G15 landlord in merger talks with non-compliant west London housing association

Meanwhile, SBHG was downgraded to a non-complaint G3 rating in June over a serious failure of governance. The regulatory judgement said that weaknesses were found in the provider’s financial governance arrangements, as well as inaccuracies in board reporting.

The RSH said, coupled with a lack of effective board oversight and scrutiny, this meant SBHG came within weeks of a potential loan covenant breach that required it to seek an emergency waiver from a third party.

SBHG, which is also graded V2 for viability, was previously downgraded to G2 in 2020, a month after it breached the Home Standard over electrical and asbestos safety. 

Guinness and SBHG said that by merging, SBHG will be better placed to deliver more reliable and consistent investment in its existing homes at a greater pace. They said the provider will also be able to improve services to customers and develop more affordable homes for the residents of west London.

Martin Hurst, chair at SBHG, said the social landlord remains a viable independent business and following its downgrade from the RSH, has made “great progress” with its governance recently.

He said SBHG wishes to build on the progress by investing in its existing stock and building new homes.

Mr Hurst said: “We want to build on our progress to do more for our residents by investing in their homes, communities and building much-needed affordable housing, which will remain challenging if we stay independent.

“Guinness is an organisation that has a strong record of growth, regeneration and investing in the communities they operate in. This partnership will allow us to improve the communities our customers live in, ensures long-term investment in our homes and provides more housing in west London.”

In the year to 31 March 2022, Guinness recorded pre-tax surplus of £44.5m, on turnover of £388.2m, while SBHG recorded surplus and turnover of £10.7m and £47.3 respectively.

Andrew Warner, interim chief executive of SBHG, said: “This exciting new partnership will strengthen our ability to improve our residents’ homes at a greater pace, whilst allowing us to also provide more affordable homes to west London, delivering a better service for our customers.

“Our customers will benefit from our combined strength and increased resilience. Through this partnership we will be able to deliver more for residents, customers and communities across west London.”

Catriona Simons, group chief executive of Guinness, said the social landlord has a “complementary presence in west London” and both associations share a strong social purpose and commitment to the communities in which they operate.

She said: “Bringing SBHG into the Guinness family will increase the impact we both have in west London and deliver more for SBHG and Guinness residents.”

Chris Wilson, chair of Guinness, said the values of Guinness and SBHG are very much aligned, with a “strong social purpose at the core of both organisations”. He said together they can deliver more homes in London.

Mr Wilson said: “We have a strong presence in London – this partnership will provide opportunities to deliver more homes in an area where demand far outstrips supply and further improve the efficiency of our customer service.”

The two housing associations said that both boards and executive teams are working closely together, ensuring residents, employees and stakeholders are kept informed at all key stages.

Subject to due diligence, SBHG and Guinness hope to complete the partnership in autumn 2023.

Guinness and SBHG said they will be communicating with and involving their customers, colleagues and stakeholders over the coming months, with SBHG shareholders being asked to formally approve the partnership later this year.