Centrus advises Circle VHA on its first social housing development project

About Circle VHA

Source: Circle VHA

Circle VHA was set up in 2003 to provide high quality social and affordable housing to families and individuals in the Dublin area.

It now operates over 1,500 homes across Ireland, providing housing and management services to approved applicants on local authority housing waiting lists.

Transaction Overview

Circle VHA achieved a groundbreaking single facility covering construction finance and a 30-year long-term finance to deliver 47 apartments.

Centrus worked with Circle VHA to deliver financing for its first social housing development project comprising 47 apartments to be built on a Dublin City centre site. The ultimate financing solution brought together different lending teams within AIB (Real Estate & Corporate Banking) within a single ground breaking facility and first-of-its-kind security structure. 

Client Objectives

  • As an Approved Housing Body (charitable) borrower, Circle VHA’s core objective was to deliver much needed social housing and to do so with the associated project construction and development risks, appropriately ring-fenced from its day-to-day operations. 
  • Typically, SPV structures are used for development projects, however given the limitations presented by Circle VHA’s charitable status, this solution was not available. Therefore, the funding and risk management solutions brought by Centrus had to sit inside Circle VHA’s balance sheet. This presented a unique challenge that required significant structure work and collaboration with all key stakeholders.

Centrus Solution

  • Against the backdrop of a volatile economic environment, Centrus worked with Circle VHA to assess the economic risks facing the project and associated mitigating options. Rising interest rates create debt capacity constraints and the focus of the hedging strategy throughout was to provide debt capacity certainty for the refinance of the development facility. 
  • This analysis informed the ultimate strategy to forward fix the long-term interest rate (i.e. locking in the rate at which Circle VHA will borrow the long-term finance to repay the construction funding).  This gives both borrower and lender, debt capacity certainty for the long-term financing which will be used to repay the construction loan. 
  • Both the construction funding and the long-term funding were documented within a single facility agreement which required strategic commercial negotiation to ensure it was fit for purpose and met the sector specific circumstances of the deal, the needs of all stakeholders (CVHA, AIB, DCC, DHLG&H, Contractor). 
  • Centrus drew on in-depth understanding of stakeholder perspectives to negotiate a financing and hedging structure that met Circle VHA’s objectives and ultimately saw the development of 47 new homes get underway in late 2022. 

“Centrus was a great partner for us in this landmark project. The team brought both financing and risk management solutions to the table and worked tirelessly to get the deal over the line.

They brought a collaborative solution orientated approach to this project which was not without its challenges. They never lost sight of the ultimate objective of getting 47 homes built”

Colin Creedon, Finance Director – Circle VHA

“Great to see Circle VHA’s groundbreaking project reach first drawdown with AIB. The project is progressing very well and we are looking forward to seeing tenants in their homes in 2024.”

Gavin Friel, Director – Centrus

For more information, please contact Gavin Friel.

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