Housing association plans £130m sale-and-leaseback with two investors
M&G Investments and Legal & General Property are in talks with Genesis Housing Association to buy hundreds of new apartments in a bid to break into the residential investment sector. Genesis is understood to be negotiating separate sale-and-leaseback deals with the two investors, involving 650 London properties.
The sale could raise £130m for the association, which intends to use the proceeds to cut its gearing. Genesis wants to grant 150- year leases to the investors, which would each grant a 35 or 45-year lease back to the association at a rent of £7m, adjusted annually to RPI.
Genesis would let the properties and retain the income from individual tenants. The assets are spread across the Stratford Halo development next to the Olympic Park and two in north London: New Hendon Village in Colindale and the half-built Zenith House in Barnet. A £130m capital receipt equates to £200,000 per flat.
A sale-and-leaseback would place Genesis under renewed scrutiny in the social housing sector. Although one of the largest housing associations, with 33,000 properties, Genesis is also one of the most highly geared and subject to a lowly credit rating.
In contrast, most of the major housing associations have managed to raise money through bond issues while preserving their property holdings. Genesis’s rating is partly a legacy of an ill-fated foray into development, which culminated in construction stalling in March 2009 at Stratford Halo.
The 700-unit scheme – a mix of private and social housing, including a 43-storey tower – required a cash injection of up to £48m from the Homes & Communities Agency. It is due for completion next year.
In a statement, the association said: “Genesis is looking to work with external parties such as pension funds to invest in the market housing Genesis has developed. “It is using this investment to develop more affordable homes in greater London and the east. To date no agreements have been reached.”
M&G and L&G declined to comment.