Hong Kong-based real estate private equity group Gaw Capital Partners and InvestUK have teamed up to launch an ‘Education Bond’, with the aim of raising up to £1 bn (€1.3 bn) of UK inward investment for affordable housing and other priority infrastructure.
More than half of the bond will be invested in high yielding real estate-backed debt, with the balance held in UK Government bonds. The funds raised via the bond will be used to finance real estate-related projects in the UK, including in the affordable housing sector and infrastructure. The yield from these investments will fund bursaries for Chinese and other international students' tuition fees in the UK.
Bondholders will be eligible to apply for a UK 'ILR' permanent residence permit after a five-year term of the investment. The Education Bond has a minimum subscription price of £2 mln which would be invested after a Tier 1 (investor) visa is granted. Around 70,000 Chinese students attend UK schools and universities every year.
'We believe that our scheme is a first,' Rupert Gather, chairman of InvestUK, a foreign direct investment platform to help international private clients invest directly into UK companies, told PropertyEU. 'The investment strategy will resonate with Chinese investors and also appeal to the UK government because of the affordable housing element.'
In addition to affordable housing, Gaw Capital and InvestUK are also open to investing in student housing 'because it has the halo of government around it', Gather said. 'We could extend this into schools and healthcare,' he added.
Gather is aiming to raise the £1 bn within four years, with a view to fully investing it within two years of the capital being raised. Follow-on projects could also be in the cards, he said.
Joint venture
InvestUK has brokered 115 deals totaling £26 mln since its inception in 2012, although this is the first time it has joined forces with Gaw Capital. Gaw Capital, for its part, has not yet completed any deals in Europe this year, although a spokesperson told PropertyEU that they are hoping to close a deal by the year-end.
'We don't really have a fixed investment target,' a Gaw Capital spokesperson said. 'We buy and sell at our clients' command. We do think it is a good time to buy in London for long-term holding and encourage our clients to do so. The exchange rate is good, property prices are down, and there are many good opportunities. We think the London market will bounce back. It is just a matter of time.'
InvestUK's Gather maintains that the Brexit in the UK has actually created 'huge opportunities': 'Bonds are 20% cheaper than three months ago and private equity capital can be very agile. Ultimately, the fundamentals in London are still good – it's still a safe haven.'
In 2015, a consortium led by Gaw Capital acquired two offices at 123 and 152 Buckingham Palace Road in London, which are let to Google, for around £500 mln, marking the biggest single deal in London's West End for two years. The two properties are separate entities but interlinked.
Since its inception in 2005, Gaw Capital Partners has raised equity of $6.9 bn (€6.2 bn) and has assets of $12.7 bn under management.
