Optivo and Southern Housing eye 77,000-home merger

Mr Hackett said: “By joining forces, we can create an organisation with the strength to deliver for residents through these increasingly challenging times. We’re bringing together two associations with proud histories to create a combined organisation that’s fit for the future.”

An engagement programme will be launched to provide residents, staff and external partners an opportunity to feed into the discussions.

Under the plans, Fleet House in Farringdon, the head office of Southern Housing Group, would become the headquarters of the new group, with back-office functions at Optivo’s large office at Kent Science Park. Office space would also be maintained in Birmingham, Sussex and on the Isle of Wight, the providers said.

Better together?

The two organisations share a similar credit profile, however Optivo benefits from higher regulatory grades at G1/V1. It has an A3 (stable) rating from Moody’s.

The group outlined in 2020 that it was ‘reprofiling’ its development programme as it dealt with ongoing fire safety remediation costs.

Meanwhile, Southern has a credit rating of A3 (negative) from Moody’s, an ‘A’ from Fitch and is graded G2/V2 by the Regulator of Social Housing.

The group’s lower (but compliant) governance grading follows a downgrade in April 2020 from its previous G1, after an in-depth assessment found the provider “needs to improve some aspects of its governance arrangements to support continued compliance”.

In November 2021, Southern received a regulatory notice over issues with its rent-setting, for which it apologised and said it had refunded tenants with all the money paid in error.

Social Housing enquired about the intended legal and treasury structure of the new organisation, should discussions be successful, and who will be heading up the finance function.

A spokesperson for the organisation said the legal structure would be an “amalgamation”, with the treasury functions being brought together. They said that no decision had yet been made on the executive director positions, but that executive team appointments were expected to be considered “early in the process”.

Asked whether the merger was at all connected with Southern’s efforts to strengthen its governance following its downgrade to G2, the spokesperson said that it was not.

“The purpose of the merger is to create a more resilient organisation that can deliver high-quality resident services,” they said. “The two organisations work alongside each other in many of the same communities and share the same values, so there’s a good fit between Southern Housing Group and Optivo.”

‘Impact, not expansion’

The announcement comes days after news of a major stock transfer to Southern from L&Q, with the latter handing over 803 homes in Surrey and West Sussex as part of its ongoing stock rationalisation programme.

Commenting on the merger talks announcement, Mr Townshend said: “As Optivo and Southern have worked alongside each other in many of the same communities, merger gives us the opportunity to unify our work. We’ll be big but local, deepening our ties to the areas we work in. This will bring real benefits to our residents, our colleagues and our external partners.”

Mr Dixon said: “This is a different type of merger, focused on impact rather than expansion. The combined scale of the new organisation in the communities we operate in will enable us to work with our residents to make a real difference.”

The partnership talks are the latest to involve a member of the G15. Peabody and Catalyst are due to complete their merger next week, on 1 April, which will bring together circa 100,000 homes.

In December, One Housing formally completed its tie-up with national landlord Riverside, becoming a subsidiary of the larger group and creating a 75,000-home entity.  

Update: at 15.08pm, 01.04.22

The story was updated to include responses to Social Housing’s queries, received from a spokesperson on 24 March.