placement deal, which will be repaid over 40 years and was priced at 4.6%, was part of a re-financing package agreed with Lloyds Bank.

Joanne Newling, relationship manager from Lloyds Bank Commercial Banking’s social housing team, said: “This deal provides Derwentside Homes with a flexible debt package to support its development programme and continue to improve the properties in its portfolio.

“It also demonstrates the growing appetite among investors for private placements, which are increasingly being used to fund successful social housing providers like Derwentside Homes.

“We were pleased to advise on this deal and also extend our relationship through a restructured debt agreement.”

Derwentside Homes was also assisted by its legal advisors DWF LLP and treasury advisors David Tolson Partnership.

As well as paying off part of a loan taken out with Lloyds in 2006, the money will be used to build new homes for rent across the North East.

Some of these properties will be built as affordable housing available through Derwentside Homes, with the rest to be let at market rent through the association’s subsidiary company Prince Bishops Homes.

Set up in 2008, Prince Bishops Homes currently owns 250 properties across County Durham and offers an innovative ‘rent to buy’ scheme, through which, after renting a property for more than four years, tenants are given the chance to buy their home.

Any increase in equity value which has occurred over that period is split between Prince Bishops Homes and the tenant, and can then be used as a deposit for a mortgage.

The scheme is targeted at first time buyers who do not have the deposit needed to buy their own property. Rents are set at market levels and there are no up-front fees or obligation to buy.

Keith Tallintire said: “This deal is good news for the people of County Durham. We know that housing, both affordable and at private market rent, is in short supply and this investment will allow us to build much needed new homes to meet local demand.”

This was posted in Bdaily's Members' News section by Tom Keighley .