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GCP Infrastructure cuts ties with troubled First Priority

GCP Infrastructure cuts ties with troubled First Priority

GCP Infrastructure Investments (GCP) has followed Civitas Social Housing (CSH) by cutting ties with troubled housing association First Priority.

The infrastructure debt fund had exposure to a loan that was secured against 24 properties with 35-year leases held by First Priority, let to around 200 tenants. The loan was provided to Supported Living Infrastructure to finance supported living units for adults with learning or physical difficulties.

At the end of March, it accounted for around 3.7% of the GCP's total assets - which stood around £1 billion.

First Priority was censured by the Regulator of Social Housing in February as a result of a ‘fundamental failure of governance’. 

In response, manager Gravis Capital Management has announced that the 24 leases against which the loan is secured against have been transferred to Bespoke Supportive Tenancies, a not-for-profit provider of social housing for vulnerable adults.

Gravis Capital said the transfer of the leases would not have a material impact on the company’s net asset value (NAV).

While news of GCP's exposure to the loan initially caused the fund's shares to drop 2.6% to 117.6p, today they are slightly higher at 119.4p per share. Over the past 12 months, GCP's share price has risen by 1.1%, which compares to a 0.1% loss by the average fund in the Association of Investment Companies' infrastructure sector. 

These figures reflect what has been a tough year for companies investing in UK infrastructure, as nationalisation threats from the Labour party have weighed on the sector. Earlier this year, GCP was also hit by the collapse of Carillion. 

GCP is not the only fund to cut ties with First Priority: Civitas, which supplies rental accommodation to hard-pressed local authorities, transferred 44 First Priority leases to Falcon Housing Association earlier this year. It announced at the time that some rent owed to First Priority on the leases was in arrears, but this was not material to the company.

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