Landlord profile

The announcement that Anglia and Circle 33, two of southern England’s largest housing associations, were merging caused quite a stir last month, writes Vikki Miller.

They are the first of the Housing Corporation’s 70 development partners to merge and will create one of the country’s largest registered social landlords. They have bucked the trend for larger associations taking over the tiny or the troubled: both are big players in their home regions. So why merge?

The ability to build more homes and take advantage of development opportunities in the M11 and Thames Gateway housing growth areas are prime reasons for the union. The new super-association, provisionally named Anglia Circle 33, will link Anglia’s patch – which takes in the M11, much of eastern England and the eastern part of the Thames Gateway – to Circle 33’s stomping ground in other parts of Thames Gateway and London.

Both are already development partners but, if the trend to give greater sums of grant to a small group of developers continues, being bigger might give greater certainty to staying in the elite group.

Then there is the issue of money and efficiency. Bringing two associations together can sometimes strengthen the balance sheet, but obviously this depends on the health and relative positions of the two partners. Anglia is made up of several stock transfers, which by nature tend to be more reliant on debt at the start of their lives than traditional RSLs. Circle 33, on the other hand, includes a mix of traditional housing associations and stock transfers. Anglia has turned its historic after-tax deficit into a surplus of more than £1m, but this is mainly down to sales of homes, while Circle 33 has an £8.3m surplus after tax.

The chief executives of the two associations both emphasise the added buying power that the new entity would have. Mark Rogers, who is chief executive of Anglia and likely to head the merged association, says: “The Housing Corporation’s direction is to encourage housing associations to come together to deliver the goods. Larger organisations have clear advantages, such as economies of scale and financial strength, which make it much more achievable.”

Richard Williams, director at consultant Beha Williams Norman, is working on the deal and agrees the merger will create a more competitive organisation. The new association can lever in more private finance thanks to a bigger property portfolio to borrow against. The new organisation will be a major player with a large market share, he says.

So is this is dawn of the super-merger? Williams thinks large-scale mergers will remain an occasional event. He says: “We will probably see the occasional large merger, but most will probably be small and medium-sized associations joining up. They tend to get together rather than go with larger associations as they get subsumed by them.”

However, Circle 33 and Anglia’s chief executives think their merger is the start of a trend. Donald Hoodless, chief executive of Circle 33, says: “With the pressure coming from the government concerning the efficiency agenda, I think other housing associations will follow suit. I believe we are the forerunners for significant mergers to come.” He adds that a number of the big players are in merger talks.

Anglia’s Rogers predicts more mergers of large associations and expects the number of associations with more than 25,000 properties to double over the next two to three years.

The Anglia Circle 33 merger is set to be in place by next June. But before then, don’t be surprised to see other big associations follow their lead.