Hedge your bets

No, Crystal Amber is not the name of an inmate in Orange is the New Black. But she just might change your life.

Hands up if you are one of the registered providers (RPs) that piled into private renting? It all looked so easy. Grainger are the biggest players and they make money. So just copy what they do and nothing can go wrong. How many times have I heard someone say that? But Crystal Amber does not agree with this at all. In actual fact Crystal Amber is the name of a hedge fund and they think Grainger can do much better. Or else.

Since Crystal took a stake in it, they’ve called the shots. It’s bye bye to Grainger’s old boss and time to take the red pen to costs. Should Brandon Lewis send them into do a deep dive and shake up RPs in the same way?

There’s just one tiny flaw in that plan. At the end of the day hedge funds are get rich quick schemes. It’s all very well cutting the running costs but the big prize is the cash you get when you sell off assets.

The HCA would take a dim view of money going out of the sector in this way. Will the time ever be right for the hedge funds to play in our world? Yes!

Some of the bigger RPs want to be private companies. Let’s say they find a way of doing that. What will happen next? Crystal will snap up a stake. That’s when the trouble starts. They will do to you what they are doing to Grainger and others.

It turns out they have a stake in the film studios where the Carry On films were made. Do you remember that great line from Carry on Cleo? “Infamy! Infamy! They’ve all got it in for me!” That’s what you will be howling after five minutes with the bean counters from a hedge fund.

And you won’t get a lot of sympathy from small RPs. Why is that? They think the big RPs are all out to get them. So why should they shed any tears when the predators get their comeuppance?

You’ve all seen the letter from the HCA to small RPs telling them to look at merger. Is it the right answer?

You can just picture an option review that says a small should join a biggie. That’s the easy bit. Of course the costs will go down. But what next?

If you look at the history of option reviews they don’t always get it right do they? Let’s go back in time. This is a joyride that many tenants have been on.

Option review one: You’d be better off in a local housing association than the council. Please vote for us. It’s bound to be OK, you can sit on the board.

Option review two: Oops we are shrinking due to the RTB. It’s time to join a group, we can do more – but don’t worry you will keep your local identity.

Option review three: Sorry guys, things have changed, so we need to be in a bigger group and we will save money by being one brand. There will still be a vital role for tenants, somewhere. Maybe you can tweet us.

So there we go, tenants went from a third of the board to a 140 character foot note in 20 years. That’s life. It moves on for better or worse.

If you are small how do you really know that you are picking the right merger partner? Here’s why it is so tricky. You can’t negotiate with the future. The people you are doing a deal with won’t be around for ever. You know that management teams move on, the economy ebbs and flows and the pendulum of politics swings.