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Law firm Winckworth Sherwood to launch UK’s first social housing REIT
Tue 22 May 2012
Law firm Winckworth Sherwood has today, 22 May, announced that it is advising on the structure for the UK’s first social housing real estate investment trust (REIT).
The REIT will bring together 10 housing associations from across South East England with an investment target of £500m by listing on the alternative investment market in September 2012. Any money raised will be used to fund new homes and buying Section 106 sites.
The structure will be an aggregated REIT providing medium and smaller housing associations access to new equity funding over a 40 year period, replacing grant and long term debt financing. Returns will be indexed to social housing rents keeping landlord and investor liabilities matched. The associations will continue to manage the homes throughout the 40-year period, with ownership reverting to them at the end of the period.
Despite an obvious need for more social and affordable housing in the UK, the withdrawal of Government development grant and unavailability of bank lending means social and affordable housing development are at all time lows. A REIT is designed to raise significant amounts of private sector funding for investment in social housing.
Keith Jenkins, Senior Partner at Winckworth Sherwood said: “Until now, landlords have relied on raising cash from grant funding from government, through bank debt or from investors on the debt capital markets. This is not always suitable or viable. Government has been seeking ways of bringing institutional equity investors into the social housing market through a tax-efficient REIT model for a number of years.”
“The aggregated REIT model provides security for associations and releases funds for much needed new homes, whilst offering good returns for investors. We have had considerable interest in our aggregated REIT from associations and investors.”
Winckworth Sherwood’s aggregated social housing REIT structure is launched in advance of the close on 27 June of Treasury’s consultation on how REITs might be used in social housing to attract institutional investors.
Keith said: “The consultation could be read as an examination of how the Government could use REITs as a way of compelling housing associations to permit private investment. Our model gives associations the opportunity to adopt a REIT under their own terms, rather than being compulsorily REITed.”
Keith adds: “We are also well aware that commentators will accuse housing associations of selling off the family silver or taking one further step towards the privatisation of social housing. We do not believe this is the case at all – this product allows housing associations to join with private investors to create more social housing. The introduction of shareholders will also make landlords more accountable.”
Winckworth Sherwood is also advising on the structure a second REIT to be launched in the autumn that will buy open market properties built by large housing associations at a wholesale price, providing security of sale of market stock for the participating associations to release funds for investment in social housing.
Winckworth Sherwood has one of the largest social housing legal practices in the UK, acting for a wide number of large and small housing associations and registered landlords. The firm is passionately committed to supporting social housing organisations as they respond to the challenges of providing affordable and quality homes.