Drop in valuation of student properties pushes Sanctuary into deficit

Sanctuary will report a deficit of around £30m in its 2024/25 accounts due mainly to property revaluations and a development write-down.

The 126,000-home housing association revealed the impending deficit in a short unaudited trading update yesterday.

The £30m deficit compares to a surplus of £207m the previous year, the latter figure inflated by a £162 million gain from the acquisition of Johnnie Johnson Housing Trust.

It said: “The group will report a deficit before tax in the region of £30 million.

“This is due, in the main, to downward revaluation movements on the group’s student and commercial properties, and a write-down in the carrying value of a development site. “ These are understood to be one-off technical balance sheet charges, rather than losses affecting the organisation’s cash.

The landlord said it is continuing to “actively explore” the sale of its student accommodation assets. It said last year that it has been working to grow the efficiency of its student business, restructuring its portfolio, including acquiring external leases from third parties.

It announced last October it is looking at options to sell more than 5,600 beds across 21 properties in eight different locations.

The trading update also revealed Sanctuary’s turnover has increased from £1.1bn to £1.2bn, while its operating surplus, which excludes certain one-off items, stayed relatively flat at £215.7m compared to £215.2m. Its “underlying operating surplus”, which excludes further non-trading items, rose from £207m to £226m.

The group completed 838 homes in the year excluding development through joint ventures or consortia. This was a drop of 8% on the 910 delivered the previous year.

The group’s social and affordable rent completions increased from 519 to 570, but this was more than offset by a fall in its shared ownership completions from 215 to 83.

The underlying operating margin excluding one-off costs or gains is 19.2% compared to 19.0% in 2024 – a product of improved operational metrics, cost efficiencies and integration benefits of recent acquisitions.

Sanctuary also said its customer experience score has increased from 75.6% to 76.9%, its void losses dropped from 2.9% to 2.4% and its care and student occupancy rates both rose. “Strong operational metrics continue to underpin our financial performance,” it said.

Ed Lunt, chief financial officer at Sanctuary said the group’s acquisition of Swan in February 2023 and the full amalgamation with Johnnie Johnson earlier this year are bringing ‘notable operating and financial benefits’

Lunt said: “Both acquisitions are delivering overhead efficiencies whilst enlarging the reinvestment envelope that both organisations had on a standalone basis.”

Sanctuary last month launched a £2.5bn debt instrument in order to raise funds to develop new homes and improve existing stock.

The Euro Medium Term Note programme is linked to the landlord’s new sustainable finance framework which was published earlier this week.

The framework is intended to demonstrate how Sanctuary can access sustainable capital. It is also intended to help it build on its existing sustainability-linked loans.

Sanctuary’s full audited financial statements will be published in the summer.