ABN Amro has structured a circa €460 million refinancing for Round Hill Capital’s Dutch residential portfolio in the largest transaction of its kind in the Netherlands.
The five-year facility, arranged and distributed by the bank as a private placing, covers 7,000 of Round Hill’s 9,000-strong portfolio of Dutch residential units.
The assets were all originally financed by ABN Amro over the last two years, except for one package which was financed by ING in 2014.
A club of European institutions, believed to be clients of AXA, have invested in the new loan, with ABN Amro retaining a small participation. About 10 investors are thought to have expressed interest, with a smaller number in the final club and the cost is believed to be competitive. Dutch banks and German pfandbrief lenders have been financing similar portfolios at margins of 120-150 basis points for senior debt up to 55-60 percent leverage.
Matthijs van der Horst, head of debt syndicate at ABN Amro, said the deal gave the investors “yield pick up vis-a-vis liquid real estate bonds, as well as diversification benefits”.
This is thought to be the first real estate loan structured as a private placement and secured on Dutch multifamily this cycle. It is another sign of institutions’ growing appetite for real estate debt and of the gradual expansion in alternative lending sources over bank finance as an option for European property sponsors.
The assets secured in the deal are valued at about €700m, implying leverage of 65-66 percent. There is no tranching, with the investors all taking vertical slices of a whole loan.
Round Hill began assembling its Dutch multifamily portfolio in 2014 and claims to be the first non-domestic investor to enter the market again after the financial crisis, attracted by the sector’s characteristics, Dutch housing deregulation and the increasing availability of debt capital. So far it has acquired 10 different portfolios.
CEO, Michael Bickford said the refinancing offered “funding diversification on highly competitive terms as well as substantial operational flexibility.” It is thought Round Hill and the bank also considered CMBS as a funding solution, but the whole loan financing was better value.
Round Hill has bought standing investments in the Netherlands, but the firm is believed to be considering investing in build-to-rent development or to build itself. It intends to be a long-term investor in the Dutch market, in line with the asset class’s return characteristics. It also invests in Czech multifamily and is eyeing other potential European residential markets.
Round Hill’s chief investment officer, Kirk Lindstrom, noted that the cost of finance had come down in the two years’ since the firm began investing: “We’ve seen the premium payable for Dutch vs. German multifamily finance significantly compress since we first invested in the Dutch market in 2014,” he said.
Round Hill’s legal adviser is Loyens & Loeff and Clifford Chance advised the investors.