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Giant investment manager strikes £60m deal with housing association
A London housing association has struck a £60m debt financing deal with a giant multinational investment management firm, marking its first foray into the UK housing sector.
A2Dominion announced the nine-year floating rate note (FRN) deal with IFM Investors this afternoon. The investment was made on behalf of two insurance clients from the UK and the US.
IFM, which has $41bn globally in infrastructure equity and debt assets, said it has been planning a move into the UK housing sector for some time.
The deal is IFM Investor’s first deal in the social and affordable housing sector and understood to be only the second floating rate note in the UK housing sector.
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FRNs have interest rates attached to a reference rate, such as LIBOR or government bonds, plus an additional margin, with the rate changing as the reference rate changes. The rate on this deal has not been disclosed.
A2Dominion will use the cash to support the development of mixed tenure housing. The 37,000-home housing association now has loan facilities of more than £2bn.
John Carey, investment director at IFM, said: “In our view, social housing has proved a resilient sector, underpinned by effective regulation.
“We have been looking at opportunities in the sector on behalf of our clients, who are looking for stable, cash-generative assets that they can invest in and hold.
“As a leader in social and affordable housing, governed by an experienced team of housing and construction experts, A2Dominion presented an attractive investment.”
IFM investors was established more than 20 years ago by a group of pension funds and now represents more than 15 million pension fund members globally.
Dean Tufts, executive director of finance and strategy at A2Dominion, said: “This landmark FRN transaction with IFM Investors underlines our strategy of diversifying our institutional investor relationships to support A2Dominion’s growth plans. The unsecured notes replicate the terms of our Euro Medium-Term Notes programme. We have now issued more than £600m of unsecured borrowing that can be deployed flexibly across the group. We were particularly attracted to IFM Investors’ willingness to receive floating rates in order to balance our interest rate risk management strategy.”
