Legal & General takes £94m UK student housing bond

Legal & General Investment Management (LGIM) has financed a £125 million portfolio of UK student housing for two investors via a long-term bond.

The £94 million of debt finance backs the acquisition by Arlington Investors and Campus Living Villages of six schemes from Spectrum Housing Group and Sanctuary Housing Association.

The 32-year part fixed and part floating-rate bond was entirely placed with Legal & General Investment Management and an in-house LGIM pension fund client, and will be listed on the Irish Stock Exchange.

Sean McKeown, Arlington Investors’ managing director, said the acquisition is the third that the joint venture has done together and also the third financed by LGIM.

“An interesting point about this one is that it is the first direct let deal backed by LGIM – the first two were nominated agreements with universities”, he said. He said the finance was competitively-priced, with about 60 percent by volume indexed and priced at 1.3 percent over the gilt, and circa 40 percent fixed at 4.8 percent.

The capital is secured on six different properties, in Birmingham near Aston University, Cheltenham, Gloucester and Exeter. The portfolio also includes a development site next to the Aston building.

“We have a product with a structure set up for very long term investing, and that is why LGIM bought it”, he added.

Arlington and Campus Living Villages have built up a £450m student accommodation portfolio in the UK and continues to look for more investments in the sector.

Jersey-based Arlington invests on behalf of Middle Eastern family office investors. Campus Living has a portfolio which also spans the US, Australia and New Zealand.

Law firm McGuireWoods advised the borrowers on the corporate, listing and joint venture negotiations on the latest transaction.

“The UK insurance industry is looking for ways to get annuity income and it has been backing student housing” said McGuireWoods’ partner Hed Amitai.