Fizzy Living, the private rental arm of Thames Valley Housing (TVH), has expanded its relationship with the US investment giant PGIM Real Estate, part of the global investment management business of Prudential Financial Inc., with a loan facility worth £53.5m.
This is an extension of the existing £32.4m PGIM arrangement for Fizzy which completed in January 2015, and will refinance existing investor-provided senior debt at two new Fizzy sites in Lewisham, South East London.
Fizzy’s approach with the new refinancing was to take advantage of the low interest rate environment and to lock in certainty in the run up to Brexit and beyond. PGIM’s willingness to extend their partnership with Fizzy underlines the success of the Fizzy business model to date and confidence in its future performance.
Fizzy also receives capital funding from the Abu Dhabi Investment Authority (ADIA). Since January 2015 they have committed a further £200m, bringing their total investment to £400m.
Rita Akushie, TVH’s Group Finance Director said “Attracting keenly priced third party senior debt is a key element to increasing investment returns. From a PGIM perspective, the Fizzy portfolio is attractive as the assets are proven to generate cash sufficient to cover interest payments, and the loan to value is low (the Fizzy portfolio value has increased 36% since ADIA invested). From a Fizzy perspective, the low financing cost increases investor returns and the covenant headroom provides comfort that Fizzy can withstand market fluctuations without risking a breach of those covenants.
It is great that PGIM has demonstrated their confidence in Fizzy’s business model for a second time. The extension of the loan facility to our new assets underlines their confidence in our ability to deliver excellent operational efficiency. Fizzy is a very strong competitor in the sector due its delivery rate of actual let units, and profitability. Our success is down to being very clear about our product and sticking to the investment parameters.”
Fizzy Lewisham comprises two 68 flat blocks adjacent to the DLR and Underground stations. The first block handed over in the week following the Brexit vote in June 2016, and experienced the fastest lease-up to date for a Fizzy building, reaching 95% occupancy in just four months. The second Lewisham block is due to hand over in September 2017 and is expected to be 95% occupied by March 2018. The senior debt provided by PGIM will be drawn in two tranches: £9.8m in May 2017 for the first block and £11.3m in May 2018 for the second block.
Aaron Knight, Director, PGIM Real Estate Finance said “On a global basis, PGIM Real Estate Finance have been a long supporter of the PRS/ Multi-family product. In building our lending platform in the UK, we quickly determined that Fizzy Living were at the forefront of the industry and a business that we wanted to support. Financing the two Lewisham assets is a further extension of that relationship, which we hope to continue as the Fizzy development pipeline comes to fruition”