…while housing association bond offers a solid home for your money
PLACES for People was the first housing association to issue bonds on the Stock Exchange’s retail bond market back in 2011. Since then, the group has expanded into other areas of the property sector and now it is back, hoping to raise at least £50million with a seven-year bond, paying a ‘coupon’ – annual interest – of 4.25 per cent.
The business remains a non-profit organisation, whose principal aim is to provide social housing. But money is tight in the affordable housing arena, so Places for People has adapted its business model, supplementing its social remit with more commercial activities.
The group manages tenants renting houses and flats. It looks after apartment blocks, ensuring services and maintenance are up to scratch. It manages gyms and sports sites for local authorities, including the brand new Hinckley Leisure Centre in Leicestershire. It even develops properties, with a focus on low-carbon homes, such as at the Prince of Wales’s Poundbury development in Dorchester.
Back in 2011, Places for People owned about 50,000 affordable homes. Today, it owns or manages more than 150,000 properties, of which just 48,000 are classified as social housing.
The business has changed considerably, but it retains a strong social conscience. The money earned from commercial activities is ploughed back into social housing and the latest bond is intended to help these subsidiary businesses grow, creating more homes for Britain across the affordability spectrum. In August, the group raised £400million in the institutional bond market and the coupon was just 2 per cent. Today’s bond is substantially more generous because it is the first time Places for People has raised money specifically for its commercial arm.
This is slightly more risky than the affordable homes division, which is partially backed by the Government, but Places for People is cautious by nature, it has a long track record and many of its management contracts stretch out for 20 years or more.
Investors keen to apply for the bonds have until December 12, though the deadline may be brought forward if demand is particularly strong. Applications can be made through firms including Barclays Stockbrokers, Hargreaves Lansdown, Interactive Investor and Shareview.
Midas verdict: In today’s persistently low interest-rate environment, a 4.25 per cent coupon is highly attractive. The prospect of rising inflation may mean that the amount invested today will be worth less in 2023, when the bonds are repaid. But the coupon should more than compensate for that and investors can always sell their bonds ahead of time. A solid buy.
Traded on: London Stock Exchange ORB Ticker: NBHA Contact: placesforpeople.co.uk or 020 7429 0400