Equitix is understood to have been forced to source a new lender for a major UK student accommodation scheme just days before the project was due to reach financial close.
Aviva agreed last October to provide a loan of in excess of GBP 100m to the manager to fund its development of new student accommodation at York University, which is being procured as a 50-year DBFOM.
However, the UK insurer late last month pulled out of the deal leaving Equitix unclear as to how exactly it would fund the project, which involves the building at a cost of GBP 113m of a new 1,400-bed campus development.
It is understood to have been a significant disappointment for the UK manager which also last year was forced to take Falmouth University to court after it pulled a student accommodation development scheme.
Aviva is a major relationship lender to Equitix, providing debt on several key deals including the acquisition of a 30% stake in the Intercity Express Programme Phase 1, the Wales and Borders rolling stock, the Yorkshire Schools PF2 and the HS1 sale.
It is understood that Aviva was not motivated to exit the deal by the current Brexit debacle. It was not clear at press time the reasons for the insurer’s move.
Aviva, which declined to comment, is a major lender to UK infrastructure – and not least student accommodation to which it has provided loans totaling some GBP 272m, according to Inframation data.
Assured Guaranty is understood to have filled Aviva’s shoes. The monoline insurer is understood to have lined up an unnamed lender whose loans will be wrapped by AG.
Another upset for Equitix is that financial close has now been pushed back to March from an original target of this month, as a result of Aviva’s move.
Reaching financial close on time is vital for student accommodation projects as they have to be delivered before the start of the academic year, meaning construction risk can be significant for equity investors in the case of late delivery.
Although work on the York project was expected to start this month, it is understood that Equitix will still be able to deliver the project on time if the transaction is finalised in March.
When Aviva was appointed by Equitix, it put an end to AG’s domination of the student accommodation market.
It is understood that Aviva extended its maturity in order to compete with AG’s offering over York. AG provided more guarantees last year than it had in the previous eight years combined, with a total par value of around GBP 550m and has wrapped around half of the last UK transaction in the past two years.
It worked with Equitix on the University of Durham student accommodation, which reached financial close last August with a wrapped GBP 90m private placement from M&G.
Aviva provided a GBP 50m term loan to the Equitix-owned University of Essex student accommodation project in 2012.
Equitix has bolstered its footprint in the UK student accommodation sector as it was awarded four new projects in 2018, leaving rivals Balfour Beatty, Galliford Try, Bouygues and Vinci behind.
In 2017 the manager took legal action against Falmouth University after the latter ditched a proposed DBFO scheme despite having already selected a consortium including Equitix and Australian developer Campus Living Villages as preferred bidder.
Equitix and York University did not respond to requests for comment.