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L&Q secures ?175m to pump into PRS
L&Q has become the first private rented sector (PRS) provider to secure funding through a new government-backed bond scheme that will ultimately be worth ?3.5bn.
Under PRS Finance Plc?s 10-year bond issuance, formally announced yesterday and priced at 1.75%, fund manager Venn Partners has raised ?265m under the ?3.5bn PRS Housing Guarantee Scheme, which is underwritten by the secretary of state for communities and local government.
Of this, L&Q is understood to have secured ?175m for its L&Q (PRS) platform, with the remaining ?90m being retained by Venn Partners until the funds are needed by the next borrower.
The fund has so far received applications from PRS providers amounting to ?1.7bn. Venn Partners, which won the exclusive management contract in 2014, has so far approved ?700m of borrowing, and is expected to go back to the bond markets again shortly.
PRS projects eligible under the scheme include any UK-based project that is aimed to be held as PRS in the long term, with a minimum aggregate value of ?10m per application through one or several schemes. The ?3.5bn scheme is open to new applications until the end of 2017.
In May last year, the programme?secured an Aa1 rating from credit agency Moody?s, but this is the first time it has raised cash.
The fund contains mechanisms to avoid being caught under European Union state aid rules, one of which is thought to be a guarantee fee over and above the 1.75% interest rate.
Richard Green, partner at Venn Partners, refused to comment on this but said: ?The scheme has been established to ensure that it is compliant with state aid rules.?
Housing and planning minister Gavin Barwell said: ?This government is committed to supporting a bigger, better private rented sector and is providing up to ?10bn government-backed guarantees to build more quality rental homes. This bond is an important step in strengthening the sector and increasing supply so that it meets the need of tenants well into the future.?
Paul House, head of real estate and managing partner at Venn Partners, said: ?We are encouraged by the strong response from PRS operators keen to access the government?s backed PRS funding. We have met with over 300 PRS operators over the last year, representing over ?3bn worth of PRS schemes, and have great confidence on the breadth, depth and long-term potential of this market.?
