THFC helps Wheatley reduce rate on EIB loan by 60%

The Housing Finance Corporation (THFC) has helped Dunedin Canmore, part of Wheatley Group, reduce the interest rate it pays on a loan from the European Investment Bank (EIB) to just 1.25%.

THFC helps Wheatley reduce rate on EIB loan by 60%

The 20-year loan was signed in 2010 at 3.00%, as part of a £345 million funding deal secured by THFC, social housing sector aggregator and its largest mutual lender, from the European Union’s non-profit bank.

At the time it marked the sixth wave of EIB investment with THFC, targeted at regionally-focused housing regeneration projects across the UK, with some £70m going to Scotland.

One feature of THFC’s EIB loans is the ability to revise the interest rate during fixed periods. Dunedin Canmore was able to take advantage of this to reduce the interest payments on its £16.5m loan by almost 60%. The new rate of 1.25% has been fixed until the maturity of the loan in 2031 (around 0.5% above the UK Government’s own cost of funding for the same period), allowing Dunedin Canmore to mitigate against risk and uncertainty.

THFC has a long history with the EIB, having pioneered its entry to the UK housing sector in 1999. Today it is the EIB’s single largest conduit for housing regeneration investment in Europe, with over £2.44bn in outstanding loans across THFC and AHF.

THFC has been lending in Scotland since 1997, and today has lent £169m to nine borrower groups across Scotland, the latest maturity of which is in 2043.

Piers Williamson, THFC’s CEO, said: “This is a really good example of so-called ‘patient capital’ in action. Throughout our long relationship with EIB we’ve emphasized the very long time periods investment is needed for - to help create and support truly sustainable neighbourhoods.

The developments this loan financed were sustainability-focused and have had a positive impact on the communities involved. Now, 10 years on, we’re able to give Dunedin Canmore the ability to further reduce that cost, to bring it in line with today’s market pricing, and fix that in for a further 10 years.

It demonstrates again that THFC continues to support its clients and add value throughout the lifetime of our loans, and that is a rare thing.”

Proceeds of the loan were used by Dunedin Canmore for three regeneration projects across Edinburgh: Westfield, Hyvots and St. Nicholas Place.

At Westfield, a mixed tenure development of 193 apartments was built on the banks of Water of Leith, as well as eight commercial units. This revitalised the area by bringing derelict land back into use as affordable housing, and the homes were built to high energy efficiency standards. Westfield Park won the Large-Scale Housing Development of the Year at the 2012 Saltire Society Housing Design Awards.

A further 58 units were built on Hyvot Terrace in a brownfield site regeneration scheme to replace existing sheltered housing which had been scheduled for demolition. Innovative design features included mechanical heat recovery mechanisms in every flat which created cost savings for tenants on bills. The mixed tenure development at St. Nicholas Place was similar, with 109 units built on the site of a former school, emphasizing energy efficiency and sustainability.

Steven Henderson, group director of finance at Wheatley Group, said: “We are delighted to reduce the running costs on our loan with THFC. The savings made will help us continue to keep our rents affordable for our tenants.

The energy-efficient homes financed by the THFC investment have transformed formerly derelict and brownfield sites into thriving, sustainable communities for our customers.”

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