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Private placements – paving the way towards new affordable housing

14/09/2012 09:05

It’s no secret that housing providers are seeking alternative sources of funding at a time when waiting lists for affordable accommodation are continuing to increase.

Cuts in government grants, along with a growing reluctance among banks to add more property loans to their books, means that housing providers are now seeking more innovative solutions to their funding needs in order to kick-start their developments and meet the UK’s affordable housing needs.

Private placements as an alternative funding option

Private placements are becoming an increasingly popular method of financing among housing associations, involving privately-negotiated bonds from insurance companies and other institutional investors with lending periods ranging from 20 to 30 years.

Private placements present many advantages for housing providers, which include:

  • Access to medium, long-term debt, which is typically between £50m and £100m
  • Lending conditions which are agreed solely between the borrower and lender
  • The ability to structure with unsecured properties
  • The lack of need for a public rating

As private placements provide access to the average amount of long-term funding that a significant number of large and medium-sized housing providers are currently seeking, they present the sector with a very attractive funding option.

The barriers to private placements

There are, however, a few barriers for affordable housing associations that are looking to consider private placements as alternative sources of funding. These barriers include the need for:

  • Long-term relationships with institutional investors, mainly due to uncertainty caused by changing appetites towards UK property investment
  • The correct contacts and networks to access deals in support of new housing projects

While many housing associations don’t have access to either of the above – and are therefore unable to undertake private placements – we at Carlton & Co do possess long-term relationships with investors, as well as the right contacts, with which we can equip various housing providers looking to secure funding through private placements.

A viable funding solution

In this current climate, long-term lending for large-scale projects is key for many housing associations, and private placements – when carried out successfully – can provide the right solution for certain housing providers and their investors alike.

As Carlton & Co provides affordable housing associations with the contacts and long-term investor relationships they need in order to access funds through private placements, we have effectively removed the barriers outlined above and have instead made this method of funding a more viable option for providers.



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