L&Q and East Thames announce successful merger completion and refinancing
L&Q and East Thames housing associations have today announced the completion of their merger, and a successful £2.6 billion refinancing package to help support delivery of their ambitious strategic objectives.
Benefits of newly merged entity
• The combined organisation owns and manages over 90,000 homes across the UK, worth an estimated £22 billion
• The newly merged organisation will improve its financial strength and, working with like-minded partners, set a vision to deliver 100,000 new homes with half being genuinely affordable to people on average and lower incomes
• The ten-year financial plan allows for:
- £15 billion gross capital expenditure in building new homes o £250 million community investment fund to improve the life chances of those who live in the organisation’s homes and communities and to promote independence among residents
- £5 million per annum for a new training academy to develop talented, qualified staff, and to provide residents with skills and employment opportunities
• The merged organisation plans to create a new 6,600 home specialist care and support subsidiary with an annual turnover of £47 million to provide a dedicated offer to older and vulnerable adults
• Continued commitment to 50% affordable housing through shared ownership and rent, reflecting the organisation’s belief that everyone should have a quality home that they can afford. The organisation will combine social purpose and commercial drive, investing all profits back into creating homes and neighbourhoods people can be proud of
• Maximising capacity and building financial resilience to future markets and economic risk through a focus on cash efficiencies and delivering improved value for money
• Pursuing significant opportunities for growth, including:
- accelerated development throughout London and the South East, including along the Thames Gateway corridor, which has been identified as a long term national priority for growth
- strengthening existing relationships and forging new partnerships with like-minded organisations – primarily within the South East but looking to expand to new regions where appropriate, e.g. Trafford Housing Trust in the North West o development of strategic land initiatives
• Targeting an improvement in key financial metrics, delivering £38 million efficiency savings per annum by March 2019, combining the best from both organisations’ operating model, sharing core central services and greater investment in technology
• Focused on achieving top quartile customer satisfaction and staff engagement:
- Customers will be at the heart of the new organisation. One of the top priorities will be to provide excellent, local, responsive services
- Investing in the organisation’s people, and providing long term career development opportunities as a recognised employer of choice
• Launch of new brand and visual identity.
L&Q has, on completion, successfully negotiated a £2.6 billion refinance package supported by key relationships with its banks. The benefits will include:
• A capital structure that supports the business objective that delivers a lower long-term cost of capital
• An improved liquidity coverage ratio that provides resilience against future market and economic conditions
David Montague, Group Chief Executive, commented: “We have built a strong track record over the last 50 years and believe the opportunities ahead for the sector have never been greater.
“The current Government talks about increasing housing of all tenures, not just home-ownership, and is focussed on long-term targets that stretch beyond the next election. With long-term planning we can make long-term commitments, and we share the Government’s determination and ambition to deliver a step change in housing.
“We are delighted with the merger with East Thames. We have the ambition and the capacity to build quality homes, fit for the future, across multiple tenures at a greater scale than ever before. We want to continue to work with like-minded organisations and have the skills and financial strength to make a difference. I would like to thank our staff for their continued hard work and focus, and our residents for their views and feedback during the process. This is an exciting moment and I look forward to working with our new colleagues and residents to deliver our plans.”
Yvonne Arrowsmith, East Thames Chief Executive, commented: “Our strong relationships in East London and Essex will help the merged entity accelerate growth in the South East over the next ten years. We believe that everyone should have a quality home they can afford. This merger will allow us to combine our social purpose and commercial drive to create homes and neighbourhoods we can be proud of and to provide even greater support to some of the most vulnerable members of society.”
Notes to editors
The new organisation will be named L&Q. East Thames Limited forms a wholly owned subsidiary of L&Q.
Prior to merger completion, the two organisations had a development pipeline of 43,000 homes. From today, the new organisation will improve its financial strength and, working with like-minded partners, set a vision to deliver 100,000 new homes with half being genuinely affordable to people on average and lower incomes.
Both L&Q and East Thames already have a strong presence and track record in the South East. In particular, both organisations see East London and Essex as particularly strong growth areas in the future. Current long term sizeable projects in this region include Barking Riverside, Purfleet, Beaulieu, Weavers Quarter and the Ocean Estate.
Since the intention to merge was announced on 5 April 2016, a partnership has been established with Trafford Housing Trust based in Greater Manchester. Further geographical expansion will be pursued where appropriate as the new merged entity looks to develop more partnerships.
The merged entity is a significant and active operator in the land market, with £800 million invested in 103 sites and a pipeline which trebled in the last year to 43,370 units.
Shortly after the merger announcement on 5 April 2016, discussions began with relationship banks with the objective of procuring a debt package that will support the objectives of the combined group.
The new group is pleased to announce today that it has secured £2.6 billion of committed bank facilities.
The organisation’s reputation, combined asset base and credit strength has enabled it to secure greater flexibility and scale in its refinancing than would have previously been possible as two standalone organisations. The refinancing package combined with the strength of the balance sheet will enable the new organisation to deliver its planned programme of growth and positions it well for the future.
The Board and Executive team have substantial experience across the public and private sectors. Representing both L&Q and East Thames, these individuals share the same culture, values and ambition for the future, whilst bringing complementary skill sets to the Board.
Aubrey Adams will be Group Chairman; David Montague, Group Chief Executive; Yvonne Arrowsmith, East Thames Chief Executive and Waqar Ahmed, Group Director of Finance.
Care and support
East Thames has over 25 years’ experience as a registered provider of care and support services including floating and outreach support, supported living, short breaks and registered care homes.
The merged organisation plans to create a new 6,600 home specialist care and support subsidiary, providing personalised support so residents can achieve independence.
As a combined organisation, this service will form a new wholly owned subsidiary, called L&Q Living, which will expand its services to meet the growing demand for supported living in the UK so that more vulnerable people can benefit from its expertise and the trusted service it provides.
Throughout the process, L&Q and East Thames have taken feedback from more than 2,700 residents. They have shared their priorities for the newly merged organisation to target.