Chinese students embark on £1bn UK property debt drive

By James Buckley - Thursday, November 03, 2016 9:23

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Gaw Capital Partners and InvestUK have signed an agreement to launch a UK bond which will allow Chinese students to pump £1bn of foreign direct investment into the country, at least half of which will be invested in high-yield real estate-backed debt, with the balance held in UK Government bonds.

Gaw and InvestUK today signed the MoU to launch the ‘Education Bond’, an investment product that allows Chinese and other international students to invest in the UK and gain permanent residence.

The programme is expected to raise up to £1bn of foreign direct investment, with the funds raised within the bond used to finance property-related projects in the UK, including in the affordable housing sector. The yield from these investments will fund bursaries to fund the student’s tuition fees.

Bondholders will be eligible to apply for UK ‘ILR’ (Permanent Residence) after a five-year term of the investment. The Education Bond has a minimum subscription price of £2m 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 are delighted to partner with InvestUK to launch this creative and innovative Education Bond which we believe is a smart and original way to gain residency while benefiting from an education angle,” said Christina Gaw, Managing Principal and Head of Capital Markets, Gaw Capital Partners.

“London is a key global gateway city with exceptional opportunities. The combination of attractive yield, top quality assets, coupled with attractive long term debt, makes London a particularly compelling market for real estate investments. We intend to use our in-depth understanding of the UK real estate market based on our proven track record to safeguard the Bond investment.” Gaw Capital Partners has been providing separate account services in the UK market for a high caliber list of institutional investors since 2010.

Rupert Gather, chairman of InvestUK, said: “The Education Bond is an innovative solution that addresses both the need to fund UK affordable housing, while continuing to attract world-class talent to the UK’s world-leading universities.

“It also provides a meaningful yield for the bondholder. This is a win-win-win, and exactly the kind of creative product that Britain’s Migration Advisory Committee has been calling for. The Education Bond conforms with both the letter and spirit of the UK’s investment visa rules, while having a meaningful and measurable impact on Britain’s real economy.”

Gaw Capital Partners and its partner in the Education Bond product, InvestUK, will form an investment committee to oversee the debt investments; one aspect of this major new initiative – with its investment in property-related and asset-backed projects in the UK – will contribute to addressing the supply shortage of affordable housing in the UK, estimated at over 1 million new homes needed over the next five years.

The scheme is a national programme, with initial projects in Derby and Kent already under negotiation with one of the Bond’s UK-based house building partners, Latis Homes.

According to Lyons Review, to keep up with the number of new households being formed, at least 243,000 homes a year must be built. In reality, the UK has only managed to deliver an average of 137,000 homes a year between 2004 and 2014.

The UK government is now tackling the supply shortage with the Prime Minister promising to boost homebuilding. In addition to extra government spending, more institutional funding will flow into the affordable housing market.

jbuckley@costar.co.uk

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