Client stories

Caledonia receives £75m for energy efficient homes

Homes and services that make life better

Caledonia Housing Association is one of Scotland’s leading providers of high-quality affordable homes and associated services for people in housing need, with a substantial track record of growth, owning and managing over 5,618 social rented homes in eight local authority areas. 

Caledonia caters for many diverse needs, offering mainstream housing for families, couples and single people, as well as supported accommodation, retirement and amenity housing and other specially adapted properties; including those specifically designed for wheelchair users.

Sustainability, value for money and customer needs are embedded in Caledonia’s strategy: the housing association is committed to taking action to work towards being a carbon neutral organisation and using its influence to promote responsible environmental behaviours. Caledonia also makes a significant and positive social impact on communities, through a number of initiatives such as the Volunteer Project, which supports older people with activities to reduce isolation and loneliness.

Private Placement fulfils Caledonia’s financing objectives

Showcasing ESG was a key strategic objective for Caledonia, and the housing association turned to NatWest to help develop a Sustainable Finance Framework, in the role of sole ESG Structuring Advisor. The new Framework, aligned with Loan Market Association (LMA) Green and Social Loan Principles, includes the following categories: 1) Construction of new homes with an EPC Rating of A or B, or an equivalent SAP score (Capex); 2) Re-financing of existing homes – subject to an EPC rating of A or B ; 3) Renovation of existing homes that improve unit EPC ratings by two notches, such as through investments in energy storage, district heating, smart grids, appliances and products;  4) The construction of new – and the re-financing of – existing Social and Affordable Housing in the United Kingdom. 

Following the publication of its framework Caledonia looked for sustainable funding through a Private Placement, aiming to achieve the following objectives: 1) At least £50 million of long dated, attractively priced funding; 2) A flexible drawdown profile in line with business plan requirements; 3) Attracting long term investor relationships; and 4) Showcasing Caledonia’s strong Sustainability credentials.

Given the inaugural nature of the transaction, the NatWest team, in the role of Sole Agent, prepared a detailed Investor Presentation to provide an overview of Caledonia’s strong credit proposition and sustainability strategy. Targeting UK and North American investors, the marketing process consisted of a Group Investor Call, followed by a Q&A process, with questions focusing on the development plan & asset management, the Scottish Regulatory environment, ESG and financials & business plan. 

The close dialogue with investors paid off: the orderbook grew to over £230 million, with investors offering 20-35 year maturities and a distinct framework of funding deferrals up to 44 months.

Given the strength of demand and the flexibility of the investor bids, Caledonia was able to upsize the transaction to £75 million and to achieve its core financing objectives: 

  • A very attractive pricing across a range of long dated tenors from 2052-2058 
  • Deferrals for 12, 29 and 44 months – aligned with the target deferrals from the business plan 
  • Supportive investor relationships from both North America and the UK, and 
  • A competitive documentation package with limited changes from the launch NPA

Caledonia intends to use the proceeds from the transaction to construct over 500 energy efficient new homes.

Investor support to help deliver high quality social housing in Scotland

Julie Cosgrove, Chief Executive of Caledonia, said: “The NatWest team have been extremely supportive in advising and guiding us through our debut private placement. The team spent time to understand Caledonia and coupled with their knowledge and understanding of the social housing sector and focused marketing of Caledonia to potential investors this resulted in us achieving strong interest from investors. We are delighted with the NatWest team and the outcome, which demonstrated both the strength of Caledonia even within a very challenging market and the hard work and expertise of the NatWest team at all stages in the process.” 

Leigh Grubb, Director of Finance and Governance at Caledonia Housing Association added: “Providing affordable and energy-efficient housing is central to our strategy, and the completion of this funding package is a significant milestone for Caledonia Housing Association as we continue to play a part in meeting the overwhelming need for high quality social housing in Scotland. We really enjoyed working with the NatWest team.  We had some very specific requirements in mind when approaching the exercise, particularly around the drawdown profile and the covenants we were looking for and are really pleased that NatWest were able to present a range of options which ensured that all of our key objectives could be met. This long-term funding at attractive pricing provides much greater certainty for our business plan and provides a strong platform to achieve our overall business objectives.” 

George Flynn, Financing Solutions, NatWest, said: “We’re delighted to have been able to support Caledonia Housing Association with their debut Private Placement, through which Caledonia has developed strong and supportive investor relationships and a funding package that is closely aligned to their core financing objectives.” 

Dean Shahfar, Financing Solutions, NatWest, commented: “We are very pleased to continue to introduce more investors to the Social Housing sector across the broader capital markets, enhancing and developing their sector understanding. This transaction demonstrates NatWest’s support for the Housing Association sector, as well as our commitment to supporting clients in articulating their ESG journeys to investors.”


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