Essential Living, Invesco source PRS debt through UK government scheme

Essential Living and Invesco Real Estate have raised capital to fund UK private rented residential sector schemes through the UK government’s bond programme, which is run by debt fund manager Venn Partners.

Venn has issued the third bond through the government-guaranteed scheme. In total, £88.7 million (€101 million) has been raised to fund loans secured by a total of 700 residential build-to-rent units owned by Essential Living and Invesco Real Estate.

The notes have been priced at the lowest coupon yet through the scheme, at gilts plus 0.41 percent, commented Venn partner Richard Green.

Venn can issue as much as £3.5 billion of bonds through the Private Rented Sector Housing Guarantee Scheme. Borrowers have until the end of 2017 to apply for funding, although the actual funding of loans does not have a deadline.

Venn was selected as the government’s partner in the initiative in 2014. Under the scheme, Venn provides investment finance to developers of multi-family product to help them source and eventually refinance development loans from other lenders.

“We are pleased that we have now funded over £300 million of loans, have credit approved over a further £1 billion and have many more applications in process,” Green commented.

The latest bond issue, sold by Venn subsidiary PRS Finance, tapped an existing 2026 £265 million bond, taking it to £353.7 million.

Last December, Venn sold its second PRS bond, at tighter pricing than the first issued three weeks previously. The £39.4 million financing, secured on assets owned by Quintain at Wembley Park, priced at gilts plus 0.44 percent. In November 2016, Venn launched a first, £265 million, 10-year bond issue, selling £175 million to investors and to fund loans.

The Essential Living loan will finance a 118-unit PRS property in London and the Invesco Real Estate loan will finance a portfolio of 580 PRS units across five sites in Bedford, Bracknell, Crawley, Exeter and Stevenage. Invesco’s UK Residential Fund, in a 10-year joint venture with Westrock, recently acquired the portfolio.

“The long term of the debt with its associated low interest rate is well suited to the build-to-rent assets that make up this particular portfolio,” commented John German, senior director, residential investments at Invesco Real Estate.