Decision

Current regulatory judgement: Sage Rented Limited (13 December 2023)

Published 13 December 2023

Applies to England

RSH Narrative Regulatory Judgement

• Provider: Sage Rented Limited

• Regulatory code: 5083

• Publication date: 13 December 2023

• Governance grade: G1*

• Viability grade: V2*

• Reason for publication: First assessment

• Regulatory route: In Depth Assessment

As noted in the body of the report, this judgement concerns an organisation that is designated a for-profit registered provider.

The registered provider is not at the head of its group. It is a subsidiary organisation within a larger group of connected companies.

The registered provider is not intended to operate as a standalone entity in the group structure. It requires the ongoing support of related parties to fulfil its functions and / or meet its objectives. The nature of this support is described in this judgement.

This judgement concerns the registered provider only and does not represent an assessment of the non-registered entities within the group.

Regulatory judgement

This judgement represents the regulator’s first graded assessment of Sage Rented Limited’s governance and financial viability. It concludes a G1* grade for governance and a V2* grade for viability.

Sage Rented Limited (SRL) does not undertake any activity that does not relate to the provision of social housing. It is a for-profit registered provider.

Based on evidence gained from the In Depth Assessment (IDA), the regulator currently has assurance that SRL complies with the financial viability elements of the Governance and Financial Viability Standard. Its financial plans are consistent with, and support, its financial strategy. The provider has an adequately funded business plan, and we have assurance that at present, it can maintain its financial viability without putting social housing assets at undue risk.

SRL’s current acquisition strategy is focused on the purchase of recently developed homes from sister companies. In delivering its growth to date, SRL has obtained loans from its shareholder and the debt markets, and equity investment from its shareholder which means it is highly geared. This provides assurance that it can maintain its financial viability without putting social housing assets at undue risk. In meeting its future growth targets, SRL expects to fund this via a combination of further external debt finance and support from its shareholders. During this period of growth SRL is forecasting a weaker financial profile.

SRL needs to carefully manage a range of exposures associated with its plans for future growth. This includes risks associated with refinancing current and future debt finance and ensuring continued access to debt markets to obtain further funding. SRL also requires continued support from its shareholders during this period of growth.    

Stress testing of its business plan has provided assurance that SRL can adequately manage a reasonable range of downside scenarios, but this would require additional parental funding. SRL does not have maintenance covenants attached to its current debt.

Based on the evidence gained from the IDA, the regulator has assurance that SRL’s current governance arrangements meet the requirements on governance set out in the Governance and Financial Viability Standard. The regulator has assurance that the governance arrangements enable it to adequately control the organisation and to continue to meet its objectives. However, as SRL matures and continues to grow, it needs to ensure it continues to evolve its governance arrangements to ensure it continues to adequately control and manage its risk profile. 

SRL is a subsidiary organisation within a group of companies. SRL has the same board members as the other two registered providers that are fellow subsidiaries of the parent company, Sage Investments SARL. These registered providers are not included in this judgement. Its governance framework establishes clear roles and responsibilities for its board and contains appropriate probity arrangements. 

SRL can demonstrate that it has taken steps to ensure that the arrangements it has entered into do not inappropriately advance the interests of third parties. This includes the use of independent information that the board has the legal right, and budgetary control, to procure to support its decision-making.

The housing management of SRL’s homes is carried out by another member of the group, Sage Housing Group Limited (SHGL), which at present predominantly contracts management out to unconnected registered providers. Agreements containing information requirements, escalation and resolution provisions are in place with SHGL and support the delivery of intended outcomes for tenants. Independent verification of the housing management service is a feature of the overall risk and control framework.

Other providers included in the judgement

None

About the provider

Origins

SRL was registered as a for-profit provider of social housing in December 2019. SRL is a company limited by shares. Its parent company is Sage Investments SARL, a holding company registered in Luxembourg.

SRL operates as part of a group of connected registered providers and a management company owned by the same parent, operating as Sage Homes. Its strategic aim is to become a leading provider of affordable homes by bringing significant, stable capital to the sector.

Registered Entities

SRL is the only registered entity covered by this regulatory judgement.

Sage Investments SARL owns a further two registered providers that are covered by separate regulatory judgements. These are:

• Sage Housing Limited

• Sage Homes RP Limited

Unregistered Entities

SRL has three unregistered subsidiaries, which are financing vehicles. Its immediate parent company, Hedwig ASR Holdco Limited, is an unregistered entity.

Geographic Spread and Scale

SRL owns homes across all regions of England with a higher concentration of homes in the south east and home counties than in the north.

At September 2023 SRL owned 6,820 homes.

Staffing and Turnover

SRL has no staff. Staff functions are provided to SRL by a sister company, SHGL, under a Corporate Services Agreement.

In the year to December 2022, SRL reported revenues of £27 million.

Development

SRL does not undertake development directly. It purchases completed homes from companies under common control. SRL has added 3,499 homes to its stock holding in 2023.

About our judgements

Key to Grades

Governance:

	Compliant
G1	The provider meets our governance requirements.
G2	The provider meets our governance requirements but needs to improve some aspects of its governance arrangements to support continued compliance.

	Non-compliant
G3	The provider does not meet our governance requirements. There are issues of serious regulatory concern and in agreement with us the provider is working to improve its position.
G4	The provider does not meet our governance requirements. There are issues of serious regulatory concern, and the provider is subject to regulatory intervention or enforcement action.

Viability:

	Compliant
V1	The provider meets our viability requirements and has the financial capacity to deal with a wide range of adverse scenarios.
V2	The provider meets our viability requirements. It has the financial capacity to deal with a reasonable range of adverse scenarios but needs to manage material risks to ensure continued compliance.

	Non-compliant
V3	The provider does not meet our viability requirements. There are issues of serious regulatory concern and, in agreement with us, the provider is working to improve its position.
V4	The provider does not meet our viability requirements. There are issues of serious regulatory concern, and the provider is subject to regulatory intervention or enforcement action.

Note: The use of an asterisk (*) against a grade indicates that the assessment refers to a provider that is designated as being for-profit.

Definitions of Regulatory Routes

In Depth Assessment (IDA): An IDA is a bespoke assessment of a provider’s viability and governance, including its approach to value for money. It involves on-site work and considers in detail a provider’s ability to meet its financial obligations and the effectiveness of its governance structures and processes.

Stability Checks: Based primarily on information supplied through regulatory returns, a Stability Check is an annual review of a provider’s financial position and its latest business plan. The review is focused on determining if there is evidence to indicate a provider’s current judgements merit reconsideration.

Reactive Engagement: Reactive engagement is unplanned work which is triggered by new information or a developing situation which may have implications for a provider’s current regulatory judgement.

Stability Checks and Reactive Engagement: In some cases, we will publish narrative regulatory judgements which combine evidence gained from both Stability Checks and Reactive Engagement.

For further details about these processes, please see Regulating the Standards.