Aviva arranges £130m long-term debt for Shaftesbury

Aviva Commercial Finance has provided a £130m loan for West End specialist property firm Shaftesbury.

The 15-year loan is secured against properties in Shaftesbury’s Carnaby Street estate, owned by one of its subsidiaries. The facility has a fixed interest rate of 3.2% throughout the term equating to between 130 and 140 basis points over the gilt.

Putting in place long-term financing arrangements fits with Shaftesbury’s strategy of retaining a dominant holding within key areas of the West End over generations.

For Aviva the deal is part of its goal of convincing large property companies and investors it is a good time to lock away assets while interest rates are still low, as it has with Kennedy Wilson Europe Real Estate and Helical Bar in recent months.

It was worked on by new business origination manager Adrian Poole. Aviva Commercial Finance is now led by managing director Barry Fowler (pictured), who joined from Lloyds last summer.

The deal replaces a £100m revolving credit facility due to expire in September 2016 with Nationwide Building Society, which has been scaling back its real estate exposure to larger property clients. The company’s remaining £50m facility with Nationwide, which is also due to mature in 2016, will be refinanced in due course.

Shaftesbury has also agreed to terminate £70m of interest rate swaps at a cost of £28.1m, equivalent to a reduction in EPRA net asset value per share of around 10p or 1.4%.

The new arrangements increase the weighted average maturity of Shaftesbury’s debt from 6.7 years to 8.7 years and reduce the weighted average cost of debt by around 25 basis points.

Chris Ward, finance director, said: “We are pleased to have secured this financing during a period of extremely low gilt yields, and with a lender of the calibre of Aviva. Long-term funding is a natural fit with our business model and portfolio of good quality assets with secure income streams.”

Fowler said: “Shaftesbury has a great pedigree and proven track record managing these iconic assets in Carnaby Street. This provides Aviva Commercial Finance with an attractive loan asset and further highlights our ability to offer bilateral facilities of scale.”