Legal & General has recruited Royal Bank of Scotland’s housing finance veteran Alex Gipson within its commercial lending team, as the UK insurance property lender looks to capitalise on a dearth of lending capacity within the niche market segment.
Gipson, who spent more 27 years at RBS including 16 years as director of housing finance within the bank’s structured finance team, will source opportunities to originate and underwrite loans within the social housing sector.
At RBS, Gipson was responsible for origination, structuring and execution of all new affordable housing loans, including funding the first project undertaken by English Partnerships under the LondonWide Initiative programme, Forest Gate Housing PFI as well as a number of local authority stock transfers.
Gipson will report to Ashley Goldblatt, head of commercial lending at Legal & General Investment Management, who set up the the lending division two years ago this month after a decade long career in fixed income with AXA Investment Managers.
Legal & General – whose maiden and still only deal was the £121m 10-year senior debt refinancing for student accommodation developer and manager UNITE Group – is seeking to establish a lending book which provides a diversification from the UK fund manager’s wider corporate bond portfolio, where lending remains scare and, as such, carries a premium.
Social housing, like student accommodation, matches Legal & General’s long-dated liability profile. With the insurance lender’s capital sourced from annuity policy sales, longer duration loans are preferable while social housing and student accommodation investors equally tend to favour longer-term money.
CoStar News wrote a profile exploring Goldblatt and L&G’s property lending strategy here.
Goldblatt said: “With around 4.5m people on housing waiting lists and one million children in overcrowded accommodation, coupled with the reduction in government grants from this area, it is estimated that the funding gap for the social housing sector will reach approximately £20bn over the next five years.
“Whilst the banks have significantly scaled back their activity within this credit worthy area, Housing Associations are increasingly looking to the bond and private placement markets to fulfil their long-term funding needs but finding that the barriers to entry and restricted flexibility of such have meant that only a very small percentage can directly raise money through this route.
“Indeed, out of 1,700 social housing organisations, a maximum of 2-3% are able to cost efficiently access the bond market in their own right.
“This is where institutions such as L&G, that are looking to provide bilateral funding, have an important role to play. We have had discussions with a number of Housing Associations and what has become very clear to us is that a ‘one-size-fits-all’ approach doesn’t work.
“With Alex’s wealth of experience in this sector, we now hope to structure bespoke solutions that not only meet our annuity book’s lending profile, but also provide social housing organisations with the flexibility that they need to achieve their long term ambitions.”