ADIA makes UK housing foray

The sovereign wealth fund has made a commitment of up to £200 million to Fizzy Living, more than doubling the firm’s capitalization.

The Abu Dhabi Investment Authority (ADIA), the $627 billion sovereign wealth fund, has made its second investment in UK real estate since 2007 with an up to £200 million (€240 million; $333 million) investment in property company Fizzy Living, according to a joint statement.

ADIA made the commitment through Silver Arrow, an investment entity that the sovereign wealth fund ultimately owns. Fizzy is the first company in the UK designed specifically to service the needs of young professionals seeking accommodation in the private rented sector and is a wholly owned subsidiary of domestic leasing firm Thames Valley Housing.

“As the private rented sector 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,” John Garrity, group chair of Thames Valley Housing, said in the statement. “To have achieved this is rewarding, as it means that that profits generated from this venture are invested back into the association to meet our social purpose. We now look forward to Fizzy proceeding rapidly towards its goal of building a large portfolio of quality private rental accommodation.”

The proceeds of ADIA’s investment will largely be used to grow Fizzy’s portfolio of assets, and the extra capital is expected to accelerate the firm’s growth plans “significantly.” Fizzy is expected to both continue to buy new buildings from developers and also undertake development of its own apartment buildings.

Fizzy was launched in February 2012 with seed capital of £30 million provided by Thames. In January 2013, Fizzy secured a further £40 million of debt funding from Macquarie Capital, the capital advisory firm’s first real estate senior debt deal in Europe. Macquarie has since assisted Fizzy in identifying a suitable institutional partner.

“We are naturally delighted to know that the Fizzy concept is as attractive to institutional investors as it was to us when we made our initial investment,” added Thames chief executive Geeta Nanda in the statement. “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.”

As one of the most active real estate investors worldwide, ADIA has been gradually reducing the amount of its assets managed by external managers and has been shifting to a more direct- and joint venture-heavy approach since the onset of the global financial crisis. The sovereign wealth fund’s most recent investment in the UK was in 2012, when it reportedly bought a portfolio of 42 hotels currently subject to distressed circumstances in a deal valued at about £620 million.