S&P downgrades Places for People’s outlook to negative

On Places for People, S&P said: “The negative outlook reflects the risks that higher costs, related for example to investments in existing stock, in combination with ambitious development and absorption of weaker entities aspirations, may weaken the group’s credit metrics on a sustained basis.” 

Places for People took on non-compliant landlord Origin Housing as a subsidiary in April, but S&P said it did not expect the integration of the 7,800-home provider to “materially impact” the group’s financials.

However, “high levels” of investments in existing homes, ramping up an ambitious development programme and incorporating Origin could “tighten” Places for People’s financial headroom, the agency said. 

Places for People has said it expects to spend around £100m on improving Origin’s homes over the next 10 years.

In its last full year to March 2024, not including Origin, Places for People’s repairs and maintenance spending jumped by 45 per cent to £219m. The group carried out around 54,000 more repairs than it had planned in its budget.

With Origin joining Places for People, the enlarged group owns around 80,000 social, affordable and shared ownership homes, according to S&P.

Overall, including its managed properties, Places for People oversees around 245,000 homes. 

The group’s other activities include managing leisure facilities, property management, development and construction services.

“Although we think these could bring more volatility to financial results and carry operational challenges, we consider them less risky than sales activities, and that PfP has adequately managed these in the past,” S&P said.

“In our forecast, we expect the group’s exposure to sales activity will increase, but remain below one-third of total revenue.”

S&P concluded: “We project that PfP’s management will recover its financial indicators after two fairly weak years.

“This is underpinned by balancing cost pressures, delivering efficiencies in its repairs model, cost controls, and rents growth outpacing costs inflation.

“That said, we consider that the group’s financial headroom had tightened, such that our projected recovery may be delayed and credit metrics will remain at current levels.”

Places for People has been contacted for comment.