Venn aims to issue first property bond in autumn

Around 130 borrowers have expressed an interest in the £3.5 billion government-backed scheme.

Venn Partners, appointed as delivery partner to the UK Government’s £3.5 billion Private Rented Sector Guarantee Scheme, is expected to issue its first long-term bond backed by the initiative in the autumn, the firm announced.

The real estate manager is currently working on the first bond, recently awarded a provisional Aa1 rating by Moody’s, and issuer PRS Finance is likely to become a regular issuer over the next few years, the firm said, targeting to raise at least £3.5 billion for the private rented sector.

PRS Finance will issue the guaranteed bonds with up to 30-year maturities in order to finance lending to selected PRS operators. The scheme is open for applications from borrowers and around 130 have expressed an interest in refinancing short-term capital for long-term loans financed via the bonds. The loans will be provided to developers to finance property development projects, a spokesman for Venn Partners, told PDI.

Such government guaranteed bonds are typically priced at a modest spread pick-up from government bonds of the same maturity, according to a statement from the firm. The initiative is aimed at attracting a variety of long-term institutional investors, such as insurance companies and pension funds “seeking long-dated high-grade assets to match their long-dated liabilities,” it read.

The aim of the scheme is to accelerate growth in the private rented sector by institutional property investors and increase the investment viability of projects to develop new private rented sector homes, initially for £3.5 billion but with an option to increase up to £6.5 billion.

It is targeting large-scale purpose-built private sector projects worth more than £10 million and Venn has seen proposed projects with values up to £350 million.

Gary McKenzie-Smith, co-founder and managing partner of Venn Partners, commented in a statement that the rating by Moody’s represented an “important milestone in the roll-out of the scheme, and an important message to borrowers as we open the scheme to formal applications. We look forward to the inaugural issue from PRS Finance plc later this year.”

“Institutional investment is key to achieving improving standards and tenant choice in the private rented sector, which is critical to help address the UK’s overall housing needs. Equally important is ensuring enough borrowers access the scheme and we are delighted at the strong response from a range of property investors keen to access the funding for their Private Rented Scheme projects,” Paul House, head of commercial real estate and managing partner of Venn Partners, said.