Private rented sector developer Fizzy Living has received a £200 million cash investment to help speed the growth of its rental homes portfolio. The funds have come from the Abu Dhabi Investment Authority, via its investment vehicle Silver Arrow.
The injection will enable Fizzy Living, which is owned by Thames Valley Housing Association, to significantly expand its activities in the private rented sector, where it has set out firmly to provide rental homes primarily for young professionals, and initially in the greater London area.
Said John Garrity, group chair of TVHA: “As the PRS market is growing quickly with new players emerging all the time, it was a specific objective of ours for Fizzy to have access to a larger capital source within the first two years of operation. We now look forward to Fizzy proceeding rapidly towards its goal of building a large portfolio of quality private rental accommodation.”
The involvement of ADIA, which is well known for its significant investment in other areas of property, including major commercial projects, shows that the UK rented housing sector is now attracting institutional funds. The deal also suggests that ADIA has seen past the historic opinion of many institutional investors, who believed that offices, retail and warehouse properties presented better returns than housing.
Fizzy is likely to split the money between purchasing complete blocks of apartments or whole schemes from developers, and undertaking its own residential developments. Already the company has Poplar, Stepney Green, Canning Town and Epsom which it is renting out.
Fizzy Living launched in early 2012 with £30 million of funding from TVHA. It has subsequently drawn in a further £40 million from Macquarie Capital, but the involvement of ADIA will now considerably accelerate its activities.
TVHA is probably the leader among housing associations getting into the private rented sector. It has managed to finesse the relationship between a not for profit parent and its commercial arms-length subsidiary in Fizzy Living successfully, while other housing associations are still struggling to get comfortable with the concept. Garrity made the point that “profits generated from this venture are invested back into the association to meet our social purpose”.
One key to Fizzy Living’s success is the fact that it has its own, stand-alone branding, complete with an edgy design and website designed to appeal to the target market; and a strong customer service ethos to support its renters.
Geeta Nanda, CEO of TVHA, noted that ADIA’s investment reflected that differentiation in the market: This, we believe, is largely to do with the clarity of Fizzy’s focus, which delivers a great solution to the housing needs of a defined demographic.”