Aviva Investors announces the funding of 212 residential properties in the South of England for GreenSquare Community Housing (GreenSquare). The transaction by the Aviva Investors REaLM Social Housing fund, part of the Aviva Investors Returns Enhancing and Liability Matching (REaLM) fund range, is for £19 million (approx. 22 million) under a 48 year lease and leaseback arrangement.
GreenSquare retains management and resident facing responsibilities, whilst the fund receives income from rent payments that are increased in line with the Retail Price Index. Upon expiry in 48 years, full ownership of the properties reverts back to GreenSquare.
The Aviva Investors REaLM fund range was launched in July 2011 to invest in specialist real estate and infrastructure-related assets that provide secure, long-term, inflation linked income streams. It aims to help institutional investors, particularly UK pension funds, address the challenges they face in matching liabilities and capturing income in a low-yield environment. The Aviva Investors REaLM Social Housing fund invests in high quality UK residential property that is let on long term leases to registered providers and local authorities, providing a strong match for investors' income requirements.
Today's transaction follows three acquisitions totaling £70 million (approx. 81 million) completed with Derwent Living Housing Association in the East Midlands, bringing the total now invested by the fund to £89 million (approx. 103 million).
GreenSquare Group owns and manages 11,000 properties in Wiltshire, Oxfordshire and Gloucestershire, and is the parent company of GreenSquare Community Housing. GreenSquare was advised on the transaction's structure by Savills.
Nigel Rule, fund manager for the Aviva Investors REaLM Social Housing fund commented:
"This is the first transaction in a strategic partnership we have formed with GreenSquare, and we are pleased to have worked together to provide cost effective and sustainable long term financing for this portfolio of affordable housing.
We are seeing significant interest from UK pension funds in high quality specialist real estate assets, at a time when local authorities and other registered providers are looking for new sources of funding and when the UK government is encouraging the private sector to play a greater role in affordable housing development. The result of this is that we have significant equity commitments available and would be delighted to discuss similar opportunities with other registered providers and local authorities."
Tim Jackson, Executive Director (Finance), GreenSquare Group commented:
"This transaction allows the group to access long dated annuity style funding to complement our more traditional funding sources, and reflects increasing interest amongst institutional investors for the good quality income streams that affordable housing schemes can provide. We believe that a balanced funding strategy is the key to effective treasury management and believe that an element of index linked finance will have an increasing role to play within this. As such we were attracted to the proposition Aviva Investors offered through its REaLM Social Housing fund, since financing of this nature has been difficult to obtain to date."
James Coghill, Director, Savills commented:
"Our view is that pension funds will have an increasingly important role to play in funding new and existing affordable housing in the UK. The approach taken by Aviva Investors' REaLM funds is quite different to more traditional funders, and provides a major avenue for funding new development, stock rationalizations and existing stock as part of a balanced portfolio approach. This is particularly significant at a time when it is increasingly difficult to secure finance from traditional sources to provide much needed affordable housing. Risk management is, of course, key and Savills is pleased to have advised GreenSquare throughout this process."