Shared-ownership specialist Heylo Housing is looking to raise £620m via its second bond issuance to fuel its rapid expansion.
The company, which launched in September 2014, currently provides more than 600 affordable homes across 40 local authorities and expects to double that by the end of this year.
Lancashire County Pension Fund supported Heylo’s launch with an initial investment of £180m, of which Heylo has already invested more than a third and committed the rest.
As a result, it is looking to source an additional £620m on the bond markets, and has enlisted the help of UBS and Royal Bank of Canada. The bonds are aimed at large corporate pension funds as they offer secure and inflation-linked long-dated income, helping them match their long-term liabilities.
“This is the purest income match we’ve seen to uncapped RPI, rising on an annual basis from leases that are typically 125 years in length,” said Steve Faber, head of UK investment management at Internos, which is a Heylo shareholder and acts as fiduciary supervisor to the bonds.
Heylo’s chief executive Nicholas McAlpine-Lee said he was pleased how quickly the company had grown. “We are pleasantly surprised that we’ve committed our first round of funding already,” he said. “We have been stepping up to fill the gaps for local authorities and housebuilders needing to fulfil their affordable housing obligations.”
Under Heylo’s Home Reach contracts, developers and housebuilders build and sell new shared-ownership homes and simultaneously sell the landlord’s position in the leases to Heylo via a framework of contracts designed to operate across multiple sites over several years. McAlpine-Lee claimed that developers typically receive 80% of open-market value at the point of sale.
The popularity of shared ownership has also helped, he added, citing the growth of its retail product YourHome.org.uk, on the back of next to no marketing. It allows people to buy homes on the open market and convert them to shared.
“In the current environment, we hope to add more than 1,000 affordable homes to our portfolio every year,” said McAlpine-Lee.