The real estate blog: A closer look at the Government guarantee scheme

Last week Thames Tideway Tunnel general counsel Celia Carlisle spoke to The Lawyer about how the Government guarantee scheme for infrastructure helped get the super sewer the financial backing it needed to begin work.

Carlisle was in an interesting position to comment on the guarantee scheme having acted as general counsel during its first ever use on the Mersey Gateway Project.

The scheme itself is used to attract finance from private investors by guaranteeing that they are paid all interest and principal due to them. In basic terms the investor replaces the risk of lending to the company with the risk of lending to the UK Government.

However, Carlisle’s work has involved only two of the 39 projects that have been given pre-qualified status for Government support through the scheme.

Not all of these projects made it passed the shortlist but by the end of 2014 the Government had signed seven guarantees and committed a total £1.7bn to infrastructure projects under the scheme. So far the largest proportion of this backing has been in support of the Northern Line Extension, which has had its £750m investment secured by the Government.

These figures are no small sum, but there is a great deal more available for projects looking to secure backing as the scheme has a total limit of £40bn in guaranteed lending.

Initially the scheme was set to end on 31 December 2014 but the deadline has since been pushed back to the end of 2016.

In order to be eligible for the scheme projects must meet five key criteria. The project must be nationally significant, ready to be constructed within 12 months, depend on the guarantee to proceed, be financially credible and also must be good value to the tax-payer.

Deal roundup

Taylor Wessing advised Tritax Big Box REIT (TBBR) on a five year £500m secured debt facility with a syndicate made up of four banks.

The real estate investment trust entered into the agreement with the syndicate, which was made up of Barclays, Helaba, Wells Fargo and ING Real Estate Finance.

The lending facility is made up of an immediate £320m loan and a further £80m loan available for one year after the facility is agreed. It also consists of a £100m revolving credit facility, which includes a £10m overdraft. The facility was needed in order to support TBBR on its ongoing growth plans.

Taylor Wessing’s team was led by finance partner Martin Yell and included finance partner Will Belcher, tax partner Peter Jackson and real estate partners Emma Oakley and Alan Evans.

Meanwhile, Herbert Smith Freehills (HSF ) has advised long standing client Hammerson on its entry into a joint venture with Allianz Real Estate Germany.

Hammerson relationship partner and head of real estate Don Rowlands and corporate partner Alex Kay led the HSF team. Finance partner Simon Chadney also worked on the deal.

Clifford Chance Frankfurt managing partner Christian Keilich advised Allianz on its entry into the joint venture.

The joint venture was created in order to acquire a €2.6bn (£1.92bn) loan portfolio from the Irish National Asset Management Agency. After competitive bidding the portfolio was purchased for €1.85bn (£1.36bn).

The loans were secured against retail property assets in Dublin including Dundrum Town Centre, a 1.5m sq ft shopping centre.

William Fry advised the joint venture during the acquisition of the portfolio with a team led by real estate partner Andrew Muckian.