BlackRock backs for-profit RP on £362.5m shared ownership acquisition

News25 May 2021Sarah Williams

The group behind for-profit registered provider (RP) Heylo has received £362m of debt funding from the world’s largest asset manager, BlackRock, to support the purchase of an existing portfolio of shared ownership homes.

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For-profit registered provider Heylo has received £362m of debt funding from the world’s largest asset manager, Blackrock, to support the purchase of an existing portfolio of shared ownership homes #UKhousing #SocialHousingFinance

BlackRock backs for-profit RP on £362.5m shared ownership acquisition #SocialHousingFinance #UKhousing

Through the funding, Heylo – which acquired its for-profit RP in 2017 and has previously received investment from Lancashire County Pension Fund – has brought the collection of 3,000 homes across England into a holding entity.

BlackRock said that it has acted as majority debt provider on the £362.5m acquisition, arranging £291m of investments on behalf of managed accounts, and £71m of co-investments.

The facilities break down to £262m of RPI-linked facilities and £100m of fixed-rate facilities over a 25-year term.

The deal marks the 18th investment into the UK residential sector by BlackRock Real Assets, to which it has committed £1.1bn to date. Within this, its social housing commitments total £740m across eight deals, made via its BlackRock Infrastructure Debt division.

Other investments via the real assets arm into UK residential include student accommodation and senior living, with news of the latest deal emerging this week in the form of a £500m joint venture with retirement living provider Audley Group. The partners have agreed to deliver at least three villages through Audley’s ‘mid-market’ homeownership brand, Mayfield.

Heylo’s latest portfolio acquisition, completed on 18 May, is spread across Yorkshire, the North West and the South West of England. Of the 3,000 homes, most have been completed and purchased in the past three years, comprising a mix of semi-detached and terraced houses, purpose-built flats and detached houses.

In the case of the newly purchased portfolio, the homes were previously owned by an undisclosed external legal entity but had been “originated under Home Reach by Heylo [and] managed by Heylo”, it said, with almost all homes leased via the Heylo RP. Through the BlackRock loan, made to an "acquisition holding entity", this portfolio has now been brought into group hands.

As of May 2021, the Heylo group owns more than 5,200 units, with further homes under contract in excess of 2,500, the firm told Social Housing.

Commenting on the deal announcement, Jonathan Stevens, head of European infrastructure debt at BlackRock, said: “Heylo housing plays an important role in supporting the provision of affordable housing in the UK and we’re thrilled to assist its latest acquisition. The transaction demonstrates BlackRock’s ability to provide sizeable, flexible debt solutions and our pursuit of investments aligned with clients’ ESG commitments.”

Wayne Bennett, national partnership director at Heylo, said: “Continuous engagement with our investors, Homes England and our house builder partners has meant that Home Reach is now a widely recognised mainstream product suite sitting alongside Help to Buy and part exchange.

He added: “Housing supply continues to lag demand and so we’re focused on the win-win-win: helping house builders build and sell the right mix of stock; enabling more people to get on in life and enjoy homeownership; and creating attractive, high-quality investment returns for providers of capital.”

Social Housing reported in January that a handful of for-profit registered providers including Heylo had geared up with more than £1bn of debt over the preceding 12 months. At the time, published accounts for Heylo showed that in early March 2020, group subsidiary HH No2 Limited entered into a new facility agreement, in which (undisclosed) investors “agreed to lend up to £250m” to the company.

The report notes that this matures in 2045 and is available for drawdown in multiple tranches, with an initial drawdown of £10m received at the end of March. Social Housing understands that this investment relates neither to Lancashire County Pension Fund nor to BlackRock.

Speaking this week, Jonathan Conway, corporate finance director at Heylo, told Social Housing that since the start of 2020 the company has raised “over £700m in funding for shared ownership, from a number of investors”.

Vistry Partnerships

In addition to its latest funding deal with BlackRock, Heylo recently announced that house builder Vistry Group has agreed to commit 1,000 properties to the Home Reach scheme. It said that these have a gross open market valuation of approximately £300m.

The homes will be delivered over a two-year build programme across 89 sites within 62 local authorities.

The news comes after the director of strategy for the Regulator of Social Housing last week told the Social Housing Finance Conference that around 50 applications for new for-profit registered providers are currently in the pipeline.

Will Perry told delegates at the virtual event that the number of homes owned by for-profit RPs is doubling annually, having risen from around 5,000 in March 2019 to 10,000 a year later.

“We’re expecting similar growth this year,” he said. “We may be close to 20,000 homes for the end of March 2021.”

Update: at 5.10pm, 25.05.21

This story was updated to clarify that Heylo acquired its for-profit RP in 2017, and to clarify that the BlackRock loan was made to an acquisition holding vehicle within the group, not to the RP directly.