Housing Affordability Finance
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INTRODUCTION
HAF
will support the purchase of good, affordable housing, and related property, for church workers and the charities that employ them
will find, fund and improve homes
is comprised of experienced property and investment professionals
offers investors professional, hassle free management and exposure to a diversified portfolio of residential properties
offers investors competitive returns
plans to scale up nationwide, following a pilot of 10 houses
has identified an addressable market of £450m in the UK alone
has closed its first raise at £2.5m. We look to deploy this capital during 2022-3.
“Helping church workers transition from renting to paying a mortgage would be a great step forward.”
Jeremy Marshall
Chairman, Christianity Explored
THE PROBLEM
Price growth outstripping income growth
House prices have risen much faster than income
UK Average House Price vs UK Average income 1995 - 2018
Inadequate funding for Christian workers
House price growth
UK house price growth of +300% in 20 years*
Average income growth of +30% in 20 years*
Too few houses built, leading to a shortage of housing stock.
* Office for National Statistics (ONS), 2021
Church workers’ constraints & needs
Average annual incomes of ~£38,500*
Low or no pension provision
Church leaders use their homes for ministry purposes so need the space to host meetings, groups etc.
Lack of appropriate finance
Mortgage providers lend max. x5 existing income
A ‘stress test’ on free cashflow used with interest rates at +5.5% BofE base rate, resulting in smaller mortgages
Given low wages and high rental costs, it can take many years to save up for a deposit.
“Living locally is essential for planting and growing more churches, especially in poorer neighbourhoods. HAF is a great innovation to address inadequate and expensive housing.”
Ric Thorpe
Bishop of Islington
THE SOLUTION
HAF provides the ‘Missing Piece’ of capital
The HAF Approach
90% percent mortgages are too expensive for Christian workers to service
HAF assists churches to make the monthly cost affordable
HAF enables the Christian worker to participate financially in house price growth/decline.
How HAF works
SERVICES
Structure the project to align stakeholders
Support the development of the capital stack
Assist in finding fairly valued property
Assist and try to negotiate best price
Support property improvements throughout the planning process and the build project, including project and contract management.
LOANS
An equal blend of equity-linked and mezzanine loans with a 2.5% cash coupon
Working together with senior lenders
Open to churches and indirectly to Christian workers
Owner must be a charity
HAF shares in the risks and returns from any house price growth through equity-linked finance
Charities have the flexibility to repay some or all of the debt at any time.
Worked example representing 3 scenarios of future growth/decline
“It’s difficult to get into the market and service the mortgage.”
Church planter
GOALS FOR THE 2021 FUNDING ROUND
1. Regular interest payments
2. Christian impact investing
3. Potential for capital appreciation
Attractive risk weighted returns
5-8% IRR
Quarterly 2% cash coupon
Low correlation to other asset classes improves diversification and risk
‘Kingdom’ returns
Impact investing with significant potential for better stewardship and ministry performance.
Deal execution: Negotiating power in a buyers market
HAFs cash-to-hand creates potential for beneficial terms which enables robust negotiation with Senior lenders and sellers.
Value-added: Find and improve appreciating assets
Ability to find, secure and improve fairly valued property
Management: Co-invest with experts
Analytical and experienced vetting pre-purchase by co-investors
Diversification: Country-wide portfolio
Hassle-free management of a diversified portfolio
Portfolio reporting
Access to an unlisted asset class with regular mark to-market valuations
HEADLINES FOR THE 2021 FUNDING ROUND
Target Return
5-8% IRR
Based on property appreciation of 4.5% p.a.
Capital split between second ranking fixed rate and equity-linked debt
5% cash yield on second ranking debt.
Fees
0.5% p.a. management charge on funds deployed, drawn from interest - bearing loan
Investor returns capped at 8% blended annual return with any surplus retained by HAF in order to re-invest alongside investors on future projects
Terms
10-year unsecured limited recourse loan with returns linked to recoveries from HAF security interests
Min. subscription: £25,000
HAF borrows from investors and on-lends to charities on second ranking charge secured basis against UK residential property
HAF can repay funders early, if underlying loans are repaid to HAF
Assets are valued on a mark-to-market basis twice a year
Size: £2.5m UK Sterling (£)
Structure: UK Ltd company, No. 1209 6242.
BIG ADDRESSABLE MARKET
Potential partners may include:
THE TEAM
160 years of relevant experience in property; residential property development; financial products; law and investment management
Simon Pillar, Chairman
Founder and Managing Director, Pacific Equity Partners (PEP). Prior to founding PEP, Simon was a Partner with Bain & Company. He started his working life as an engineer with the Royal Dutch/ Shell Group in The Netherlands. MBA from the Wharton School.
Patrick McDonald, CEO
Patrick has been involved with key worker housing for 5+ years, including planning, construction and property finance. He has brokered commercial capital for impact investors and consulted alongside McKinsey and Company. He holds an MBA from Oxford University and is a Partner in Openwell.
Nicholas Bewes, Investment Committee
CEO of the Howard Group of Companies, encompassing Howard Property Group and Howard Capital Partners. Prior to joining the Howard Group in 1999, Nicholas worked with The BOC Group for ten years, where he held various management positions.
Denis Petkovic, Legal Counsel
Practised law in London, Hong Kong and Sydney for over 37 years. Partner in leading UK and US law firms. Broad experience in finance and corporate transactions including acquisitions and disposals, structured finance, project financings and securitizations and derivatives.
Andrew Brown, Investment Committee
Qualified chartered surveyor (MRICS) and Managing Director of Ash Mill Developments Ltd, a family firm specialising in residential development projects across southern England. Before joining Ash Mill Andrew trained at Savills Plc, qualified as a planning and development surveyor with St George Plc in London, and then had a brief spell with Laing Homes in Surrey.
Richard Gray, Director
Richard has 30 years of experience in the financial and legal sectors, most recently as a member of the executive committee at HSBC and is a committed Christian.
Anchor Computer Systems Ltd provide software solutions for the UK finance industry. Established in 1981 they serve over 200 customers including United Trust Bank, Conister Bank and Portman Asset Finance. Anchor have transacted more than £6b in loans with more than 1m live agreements.
CONTACT US
To receive further information or schedule a call please contact
Patrick McDonald
patrick.mcdonald@housingaffordability.co
+44 (0)7968 024 903