Orbit announces a proposed partnership with troubled Swan will not go ahead following a ‘detailed due diligence process’
Orbit has announced the end of merger talks with troubled Essex-based Swan.
The 47,000-home association had been in discussions with Swan about merging to create a 60,000-home provider, following Swan’s regulatory standard breach last year.
However, in a short statement today, an Orbit spokesperson said: “Orbit Group has confirmed that following a lengthy and detailed due diligence process, partnership discussions with Swan Housing Association have ceased.” Neither Orbit nor Swan have commented on the reasons for the talks ending.
Talks began with Orbit about a potential merger last December after the Regulator of Social Housing found Swan to be non-compliant with the governance and financial viability standard.
RSH said at the time a “material deterioration” in Swan’s finances had occurred and there had been “a significant adverse variance in its future development costs, largely due to the ineffective management of its development programme and its development subsidiary”. It placed Swan under intensive regulatory scrutiny.
RSH also said the board and executive of Swan had lost control, as its ability to maintain covenant compliance was reliant on the co-operation of third parties. It had also presented inconsistent information to the board and regulator, which together with a failure to monitor covenant compliance, had led to “a loss of regulatory confidence in its accuracy and reliability”.
Swan had been seen by many as a pioneer of Modern Methods of Construction (MMC) in the affordable housing sector. It had previously claimed to have an 8,000-home development pipeline, including from its for-profit MMC developer subsidiary Swan New Homes, which trades as Nu Living, despite only owning 11,600 homes.
The firm created a modular housing factory in Basildon, and announced plans for a second facility to take its build capacity to 1,000-homes a-year.
Following the regulatory judgement in December, Swan’s finance director James King left his position and Jeremy Vickers, formerly finance director development at Metropolitan Thames Valley, was appointed as interim group finance director.
The association appointed former Peabody finance director Susan Hickey as interim chief executive, following the retirement of previous boss John Synnuck. Swan has also beefed up its board, drafting in Matthew Bailes, former head of the social housing regulator and chief executive of Paradigm Housing, and Paul Phillips, former chief financial officer at Notting Hill Genesis, as co-opted members.
In May, Swan was found to have breached another RSH standard. RSH found it to be non-compliant with the Home Standard over issues around fire safety, asbestos management and water safety.
Orbit Group earlier this month reported a 19% rise in housing completions in 2021/22, completing 1,013 homes. It is aiming to ramp up development to meet a target of building 6,500 homes over five years to 2025.