BEST PRACTICE A DAY IN THE LIFE: SOUTHERN HOUSING Tariq Kazi, Southern Housings director of treasury, talks about life in the social housing sector, the reasons behind a recent merger, and why hes happy to play a role on the ACT Council LEADERSHIP & CAREER I We dont exist to deliver conventional financial dividends t isnt every day that you get to complete a merger, one that had a direct impact on 77,000 households, but that day happened for Tariq Kazi last December. Up until the end of 2022, ACT Council member Kazi was director of corporate finance for Optivo, a not-for-profit housing association. But 16 December 2022 became a day to remember as it saw the completion of a merger between Optivo and Southern Housing Group to become Southern Housing an association with more than 77,000 homes, serving 167,000 UK residents across London, the South East, the Midlands and the Isle of Wight. Now, Kazi is director of treasury for the enlarged group and, as he says, the hard work starts in terms of making the operations work together. The treasury side is quite complex. As a combined organisation, we have a 4bn-plus funding portfolio, with around 3bn of drawn debt, of which about half is in the form of publicly listed bonds and half is a mix of privately negotiated bank facilities and other long-term debt. Kazi explains that the funding trajectory of the social housing sector, which has around 90bn debt on its balance sheet and 30bn undrawn committed headroom, is increasingly towards the long-term bond markets. The reason for this, he says, is that 15 years ago it was easy to get long-dated, low-priced flexible banking facilities, but the credit crunch put an end to that. Since then, relationship banks have been steering us towards the long-term bond markets. Where banks do offer long-dated lending, they are quite demanding in terms of the financial covenants, restrictions and reporting requirements. He also observes that the social housing sectors 2.8m homes support debt funding that is still secured on an individual asset-by-asset charge basis, rather like individual mortgages, which is in effect using a retail security method for a wholesale financing product. This is beginning to feel a bit long in the tooth, he says. The public bond market, which we are moving towards, also requires security and typically it doesnt have financial covenants, but it does require a credit rating. Going into the merger, Kazi and his opposite number at Southern Housing Group were tasked with seeking consent from all the bank lenders for the merger to take place. There were lenders that were common to both organisations and only a few that were with only one of the organisations, and they needed to give consent for the 1.5bn that wasnt in publicly listed bonds. The banks needed a full credit narrative and relationship rationale in order to carry on supporting us, he says. It made the period between March 2022, when the deal was announced, and December when it was completed quite busy. CENTRAL GOVERNMENT MOVE Kazi hasnt always been in the social housing sector he trained as an accountant at KPMG, moved to HSBC for a year and then joined BNP Paribas. After seven years, he moved to Lloyds Bank, where he ultimately held the role of head of pricing for wholesale loans. He then moved into central government to become head of credit and housing debt guarantee schemes at the Department for Levelling Up, Housing and Communities. I learnt so much from civil service colleagues about what is strategically important to help deliver government policy. And in a lightbulb moment, I realised that this is more interesting than going back to doing more banking deals. Since joining Optivo four years ago, Kazi has been hoping that others, too, will have this lightbulb moment as he is seeking to encourage more bankers, accountants and treasurers to bring their professionalism and experience to the social housing sector. He says that the rewards go beyond what is in the monthly pay packet, with job satisfaction and sense of 48 ISSUE 1 2023 treasurers.org/thetreasurer TT ISSUE 1 23 pp48-49 Day in the life.indd 48 23/02/2023 09:32