SettleParadigm’s CFO on how the landlord plans to expand post-merger

But Ms Ewen is hoping it can deliver “a minimum of 50” more homes per year as a combined organisation, helped by the government’s new Social and Affordable Homes Programme and potentially rent convergence.

 

The group has stress-tested that rent convergence of £3 extra per week would generate the group £44m in cumulative income over the next 10 years.

 

Over the same timeframe, £1 extra per week would lead to £24m in additional income, and £2 a week would lead to £36.4m, the group believes.

 

SettleParadigm is also upping its footprint by buying homes. It has exchanged contracts on the acquisition of 3,500 homes in South Buckinghamshire from L&Q. However, that is likely to be it for acquisitions for the time being.

 

“There’s nothing in the pipeline beyond our plans with L&Q,” Ms Ewen says.

 

Away from development, the group must tackle the sector-wide challenge of investing in its existing stock. 

 

SettleParadigm plans to spend £37m per year on its homes over the next five years (including 2025-26) and £1.16bn over the next 30 years.

 

The programme includes looking at the required investment for Decent Homes Standard 2 and energy efficiency.

 

Stock condition surveys are being conducted by the group because data plays a “really key part” in finding out exactly how much investment is needed, Ms Ewen says.

 

“[Having] the scale to tackle some of the bigger sector challenges is really important,” she adds.

 

Among these challenges are damp and mould, and the new requirements under Awaab’s Law, the first phase of which came into force in October.

 

The group has been trying to get ahead of the game on this.

 

“We have been prioritising using data to surface and mitigate issues before Awaab’s Law was implemented, which has put us in a good position,” Ms Ewen says. “We’ve opened up new and simpler reporting procedures, and have dedicated teams that deal with reported cases as well.”

 

To date, neither SettleParadigm nor its legacy organisations have received a consumer grading from the Regulator of Social Housing, while both had a G1 grading at the time of their last assessment in December 2024. Paradigm was graded V1 and Settle was graded V2.

Credit rating and improving financial metrics

 

SettleParadigm is also aiming to improve its financial metrics.

 

The aspiration comes after S&P Global gave the new group a negative outlook in October. S&P made the change to reflect its view that the merger could result in “sustained reduced capacity in the absence of significant synergies”.

 

The agency assessed that the combination of Paradigm and Settle, in conjunction with the L&Q stock acquisition, has reduced the headroom in the combined group’s debt metrics.

 

However, the agency also noted SettleParadigm’s “very strong” liquidity and said it continues to see the landlord’s management “favourably”, owing to its track record of “appropriate cost containment and focus on low-risk activities”.

 

When asked if SettleParadigm shares S&P’s concerns and how it will look to mitigate the risks identified, Ms Ewen says: “The intention is to maintain and improve the existing metrics.”

 

She adds: “We’ve had a step down as we’ve come together, because that’s just the nature of these things, but we expect it to improve over time.”

 

Prior to the merger, Paradigm was rated as a standalone A+, but S&P lowered this to A after it came together with Settle. However, the new group maintained an A+ for its long-term issuer credit rating as a result of a one-notch uplift on account of being perceived as a ‘government-related entity’. The outlook is negative.

 

“Part of the strategy and part of the business case is to deliver the efficiencies to improve the financial metrics back to the standalone A+,” says Ms Ewen.

 

Efficiency savings

 

So, what will those efficiencies look like?

 

The new group has assessed both Settle and Paradigm’s costs per home (£6,639 and £5,002 respectively, according to financial results for 2024-25) and decided it will be able to bring them together and run against the lower one.

 

But how will costs be brought down? Ms Ewen points to “economies of scale” and being able to negotiate better deals with suppliers as a larger group. 

 

In addition, it will look to “remove duplication, particularly in the back-office functions”, she says.

 

“We also believe that any internal restructuring can align more of the work we do to make it more effective at first point of contact with residents to help cut costs on the operational side.”

 

However, the group overall is expecting to increase its number of staff. “With the L&Q stock transfer, there’s a clear need for more staff to work with more residents,” Ms Ewen says.

 

“In addition, we’re expecting to grow our technician workforce to complete more repairs under the SettleParadigm banner. Of course, we expect this to have the additional knock-on effect of reducing costs associated with contractors in that same area.”

Refinance and raising new funds

 

In October, SettleParadigm completed a £1.55bn refinance. This involved combining the existing portfolios of both landlords, extending the terms of revolving credit facilities worth £450m in total, and agreeing two new term loans worth £300m.

 

The new group engaged with funders from both legacy landlords to gain consents for the merger and ensured covenants were aligned for the new organisation.

 

So how was that process? The funders were “really supportive”, even though some had loans with both organisations, Ms Ewen says. All lenders have remained. 

 

“They were really positive because they can see the benefits of the merger from a customer and a financial perspective,” she explains.

 

SettleParadigm also sold £150m in retained bonds last month. Ms Ewen says the new funding from this and the refinance will be used to acquire the 3,500 homes from L&Q and to fund its development pipeline over the next three to five years.

 

When asked when the organisation will next need to raise more funding, Ms Ewen says there are no “immediate needs”, but that it will look at the idea of raising funds “on a regular basis”. 

 

She adds: “At the moment, our plans tell us it’s broadly once a year, although that’s depending on the development pipeline.”

 

SettleParadigm now has £2.29bn in total debt, including £1.68bn in drawn facilities and £610m in undrawn facilities.

 

The housing association has £1.24bn in bank facilities and £1.04bn in capital market funding.

 

According to each organisation’s 2024-25 results, Paradigm reported a pre-tax surplus of £22.9m, while Settle posted a surplus of £13.5m, giving the group a combined surplus of £36.4m.

 

Looking ahead

 

Now that Settle has joined Paradigm as a subsidiary and the new group has completed its treasury integration, the next stage is a transfer of engagements and integration from an operational perspective.

 

This is all expected to be completed by 27 March 2026.

 

SettleParadigm is also working on a new corporate plan, alongside a name change and an updated sustainability strategy.

 

Finally, then, what does Ms Ewen mean when she says the group wants to become “more local”?

 

“This is really about putting the emphasis on not spreading out more geographically,” she explains. “We have our core [local] areas of Bucks, Beds and Herts, with some other homes also surrounding those immediate areas, and with the creation of SettleParadigm we’re doubling down on that area.”

 

She concludes: “We’re really excited and think we’ll be able to do much more in our local area than either one of us could have done on our own. That was the key driver for the merger.”