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Pension insurer backs £105m London student homes deal

The UK-based Pension Insurance Corporation has supplied £87m of debt to the project alongside the PGGM-owned University Partnerships Programme, wrapped by Assured Guaranty.

The University Partnerships Programme has closed a £104.7 million ($128.4 million; €123 million) deal for a new 511-bedroom student home development in London.

The UK-based student accommodation operator will provide £17.9 million of subordinated debt and equity towards the mixed-use 33-storey Duncan House project, while the Pension Insurance Corporation is backing the bulk of the deal with a 46-year index-linked loan of £86.8 million.

PIC’s loan comes with an investment-grade AA-rated wrap by Assured Guaranty, the monoline insurer’s second wrapped transaction for a UK university in recent years after a bond deal for a £110 million student accommodation complex in Scotland in 2013. Assured Guaranty said it has a strong pipeline of similar deals for the coming year.

“The infrastructure finance market is transforming as a result of the implementation of Solvency II in January 2016,” its chief executive Nick Proud said. “[Assured Guaranty’s] AA guarantee allows for substantial capital relief under the new Solvency II rules. This is proving very attractive for both institutional investors and sponsors and issuers. We are entering what appear to be the most favourable market conditions for financial guarantees in nearly a decade.”

The deal is the second time PIC has invested in a UPP project. The firm provided £114 million of funding to the 1,200-room Garden Halls student accommodation complex run by the company in 2014.

UPP is 60 per cent owned by Dutch pension fund PGGM after the latter bought the stake from Barclays Infrastructure Funds Management in 2012. The remaining 40 per cent was sold to Chinese state-owned fund Gingko Tree Investment in 2013.

The company has invested over £2.2 billion in the UK student accommodation market since 1998.