The University of Essex has struck a £60.6m deal with the Pension Insurance Corporation for investment into a new build 643 bed student accommodation development on the Colchester Campus. The latest deal adds to a previous £98m refinance package for existing accommodation for the University. PIC aim to hold the investment for the long term with nominations agreements with UoE to support the income profile.
The secured bonds are rated AA by S&P, with a guarantee from Assured Guaranty. The project sponsor is Uliving with Bouygues UK Limited as main contractor. TradeRisks arranged the deal for the bond issue. PIC has invested around £500 million in the student accommodation sector over the past three years.
Key points of the transaction:
- The project is for construction of a 643 bed student housing development on the University of Essex Colchester campus
- The inflation-linked debt structure and amortising profile maturing in 2063 is a good match for PIC’s pension liabilities
- Bonds are rated AA by S&P, benefiting from a guarantee by Assured Guaranty
PIC has invested around £2.5bn in direct and bilateral deals, including with providers of student accommodation, universities, renewables and over £700m in social and affordable housing across the UK.
Self builders are set to save £1,000s thanks to a recent decision on Section 106 Planning Obligations. On 11 May the Court of Appeal Civil Division reversed last year’s High Court decision to quash the exemption from s106 planning obligation payments for small sites.
The exemption, first introduced by Minister for Housing and Planning, Brandon Lewis MP, by Ministerial Statement on 28 November 2014, freed self builders from the unpopular s106 planning obligation payments which required them to divert £10,000s from their budget for a new home, into a payment towards roads, schools, affordable housing and other local authority infrastructure projects.
NaCSBA, the National Custom and Self Build Association, campaigned for the exemption on the grounds that the payments – designed to mitigate the impact of major development on local infrastructure – were disproportionate to the impact of small developments, especially single self build homes and failed to recognize the exceptional costs of developing a small site.
The exemption, applied to sites in England of 10 new homes or less (five in designated rural areas), was welcomed by self builders and small housebuilders alike. Some local authorities, however, disagreed with the exemption and on 31 July 2015, the judge in a High Court case brought by two neighbouring authorities, Reading and West Berkshire, found the exemption unlawful, and it was quashed just eight months after its introduction leaving many self builders in indefinite limbo.
The High Court Judge’s ruling clearly contradicted the intentions of the Government and its stated commitment to boost housebuilding, help smaller local housebuilders and double the size of the self build sector to 20,000 homes a year by 2020. NaCSBA immediately launched a campaign for the reintroduction of the exemption and in August 2015, DCLG was granted leave to appeal. The High Court’s decision to quash the exemption has been reversed with immediate effect. The Government is expected to update its guidance accordingly.
“NaCSBA welcomes the Court of Appeal ruling,” says Chair, Michael Holmes. “This exemption, together with the existing exemption from the Community Infrastructure Levy (CIL), brings us one step closer to NaCBSA’s stated aim to make a high quality, sustainable, affordable individual home an option for the many and not just the few.
“Despite this victory for those who want to build their own home, it is still possible that the original appellants may seek leave to appeal to the Supreme Court.”
The latest Knight Frank regional office market review is reporting that 2016 was a relatively quiet year for the local office market in terms of occupier take up. 63 deals completed compared to 84 in 2015 with a total of 201,500 sq ft being occupied, 36% below the 10-year average. Deals included 9,500 sq ft letting to leisure and gaming company Rank Group at Navigation House in a relocation from London and 7,840 sq ft letting to Zoo Digital at City Gate. Headline rents stagnated at £23.00 / sq ft but hopes are high that this will push out to £24.00 / sq ft in 2017.
On the office real estate investment front the picture looks better with a substantial increase in deals being completed. Around £85m of key deals with prime yields at around 6.5% went through in 2016.
Vulcan House occupied by the Home Office at the J2 Riverside Exchange was bought by Spanish investor Trinova Real Estate for £30.9m with initial yield of 6.78%. The 75,600 sq ft Riverside East office let to Irwin Mitchell util 2017 was sold for £23.4m to 90 North Real Estate on behalf of Arzan Wealth and Sidra Capital,indicating a net initial yield of 6.73%. Pramerica Real Estate Investors bought Derwent House for £8.7m on behalf of the The John Lewis Pension Fund.
Perhaps unsurprisingly in a global market over two thirds of these purchases were by overseas investors. Although the volume is small compared to centres like Leeds and Manchester it does show that Sheffield can offer value on the world stage with quality real estate deals and considering that yields were at 5.00% in 2007 there is plenty of room for growth in the coming years.
Once again house prices are in the news, but this time it’s because the Business Secretary Vince Cable is talking about raising interest rates to help keep them under control.
Cable was speaking primarily about the overheating in the London and south-east housing market, introducing the spectre of London becoming a city populated by wealthy foreigners working in high-paying jobs.
Sadly this is another example of the London centric view that policy-making seems to be adopting increasingly at the moment. While it is true to say that London is attractive to many wealthy overseas buyers, the one thing that is self-evident is that house prices are not a problem to those people. Increasing interest rates will have the most on anyone apart from who is already struggling or in marginal position when it comes to their monthly mortgage repayments. Cash buyers and those with plenty to spend don’t inhabit this part of the market.
The other self-evident fact is that it is a problem of London and the south-east. The implications of the Bank of England raising interest rates go far beyond house prices for the rich and famous in London. The help to buy scheme introduced to assist in providing deposits for purchases up to £300,000 has been a runaway success and it’s now made victims of its success by inflating house prices across the country.
Straightforward supply and demand economics is what is driving as prices up. While our developers build less than half of the required number of houses the problem is not going to go away, no matter what happens to interest rates. Until planning and development policies relieve restrictions on building the new family homes that are in the greatest demand, the prices of those houses will continue to rise by more than the rate of inflation.
Vince cable may not want to put up house prices but there’s little point in espousing on interest rate ideas unless it’s on the table or it’s an elaborate precursor to some other measure. In the past he’s been a keen proponent of land and property taxes based purely on the value, in other words, carpetbagging. While this may seem a politically expedient and to some extent a populist move, it puts the needs of government receipts above the needs of business and industry to create wealth and reinvest in their product and customers. It will be the small customer (first-time buyers, young families, retirees) who pay for any government property value grab, which will do nothing to provide the quarter million new homes a year needed to prevent market busting house price rises.
