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Carduus bids to raise £200m for homes projects

  • by ERIKKA ASKELAND
 

SOCIAL housing bond company Carduus is expected to raise up to £200 million from City investors to finance new housing developments in Scotland.

As many as half of Scotland’s housing associations are in talks with Glasgow-based Carduus to refinance their existing debt and raise further funds for development at rates below current bank lending availability.

Carduus managing director Brian Gilmour estimates interest rates on a series of bonds backed by social housing assets will be below 5 per cent on a 30-year term.

The investment will be good news for struggling construction firms once close to 100 Scottish housing associations are able to refinance their debt and start building to meet demand for housing.

Gilmour said: “Even on a conservative estimate, every property built creates 2.6 jobs directly and indirectly. If we are looking at £200m being 200,000 houses, you are looking at between 4,000 and 5,000 jobs. What a brilliant kickstart.”

Carduus, which is backed by venture capital firm Bridges Ventures, aims to raise £1 billion of finance over the next three years and more there-
after. The company estimates the social housing sector currently has £9.7bn of assets and an estimated £7bn liabilities.

Housing associations in England in the past year raised £3.5bn on the bond markets – with very little of this trickling up to Scotland. Gilmour believes that difference stems from the more fractured nature of the sector, which is populated with much smaller housing associations than are typically found in England.

He believes that this is why Carduus’ plan to aggregate housing association assets in a series of £150m to £300m-sized tranches is gaining traction, both among investors looking for a safe haven for long-term investments as well as cash-strapped social housing providers.

“Government funding is reducing for housing associations and bank funding has virtually disappeared. Housing associations run on 30-year business models so our model works for them.”

The bonds are being arranged with advice from credit ratings agency Moody’s – which has provisionally given the Carduus bonds a high grade AA2 rating – and HSBC Capital Markets. Recently the former head of PWC in Scotland, Frank Blin, joined the Carduus board as non-executive chairman.

Gilmour admits that the project to raise finance for Scottish housing associations has taken longer than initially envisaged due to the “natural conservativeness” of social housing firm boards.

He said: “One of our challenges is educating firms. It might sound too good to be true, but it actually is true.”

 

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