Debt Sale Gives A Glimpse Into Blackstone’s Big UK Housing Play

Photo credit: Courtesy of Blackstone
Blackstone Head Of Europe James Seppala

A new sale of commercial real estate debt securities has provided a rare insight into Blackstone’s UK social housing investment strategy, which is on course to become a £1B-plus business.

Blackstone-backed Sage Housing is selling £220M of commercial mortgage-backed securities in a deal being managed by Deutsche BankCoStar reported.

The debt is secured by a portfolio of 1,609 social housing units let to local authority tenants, spread across 113 separate developments. The portfolio is valued at £308M and provides annual income of £12M, and all of the units have been built within the last three years.

Blackstone, led in Europe by James Seppala, first moved into the UK social housing sector by backing Sage, which was then a very small player in the market.

In an event hosted by Savills last autumn, reported on by Inside Housing, Sage interim chief executive Rod Cahill said the registered provider had already agreed contracts to provide 7,300 homes and was in talks on another 2,800, which would take its portfolio past 10,000 homes.

If those 10,000 homes had roughly the same value as those secured by the Deutsche Bank CMBS, that would put the value of Sage’s portfolio at close to £2B.

Social housing has become an attractive investment sector for private equity firms, hedge funds and listed investors because while the returns are not typically high and rental growth is capped, the income is very secure and regular.

In other markets like Spain and Scandinavia, Blackstone has made opportunistic returns investing in social housing by building up large businesses and refinancing assets.

Sage has typically bought affordable units being built by private sector developers or other housing associations.

Just over half of the portfolio is located in the south east of England and London, with the rest spread across the Midlands and east of England. Two-thirds are houses, a third are flats, and the majority have two or three bedrooms.

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