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Westpac signs its largest Community Housing Provider deal

 

24 October 2014

Westpac has signed its largest single Community Housing finance deal, providing A$61 million debt finance to SGCH to facilitate the construction of 275 new dwellings across the Sydney metropolitan region.

SGCH is a not-for-profit organisation with close to 30 years’ experience in providing housing assistance to those most in need. Recognised as one of the largest Community Housing Providers (CHP) in Australia, SGCH houses over 8,000 people in 4,300 homes. SGCH provides social and economic opportunities through the provision of secure, affordable and sensitively managed housing.
 
According to SGCH CEO, Nazha Saad, the current lack of affordable housing in Australia is a significant social issue.

“Working with Westpac, we have been able to secure finance that will allow us to safely grow our business and fulfil some of this overstretched demand. This finance facility will go a long way to providing safe, secure housing for families across New South Wales where the current waiting list for social housing has over 58,000 applicants,” Ms Saad said.

According to Westpac Institutional Bank’s Head of Financial Institutions, Government, Health & Diversified Groups, Janie Wittey, there is no single solution to grow the supply of social and affordable housing in Australia.

“At Westpac, we continue to look for better ways to partner with not for profit CHPs and government to help grow the industry in a sustainable and commercial way.

“Helping people gain access to social and affordable housing is a core part of our Westpac’s vision. Beyond lending money, Westpac can play a vital role, lending our time and expertise,” she said.
 
Westpac Institutional Bank’s Head of Government and Education Jon Ross said: “This form of housing in Australia has traditionally been built through capital programs fully funded by Government,”

“The landscape is now being reshaped by the growing role of CHPs. We are beginning to see signs that the sector is evolving along similar lines to the UK; a mature market with total borrowings in excess of GBP40 billion.

“In recent years, we have seen the composition of Boards and management change across this sector with a strong focus on financial expertise and the introduction of strict risk management protocols and corporate governance.

“Westpac is working with the CHPs and the State Governments to explore the optimum way for this sector to source the capital needed for the growth,” Mr Ross said.

Although progress is being made, there are still significant challenges, particularly for households across the very low to moderate income brackets. The 2014 Rental Affordability Snapshot by Anglicare found of 12,164 rental properties advertised in one weekend, only 33 were affordable and appropriate for households on income support payments without placing them into rental stress.


About SGCH
SGCH is a not for profit with close to 30 years’ experience in providing housing assistance to those most in need. Recognised as one of the largest CHP’s in Australia, SGCH houses over 8,000 people in 4,300 homes. SGCH provides social and economic opportunities through the provision of secure, affordable and sensitively managed housing.

In addition to core housing services, SGCH works in partnership with Government agencies and support partners to provide a range of initiatives to improve the lives of tenants; such as training, education, employment and community engagement opportunities. These initiatives are designed to provide social and economic opportunities, creating better lives and therefore stronger communities.

What’s the deal?
This is Westpac’s largest single community housing finance deal, Westpac has provided a AUD$61 million debt facility to SGCH to facilitate the construction of 275 new dwellings in the Sydney metropolitan region. These dwellings will be developed and retained by SGCH to house its’ tenants.

The structure developed with Westpac is a first of its kind in Australia and provides one of Australia’s leading community housing providers with a meaningful level of capital which will be utilised to fund the development of a significant volume of new housing stock.

The structure involves the creation of a special purpose vehicle, SGCH Portfolio, which has obtained both charity and Tier 1 Community Housing Provider status. A portfolio of dwellings occupied by social tenants was transferred to SGCH Portfolio and the bank modelled the available cashflow from these dwellings to size an appropriate level of debt. This debt will be utilised by the Borrower to develop both social and affordable housing under its asset vesting obligations with the New South Wales Government.

How did this transaction come about?
As part of the Commonwealth Government’s Nation Building Economic Stimulus Plan (NBESP) in 2010 the Government funded the construction of $5.2 billion in new social housing and contributed $400 million towards the repair and upgrade of existing homes. This initiative resulted in the completion of 19,700 new social dwellings and repairs and maintenance to some 80,000 homes.

NSW received 6,330 new social dwellings out of the 19,700 dwellings developed under the NBESP. The majority of these were subsequently transferred from Family and Community Services (Housing NSW) to a select number of New South Wales based Community Housing Providers.
 
SGCH won a tender from the New South Wales Government on the basis of their experience in managing a large portfolio of properties and providing support to high needs tenancies as well as their commitment and capacity to borrow money for investment in new housing supply.

A condition of the asset vesting program was the State’s requirement that these assets be leveraged to borrow funds to develop more social and affordable housing supply. Westpac and SGCH partnered together to determine an appropriate and sustainable debt level in accordance with the New South Wales Government’s asset vesting obligations.

Why is Westpac doing this?
This sector forms an important part of Westpac’s broader group sustainability commitment. In early 2013, Westpac’s Board pledged to make up to $2 billion of funding available to this sector by 2017 for the purpose of increasing the volume of social and affordable housing stock across Australia and New Zealand. To date, Westpac Group has publically reported $680 million of aggregate exposure in this sector across our various brands.

In completing this transaction, Westpac continues to set the standard across the Australian banking sector in helping community housing providers partner with the private sector to grow in a sustainable and commercial way.

About affordable and social housing
Affordable housing is subsidised rental accommodation for people on low or moderate incomes managed in accordance with NSW Affordable Housing Guidelines.

Social housing is subsidised rental accommodation for people on very low or low incomes that meet the required eligibility criteria defined by Housing New South Wales.

About Westpac
Westpac Banking Corporation (Westpac) was founded in 1817 and was the first bank established in Australia. Today, the Westpac Group has branches and controlled entities throughout Australia, New Zealand and the near Pacific region and maintains offices in key financial centres around the world including London, New York, Hong Kong, mainland China, Singapore and India as well as a representative office in Jakarta. Westpac Group employs approximately 36,000 people and has three key customer facing divisions through which we serve around 12 million customers.

About Westpac Institutional Bank
Westpac Institutional Bank (WIB) delivers a broad range of financial services to commercial, corporate, institutional and government customers with connections to Australia and New Zealand.
WIB operates through dedicated industry relationship and specialist product teams with expert knowledge in transactional banking, financial and debt capital markets, specialised capital, and alternative investment solutions.
Westpac Institutional Bank, a division of Westpac Banking Corporation ABN 33 007 457 141 AFSL 233714.