The co-founder of a fledgling firm that buys affordable homes and leases them to councils has said it is hoping to make nearly half a dozen transactions this year after its debut deal with Hyde.
Chris Ashcroft, co-founder of Beehive Affordable Homes, told Social Housing that his company is in conversation with other housing associations, and some private developers, after completing its first deal with the G15 landlord.
“I like to think by the end of the year we’ll have done maybe five transactions,” Mr Ashcroft said. “We can execute these things pretty quickly.”
Beehive, which is backed by funding from the asset management arm of Australian investment bank Macquarie, was set up last year by Mr Ashcroft and his business partner Jonathan Bunt, a former finance director for Barking and Dagenham Council.
Beehive’s first deal, announced last week, saw it acquire 50 properties from Hyde for an undisclosed sum, which it subsequently leased to Bromley Council. The properties are on 135-year fully repairing and insuring leases. But the council has the option to buy the properties outright after 50 years for a nominal fee of £1.
As part of the deal, Beehive will collect a rent from the council that is the equivalent to 69 per cent of the Local Housing Allowance (LHA), which increases by Retail Price Index each year.
A second deal with Hyde is currently in the process of completing in which Beehive is acquiring another 31 properties from the association, which will also be leased to Bromley Council.
The rents for these properties will be the equivalent to 74 per cent of the LHA, according to council documents. Mr Ashcroft said the percentages are “sufficiently low so that all of the operational costs can be met and the council can make a net surplus”.
The homes are expected to be for people who were previously in temporary housing. Guy Slocombe, chief investment officer at Hyde, said: “The main thing for us is that these homes are earmarked for people who were, until recently, in temporary accommodation.”
Bromley Council documents indicate that the properties will reduce its “reliance on costly nightly paid accommodation”.
Mr Slocombe said the proceeds Hyde receives from the sale of the properties will be reinvested in building more affordable housing. Last year, Hyde’s chief executive Peter Denton said the landlord was looking to dispose of up to 10 per cent of its stock over the next three decades.
Explaining Beehive’s business model, Mr Ashcroft said: “Housing associations are going through stock rationalisation processes for a variety of reasons. There’s been a lot of mergers and acquisitions so there’s a whole host of reasons why HAs might not want some of their stock.
“We’ve built a model that allows those homes to be maintained and retained in the affordable housing space and provides value for money to local authorities.”
In terms of its relationship with Macquarie, Mr Ashcroft said Beehive has a “long-term agreement” with the bank that ensures it is his firm’s funding partner.
“We’ve agreed a financing facility with them for the first transaction and we will agree equivalent financing facilities for any follow on transactions,” he added.
Beehive will also donate a proportion of its profits to charities once it starts generating a surplus. “As we start making some profits then we will start contributing to homeless charities in the areas within which we are working,” Mr Ashcroft said.
Gareth Edwards, senior vice-president at Macquarie, said: “This commitment underlines our desire to finance the UK affordable housing sector and local authorities, with approximately £700m invested in these sectors on behalf of our clients over the past five years.”
On the Hyde deal, the housing association was advised by Trowers & Hamlins, Macquarie by Addleshaw Goddard, and Beehive by K&L Gates.