Octopus Real Estate completes £8.6m loan as part of Greener Homes Alliance initiative with Homes England

By Bridging Loan Directory 29th November 2022

Octopus Real Estate, part of Octopus Group and a leading UK specialist real estate lender and investor, has provided an £8.6m loan facility to Lita Homes on a site in Leyton, East London as part of its Greener Homes Alliance initiative with Homes England.

The facility will finance the development of 25 new homes and two commercial units in a prime location opposite Leyton Midland Road station. The site formerly housed a mechanics and MOT centre.

The Greener Homes Alliance, formed late last year with the Government’s housing and regeneration agency, Homes England, pledged to commit £175 million towards providing both loan finance and expert support to SME housebuilders, enabling them to build more high quality, energy efficient homes throughout England.

Homes funded must achieve a minimum Energy Performance Certificate (EPC) rating of B, with developers benefiting from increasing interest rate margin discounts on the loan as the energy efficiency of the homes increases above this (as measured using the Standard Assessment Procedure [SAP]).

Developments achieving higher EPC ratings benefit from interest rate margin discounts of up to 2%. The developer – local housebuilder Lita Homes – is targeting an Energy Performance Certificate (EPC) rating of A for all the properties, utilising solar panels and air source heat pumps.

Against the backdrop of the current interest rate environment, Octopus Real Estate’s fixed rate offering coupled with the Greener Homes Alliance discount offers certainty and incentives not available elsewhere in the development lending market.

As part of the offering, Lita Homes will also benefit from free of charge, expert advice from sustainability consultants McBains and Octopus Energy – the United Kingdom’s leading 100% renewable energy supplier and part of the Octopus Group.

McBains has been providing Lita with design guidance and practical steps to achieve improved EPCs. Together, Octopus Energy and McBains recommend new technologies, suppliers or building techniques to help housebuilders maximise the energy performance of their buildings.

This education and support is available for developers to call on both during the work on their current schemes and in the future.

The deal was handled by Matthew Yassin from specialist debt advisory Arc & Co.

Nick White, Head of Development Origination, Octopus Real Estate, commented:

“This is a great example of the Greener Homes Alliance allowing us to introduce new methods of green construction to experienced, local SME developers.

The product itself is currently extremely competitive, with interest rates fixed for the term of the loan, and then discounted depending on the EPC rating achieved.

This combination gives developers and housebuilders certainty of finance costs in uncertain times, and a meaningful incentive to deliver greener homes.

By providing advice to our borrowers, we hope that the impact of the Greener Homes Alliance goes far beyond just the developments funded directly by the scheme.”

Xhevat Lita, CEO of Lita Homes, concluded

“We are delighted to be working with Octopus Real Estate to deliver a high-quality, energy-efficient development in Leyton.

These homes will be a welcome addition to the area, and we look forward to getting started on site.”