The first circa £700 million of debt capital for the private rented sector (PRS) from the UK government’s £3.5 billion guarantee scheme has been approved.
Real estate debt specialist Venn Partners is advising the government and plans to issue the first bonds under the government-guaranteed capital markets scheme soon. The bonds will be issued via the PRS Finance plc SPV vehicle, a subsidiary of Venn Partners.
It is thought that the first issue will be between £100 million and £200 million. As an investment-grade product, loan-to-values of the underlying loans will mostly be up to about 65 percent and loan agreements can be for up to 30 years.
The more than £700 million of approvals cover loans secured on a variety of schemes in both greater London and the UK regions.
At the CREFC Europe autumn conference in London this morning (15 November), Venn managing partner Paul House said: “Over £700 million has been approved and the funds are for new build construction. We have a further £1.7 billion of applications in, and another £1 billion (of proposals) in the pipeline.”
Developers have until December 2017 to bid for some of the £3.5 billion of capital.
The news will be a boost to PRS sector developers and investors where debt finance is still harder to come by than equity capital and it marks progress in the government scheme which was launched 18 months ago in mid 2015.
House told the conference he believed the PRS sector’s debt requirement over the next 3-5 years would be £15 billion to £20 billion.
Speaking on the same panel, Dan Batterton, Legal & General’s fund manager heading residential, said the insurance group had been unable to find any schemes it wanted to own when it first researched entering the PRS market and had decided to develop its own product instead.
“We just want a long, stable income return that keeps up with inflation” he said. “As there aren’t enough assets, we saw we’d have to build it.”
He said he believed government was becoming more supportive: “We are seeing a change from an obsession with home ownership to just more front doors….we need more front doors.”
Legal & General’s first PRS scheme, comprising 90 units, opens next May. House said: “It takes 3-5 years to (plan) and build these schemes. The vast majority of the PRS pipeline does not start being delivered until 2017-2019.”