Southway Housing Trust has agreed a £120m private placement, which it says is the first in the social housing sector to be linked to the delivery of a range of sustainable outcomes.
The debut private placement – supported by Savills Financial Consultants and NatWest Markets – is a ‘sustainable use of proceeds’ deal that will support Southway to achieve its targets across its Environmental, Social, and Governance (ESG) work.
The resulting investor demand was high, meaning the size of the bond increased from the £85m launch amount, with the order book six times oversubscribed.
The 6,300-home, Manchester-based housing association says it is committed to being a net-zero carbon organisation by 2038, in line with the Zero-Carbon Manchester Plan.
The private placement – which was agreed with institutional investors from both North America and the UK – will also be used to help deliver Southway’s 1,600-home development plan and reduce its overall cost of debt.
Under its zero-carbon strategy, Southway has set plans for:
- All new homes to meet EPC B or above
- Fuel-poor households to be at EPC C or above by 2030 and all existing homes to be at least EPC C by 2035
- No gas heating in new homes by 2025 and all new heating programmes to existing properties to be non-gas by 2025
- Fully electrifying its vehicle fleet by 2025
Southway also says it has a clear community investment strategy, with a core aim to reduce poverty within its communities and a commitment to invest at least £1m per year in community and social service-related projects.
‘Deliver more and be more competitive’
Karen Mitchell, chief executive at Southway (pictured), said: “We are delighted with the outcome of the private placement.
“Obtaining funding now with deferrals in one and two years’ time is really important.
“It gives Southway financial certainty during these changing times and means we can continue to work towards our ambitious targets to deliver new homes in South Manchester and our vision of Thriving Communities.
“We are also really pleased the funding market has responded well to our sustainability offer, with strong green and social principles, which are at the heart of Southway’s strategic objectives and operations.”
David Clermont, CFO at Southway, said: “The excellent outcome and demand from investors is testament to the strength of Southway’s financial position and credit proposition.
“The money raised will finance the second half of our development strategy to deliver 1,600 much-needed new homes over the 10 years to 2025, enabling us to significantly outperform our original target of 1,000 new properties.
“The interest rates secured are lower than assumed when we went to market and in our business plan, which means we can deliver more and be more competitive when bidding for future schemes. A great result.”
Mike Roche, a director at Savills Financial Consultants, said: “This deal is important for a number of reasons.
“First, it helps Southway Housing Trust to ensure it can continue to be successful in its mission of improving housing choice for the people of South Manchester and the nearby areas.
“Second, it demonstrates the ongoing size of investor appetite to work with housing associations.
“Third, it shows the importance of being able to clearly communicate how your investment will help achieve specific environmental, social and governance goals.
“We are very pleased to have been able to support Southway to achieve such a strong result.”
George Flynn, head of Debt and Financing Solutions at NatWest Markets, said: “NatWest is delighted to have supported Southway on this landmark transaction as sole Private Placement Agent and sole ESG Structuring Bank, which marks from our records the first Use of Proceeds Sustainable Private Placement in the Social Housing Sector.
“Southway has a very strong ESG story, with targets to reduce its environmental impact, a transparent zero-carbon strategy and a clear community investment strategy focussed around reducing poverty within Southway’s communities in South Manchester.
“Management clearly articulated Southway’s strong credit story to investors and addressed core questions from investors, which generated exceptionally strong levels of oversubscription and limited documentation changes.
“We’re excited that we can actively contribute to social, economic and environmental progress in the UK by supporting customers such as Southway, and this transaction is a great example of our purpose in action, championing potential so people, families, and businesses can thrive.”
Southway Housing Trust is a co-operative and community benefit society and a registered provider with the Regulator of Social Housing.
- Funders: Unnamed Institutional Investors
- Financial Advisor: Savills Financial Consultants
- Sole Private Placement Agent and Sole ESG Structuring Bank: NatWest Markets
- Southway’s Legal Advisor: Anthony Collins
- Funder Legal: Devonshires
- Valuer: JLL
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