Taking a contrarian view
Due to our knowledge of the industry, and the relationship we had built with management, we were able to take a contrarian viewpoint on the unfashionable nature of the UK social and affordable housing sector.
Keepmoat is the UK’s leading national provider of social housing refurbishment services and is also a leading developer of low-cost, affordable housing.
Social housing refers to the 1 in 6 homes in the UK owned by local government and similar bodies. These 4 million houses and apartments are rented at below market rates to low-income families. Keepmoat’s ‘Regeneration’ division primarily provides refurbishment, repair and maintenance services to the owners of these homes.
Keepmoat’s ‘Partnership Homes’ division is a developer of homes targeted at the affordable, first-time buyer market in areas outside of London. Partnership Homes typically develops brownfield land in partnership with local authorities, delivering high quality homes primarily for the private sale market.
Our involvement in the UK social housing sector dates back to 2008 when we were first involved with VPS Holdings (“VPS”) which, amongst other activities, provided property and security services to the social housing sector in the UK.
During our ownership of VPS, we gained an in-depth understanding of the unique dynamics of the customer base (local government and similar entities) and their associated funding streams, and the competitors within Keepmoat’s market.
We identified Keepmoat as the leading player within the social housing maintenance industry, and one of very few national players with a full range of services. However, Keepmoat was severely constrained by its capital structure and ownership, both of which were a result of a debt-for-equity restructuring completed by Lloyds Banking Group in 2012.
Due to our insight into the business and industry, as well as our strong relationship with management, we were well positioned to acquire Keepmoat and completed the transaction in November 2014.
What we've done
Since TDR’s acquisition, Keepmoat’s Partnership Homes division has expanded substantially. We have led investment in geographical expansion, increasing the number of operating regions from 4 to 8, thus doubling the potential capacity of the business. In addition, the Partnership Homes division acquired a regional competitor, MCI, in January 2017, further enhancing its scale and broadening its customer relationships.
As a result the Partnership Homes division is now the market leader in the provision of affordable housing for private sale, constructing more than 3,000 new affordable homes per year, with the capacity to increase this to 5,000 homes per year in the near term.
Date of investment: November 2014
Deal type: Private sale
Status: Partially realised