Allen & Overy's real estate team has advised Genesis on its GBP125m sale and leaseback agreement for its East London development, Stratford Halo.
The agreement with M&G investments will provide Genesis with greater capacity to invest in regenerating balanced communities and in good quality, affordable housing at a time when public subsidy for the development of new homes is expected to fall further.
The initiative is the largest of its kind and the first in London. It is also the first institutional investment in residential real estate for M&G’s Secured Property Income Fund (SPIF).
The agreement is an early response to the Montague Report, published in August 2012, which identified the potential of financial institutions as providers of funds for ‘build to let’ to satisfy demand for new housing. It also anticipated the recommendations of the Future Homes Commission (FHC) that the shortage of quality housing could be solved by a ‘major overhaul’ of the way the UK funds, builds and markets new housing.
"This timely initiative is an innovative and far-sighted response to current circumstances in which government assistance is no longer available," says Robert Kerse, Genesis’ Executive Director of Resources. "Genesis is recouping its investments and focusing on regenerating communities by building a diverse range of good quality rental housing in London at a time when young professionals and families on modest incomes are finding it harder than ever to secure homes. As a regulated and reputable landlord, we will retain the management of these properties so ensuring a professional service and avoiding the problems which can arise under multiple or absentee landlords."
Allen & Overy's real estate partner, Adam Cleal says: "We're delighted to have worked with Genesis on a deal that will ensure continued investment and innovation in the affordable housing market."
Jonathan Clarke, Genesis’ Director of Corporate Finance comments: "This transaction is a strategic response providing Genesis with greater investment capacity in the future when the level of public subsidy for new affordable housing in expected to fall further. Genesis has a history of innovation in terms of providing housing in appropriate tenures to meet the needs of communities and, unlike many housing associations, has extensive experience in managing market rent properties."
The A&O team was led by real estate partner Adam Cleal and lead associate Michael Chivers, construction counsel Trevor Cosgrove with tax advice provided by senior associate, James Burton.
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