Blackstone Has Built A £700M Affordable Housing Business, And It’s Still Growing

Blackstone has built a UK affordable housing business with a portfolio valued at more than £700M, company accounts filed this week show.

The 2020 annual report for Sage Housing said the company had an existing portfolio of 4,007 homes and a pipeline of a further 8,656 homes that it had committed to deliver. 

Blackstone bought into Sage in 2017, and owns more than 75% of the shares in the company, its first major investment in the UK housing sector. It has so far eschewed investing in the pure build-to-rent sector, preferring to focus on affordable housing. 

Rents in the affordable sector don’t rise as dramatically as in the open market, but the income is steady and typically backed by municipal authorities. In a low-interest-rate environment, it is also possible to add debt to affordable housing portfolios and produce returns that an opportunistic investor like Blackstone typically targets. In 2020, Blackstone securitised a £220M loan against a portfolio of 1,609 homes managed by Sage valued at £308M.

Of Sage’s existing portfolio, of 4,007 homes, 2,354 are leased at affordable rents and 1,653 are shared ownership units, the annual report said. 

Its existing portfolio was valued at £475M at the end of 2020, with the properties under construction valued at £243M, although that figure will rise as they are leased up. Revenue from the portfolio was £96M. 

Sage is owned by Blackstone's fifth European opportunity fund, meaning that at some point it will sell the business, with the likely aim of finding an institutional investor with a lower cost of capital to buy Sage. 

CORRECTION: AUG. 26, 7:35 A.M. ET: A previous version of this article mis-stated the number of existing homes in Sage's portfolio, and said some of the homes were leased at open-market rents. All of Sage's portfolio is leased at affordable rents.