Adra secures £25m RCF to build 300 energy-efficient homes

Further funding and flexibility

Mr Parry said that in 2021, Adra identified the need for further funding but wanted more flexibility in terms of the funding, rather than just one portion of fixed debt on its loan portfolio.

He said Adra asked a few banks for their RCF proposals, then received “quite a few offers”, and after some deliberation opted for a £40m RCF from Lloyds Bank in February, and the £25m RCF from NatWest.

The RCF from Lloyds consisted of refinancing an existing £35m RCF with £5m of new funding, and was obtained to build more homes and improve the energy efficiency of its existing stock. Meanwhile, the RCF from NatWest was for building new energy-efficient new builds.

Therefore, Adra now has £65m in floating RCFs and, with an existing £45m term loan from NatWest, has £70m in loans from the latter in total. Altogether, the social landlord has £215m in loans.

Mr Parry said Adra’s motivation in seeking a lender for the additional £25m was partly informed by a treasury strategy in favour of having more than one source of undrawn funds.

“So, if there are any adverse changes, we’re not all reliant on one institution,” he said.

“Previously, we only had one source of undrawn funds. Having flexibility of two sources was seen as advantageous. We set up an internal treasury task and finish group and it was a major part of the deliberations on the decision to go to two RCFs rather than one.”

Mr Parry said although it wasn’t a major consideration, it was slightly easier using an existing funder.

He said: “It’s great to continue to work in partnership with NatWest as they clearly share the same values as Adra and see the tremendous opportunity to work with us to realise our ambitions.”

Adra will need further funding, likely in the early calendar year of 2024, and Mr Parry indicated that the housing association is in the early planning stages for raising this next facility.

“We will need more funding, but we’ve not yet decided which route we’re going to take,” he said. “That is going to be a difficult decision.”

Martin Skinner, director – housing finance at NatWest, said that the bank is a “key supporter” of the housing association sector in Wales and the wider UK, with more than £14bn lent to over 250 housing associations.

He said that the lender works closely with housing associations to help them define their sustainability strategies and it has supported many providers with the structuring of their ESG frameworks. It has also been a driver of the Sustainability Reporting Standard for Social Housing, Mr Skinner added.

“We are therefore proud to be working with Adra, as North Wales’ largest housing association, to help the organisation achieve its ambitions,” he said.

Chatham Financial acted as Adra’s funding advisor and Trowers & Hamlins as its legal advisor. Meanwhile, Pinsent Masons acted as NatWest’s legal advisor and Savills provided the valuation.

According to its annual report, Adra grew its surplus from £9.2m in 2020-21 to £9.8m in 2021-22. Over the same period, the social landlord’s turnover increased from £37.8m to £40.1m.

As a Welsh social housing provider, Adra is subject to a rent cap of 6.5 per cent for the 2023-2024 financial year.