With many banks reining in project financing activity, new sources of capital are coming to the fore. M&G Investments has financed a student accommodation project for Swansea University supplying £32 million ($48 million; € 37 million) in financing to property developer St Modwen.
The deal was signed a day after Modwen sealed the development agreement to deliver the first phase of a £450 million new science and innovation campus to Swansea University.
“The majority of the £450 million will come from Modwen,” a source close to the deal told Private Debt Investor. “There is also a big possibility that Modwen will finance the construction using other debt funding streams.”
M&G will provide financing from its Secured Property Income Fund, a real-estate fund which owns properties on long leases including supermarkets, hotels, offices and student accommodation.
“It also demonstrates the willingness of institutional investors and pension funds to provide development capital through the right vehicles,” said Ben Jones, manager of the M&G Secured Property Income Fund. “We certainly have additional capital to invest in comparable projects.”
In addition to allowing the asset manager to effectively acquire a long leasehold interest in the property, the asset will also provide M&G with a 45 year rental income, linked to inflation, from which M&G’s pension fund investors benefit.
The entire campus will be located on St. Modwen's 65 acre Transit site, one of the holdings within a 2,500 acre portfolio acquired from BP in 2009.