For-profit provider secures £280m in first sustainability-labelled social housing securitisation

News04 Nov 2021James Twomey

Sage Housing has announced a £280m bond structured as what it says is Europe’s first ‘sustainability’-labelled social housing securitisation (SHS), that will fund the delivery of 20,000 new homes.

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The move by the for-profit registered provider, which is backed by Blackstone, one of the world’s largest real estate companies, comes after the housing company’s debut £220m issuance in October 2020.

That earlier transaction, which concerned a portfolio of 1,609 properties , was the first securitisation through social housing rental secured notes, and bore a ’social’ label.

When asked by Social Housing, Sage said that the SHS is a financing structure that securitises the rental income and properties of a portfolio of affordable homes.

It is the first social housing securitisation to have a ‘sustainability’ label attached to it, combining the green bond and social bond principles outlined by the the International Capital Market Association (ICMA).

The group said the SHS was a ‘use of proceeds’-style arrangement that had no required targets, only reporting parameters.

Sage accessed the ESG label through its sustainable finance framework (SFF), which has a second party opinion from Sustainalytics, the largest independent provider of ESG research and ratings.

The company confirmed the framework aligned with the Sustainability Bond Guidelines 2021, Green Bond Principles 2021, and Social Bond Principles 2021, all of which are administered by the ICMA.

John Goodey, chief financial officer at Sage, said: “Our 2020 bond received a social purpose designation and we are proud that our latest bond offering has received a sustainable, social and green bond designation. In being the first of its kind in Europe, it demonstrates Sage’s commitment to leading the sector on sustainable housing delivery.”

He added: “This successful fund raise further highlights our commitment to building a business that has ESG at its core, while providing thousands of affordable, sustainable homes across England.”

Sage Housing is a for-profit registered provider of affordable housing in the UK and said it is the largest provider of affordable homes in 2021. Its housing portfolio is entirely comprised of affordable homes and all rented homes are let to people on local authority waiting lists.

The latest bond is secured against 1,712 affordable and social rent homes and does not include any shared ownership homes.

The expected bond term is five years, but the bonds have 20 one-year extension options. The bond has a floating rate structure, with the A-E tranches having a weighted average of 145bps over SONIA, Sage said.

Deutsche Bank acted as sole arranger, sole bookrunner and lead manager on this issuance.

In September this year, Sage was awarded £73.5m funding from Homes England through a strategic partnership in the Affordable Homes Programme to build 1,750 homes.