Up to £1 billion of capital is to be raised through an issue of bonds targeted at wealthy Chinese students, which will be partially invested in UK real estate debt backing property including affordable housing.
Hong Kong-based private equity fund manager Gaw Capital and inward investment body InvestUK have signed an agreement to launch the so-called ‘Education Bond’ which will target Chinese and other international students, allowing them to invest in the UK and apply for permanent residency in the process.
The scheme’s backers said that at least half of the proceeds of the bonds will be invested in “high-yield real estate debt”, with the balance to be invested in UK government bonds. Property projects which will be financed with funds raised from the bond issue will include affordable housing schemes, Gaw and InvestUK said.
The yield generated from the investments will fund bursaries to pay for the students’ tuition fees. In addition, bondholders will be eligible to apply for UK permanence residency after a five-year term of the investment.
The bond has a minimum subscription price of £2 million, which is only invested once a tier one (investor) visa is granted, allowing them to study in the UK.
“The Education Bond is an innovative solution that addresses both the need to fund UK affordable housing, while continuing to attract world-class talent to the UK’s world-leading universities,” said Rupert Gather, chairman of InvestUK.
“The Education Bond conforms with both the letter and spirit of the UK’s investment visa rules, while having a meaningful and measurable impact on Britain’s real economy,” Gather added.
As part of the arrangement, Gaw and InvestUK will form an investment committee to oversee the debt investments. Initial affordable housing projects in Derby and Kent are under negotiation with one of the bond’s UK-based house building partners, Latis Homes.
“We are delighted to partner with InvestUK to launch this creative and innovative Education Bond which we believe is a smart and original way to gain residency while benefiting from an education angle,” said Christina Gaw, managing principal and head of capital markets at Gaw Capital Partners.
“The combination of attractive yield, top quality assets, coupled with attractive long term debt, makes London a particularly compelling market for real estate investments,” Gaw added.
The number of Chinese students attending UK schools and universities has swelled to around 70,000 each year.