Venn issues first PRS bond

The real estate debt lender has issued the first bond from the UK government-backed PRS guarantee scheme. It is aiming to raise a total of £265m through the issuance.

Venn Partners has launched the first bond to be issued through the UK government-backed Private Rented Sector (PRS) Guarantee Scheme, PDI sister title Real Estate Capital has reported.

The bond issue will raise a total of £265 million ($326 million; €307 million), of which £175 million will be funded immediately and the balance retained for applications currently being processed and expected to fund in the coming months.

The bond was priced at a coupon of 1.75 percent.

The issue is government-guaranteed, which Venn said enabled it to be competitively priced and issued on tight spreads over gilts. It has a maturity of ten years and HSBC and Royal Bank of Scotland were joint lead managers. The bond buyers were largely institutional investors, Venn added.

Last week, the first circa £700 million of PRS loans under the scheme had been approved by the UK government and that Venn would issue bonds through its PRS Finance plc SPV vehicle.

Venn was selected as the government’s partner in the initiative in 2014. Under the scheme, Venn agrees to provide investment finance to developers of multi-family product in order to help them source and eventually refinance development loans from other lenders.

The government is prepared to guarantee up to £3.5 billion of bonds which will fund the loans. Applicants have until the end of 2017 to reserve their slice of the £3.5 billion.
PRS Finance Plc will become a regular issuer of bonds with varying maturities, of typically between 10 and 30 years, over the coming years.

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 £10 million per application through one or several schemes. In order to be eligible, projects should have started building on site from June 2013. Applications can be submitted at any time after planning consent is achieved.

“This government is committed to supporting a bigger, better private rented sector and is providing up to £10 billion 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,” said Gavin Barwell, housing and planning minister.

“We have met with over 300 PRS operators over the last year, representing over £3 billion worth of PRS schemes, and have great confidence on the breadth, depth and long term potential of this market. The PRS scheme, underpinned by the bond’s government guarantee and rating, is designed to provide competitively-priced financing and work around the various needs of PRS operators across the country as they cater to local demands from tenants,” added Paul House, head of real estate and managing partner at Venn Partners.

At the CREFC Europe autumn conference in London on 15 November, House said: “Over £700 million has been approved and the funds are for new build construction. We have a further £1.7 billion of applications in, and another £1 billion (of proposals) in the pipeline.”