A Blackstone-backed transaction collateralised by £850 million of social housing assets in the UK has become the fourth European commercial mortgage backed securitisation to launch in 2026.
Morgan Stanley and Deutsche Bank have launched Sage AR Funding 2026 No1 plc, an issuer-borrower loan securitisation where the issuer will use the proceeds to advance two separate floating-rate loans to two borrowers, broken back to £241.4 million to the "Cardamom" borrower and £249.1 million to the "Saffron" borrower.
The borrowers will use the proceeds to "on-lend" the proceeds to their parent entity, Sage Rented Limited, a for-profit registered provider of social housing. SRL will use the proceeds to refinance existing indebtedness as well as for general corporate purposes.
The sponsor, the Sage Homes Group, was established in May 2017 and is majority-owned by US private equity giant Blackstone. Regis, the US and UK real estate investor, is the other owner. Sage's core business is the provision of new affordable homes, which are rented at discounts to the prevailing open market rate and are let only to people on local authority housing waiting lists who are in need. Sage is responsible for property management.
The transaction is the fourth securitisation by the sponsor following Sage AR Funding No1 plc, Sage AR Funding 2021plc , and Sage AR Funding 2025 No1 plc.
Deutsche's debut offer in the series in 2020 comprised £220 million of 5.1-year notes across seven tranches backed by a single floating rate loan.
It was unusual at the time because typically housing association-secured bonds have been longer dated and target traditional fixed-rate corporate investors, rather than CMBS investors. They are also usually sponsored by not-for-profit housing associations rather than private equity giants.
SRL is one of the companies that took advantage of changes to English legislation allowing the presence of for-profit social housing providers, attracting private investors to a sector that had been struggling to keep up with the fast-growing demand for affordable homes.
Morningstar DBRS and S&P have rated the presales document.
The loans are backed by 3,885 social housing units – 2,197 houses and 1,688 flats – across 188 residential development schemes in England. The units are new-build and were predominantly completed between 2021 and 2025 and bought as part of SRL's national new-build programme. The Cardamom portfolio contains 1,927 units across 72 sites, with an average age of 2.7 years and a 98.4% occupancy rate.
In terms of largest regional concentration, 44% of the Cardamom portfolio is in the Home Counties and London commuter belt, followed by 21% in South East. For the Saffron portfolio, 46% of the assets are in the South East, followed by 17% in the West Midlands.
Savills has valued both portfolios. The market value on a combined basis is £847.7 million. Based on this the Cardamom loan to value is 58.8% and the Saffron 57%.
Situs Asset Management is primary and special servicer for the loan.
The transaction is the fourth European commercial mortgage-backed securitisation launched in 2026. Transactions in this part of the property financing market have picked up strongly over the past year and pricing has become increasingly competitive.
Underlining the rebounding activity, in January Bank of America, Standard Chartered Bank and Wells Fargo priced the first European commercial mortgage-backed securitisation of 2026 at the most competitive level for a sterling-denominated transaction since the pandemic. The £500 million Sirius Logistics 2026-1 UK DAC is collateralised by UK industrial assets owned by Blackstone's Mileway platform.
New European CMBS issuance soared in 2025 to €8.7 billion in 17 transactions across multiple sectors, against €2.2 billion in five transactions the previous year, to chalk up the highest annual volume by a distance for more than a decade, according to a report from Scope. That included €5.3 billion in the UK. Blackstone accounted for roughly 72% of European and 79% of UK issuance.
Morningstar DBRS has said it expects 2026 to show similar numbers.
"We expect between 15 and 20 securitisations for approximately €9 billion to €10 billion. Once again, [industrial and logistics] collateral is likely to be the most common asset type securing European CMBS issuances, but we also expect multifamily, office, and retail properties to find their way into the CMBS market in 2026. In addition, we would not be surprised to see less traditional CRE included in future transactions, such as the 39 holiday parks in Caister Finance DAC last year."