PGIM Real Estate Finance has provided £21.1 million of debt to UK build-to-rent residential developer Fizzy Living to finance two properties in south east London.
The financing extends an existing £32.4 million facility which PGIM REF provided to Fizzy Living in January 2015 and the additional capital will refinance existing investor-provided senior debt on the two schemes, located in the Lewisham suburb of the UK capital.
The facility will be funded in two separate tranches. The initial tranche will be a £9.8 million loan on the first phase of the development and the second tranche, comprising £11.3 million, will finance the second phase. The finance is being provided to each of the assets once they are completed and let.
In total, the two buildings consist of 136 apartments, which form an element of the Lewisham Gateway regeneration scheme.
“Attracting keenly priced third party senior debt is a key element to increasing investment returns,” commented Rita Akushie, group finance director of Fizzy Living’ parent company, Thames Valley Housing.
“From a PGIM perspective, the Fizzy portfolio is attractive as the assets are proven to generate cash sufficient to cover interest payments, and the loan to value is low (the Fizzy portfolio value has increased 36 percent since ADIA invested). From a Fizzy perspective, the low financing cost increases investor returns and the covenant headroom provides comfort that Fizzy can withstand market fluctuations without risking a breach of those covenants,” Akushie added.
According to the developer, the first 68-flat block of Fizzy Lewisham experienced the fastest lease-up to date for a Fizzy building, reaching 95 percent occupancy in just four months, after it was handed over in June 2016. The second Lewisham block is due to hand over in September 2017 and is expected to be 95 percent occupied by March 2018.
“On a global basis, PGIM Real Estate Finance is an active supporter of the PRS/multifamily product,” said Aaron Knight, director at PGIM REF.
“In building our lending platform in the UK, we quickly determined that Fizzy Living is at the forefront of the industry and the type of sponsor we want to support. Financing the two Lewisham assets is a further extension of that relationship, which we hope to replicate elsewhere as the wider PRS industry continues to develop,” Knight added.
Aside from Lewisham, the firm has PRS schemes in the Stepney Green, Canning Town, Poplar, Epsom, Walthamstow and Hayes areas of London.
Fizzy Living receives additional capital funding from the Abu Dhabi Investment Authority. Since January 2015 ADIA has committed £200 million, bringing its total investment to £400 million.