Aviva refinances Manchester’s Bruntwood

Aviva Investors has provided long-term finance to Manchester-based property firm Bruntwood in order to support its regional UK development and investment drive.

Aviva Investors Real Estate Finance has written a £115.5 million loan for a term of 15 years to the family-run office landlord, which is led by chief executive Chris Oglesby (pictured).

The loan will create “headroom in existing facilities” in order to fund acquisition and development across the UK’s regional cities, Bruntwood said.

The Aviva loan will partially refinance a £300 million debt facility provided by Royal Bank of Scotland, HSBC, Barclays and Santander. The medium-term loan from the four banks is due to expire at the end of 2019.

Bruntwood said that the subsequent surplus in the medium-term facility will then be used to undertake acquisition and development activity while the Aviva loan significantly extends a large proportion of its debt.

The deal will help Bruntwood to bring forward the first commercial phase of its Circle Square development of 450,000 square feet. The scheme is located on central Manchester’s Oxford Road, which is being promoted as the city’s ‘science corridor’.

The Aviva facility reflects a loan-to-value ratio of 55 percent and has £15.75 million amortising over the term. The loan is priced at a fixed rate of 3.46 percent for its duration and is secured against 12 buildings in Bruntwood’s portfolio, six of which are in Manchester city centre, three in Greater Manchester and one each in Leeds, Liverpool and Birmingham. Debt advisory firm JCRA advised Bruntwood on the transaction.

“In the last four years, not only have we significantly reduced debt gearing and risk in the group, but we’ve also grown our asset base and secured a £1.5 billion GDV development pipeline,” commented Oglesby.

“This new facility allows us to respond to the strong customer demand that we are experiencing by bringing forward another significant portion of that pipeline. It also affords a level of flexibility that will allow us to remain nimble in the way in which we both accommodate our customers’ requirements and approach further acquisitions in this ever changing, uncertain world,” Oglesby continued.

Bruntwood has agreed several interesting debt deals in recent years. During 2013, it completed a refinancing of its outstanding debt, which included £435 million of securitised debt and £165 million in bank loans. In October of that year, a £221 million five-year loan from the four clearing banks mentioned above represented the last stage of a refinancing. The facility carried a 300 basis points margin at 60 percent LTV.

In December 2012, Bruntwood borrowed £120 million of 10-year finance from Legal & General. In February 2013, bondholders agreed an extension of £229 million of the CMBS debt until 2016. In July 2013, Bruntwood issued a seven-year, £50 million retail bond.

“It’s been an incredible four years for the business,” said Kevin Crotty, Bruntwood’s chief financial officer. “Prior to this time we had a £600 million debt cliff, the majority of which was in a CMBS, at a time when the CMBS market was closed.”

“Today we have a well-diversified loan portfolio,” added Crotty. “With gilt rates near to all-time lows and predicted to rise, it made absolute sense to undertake this deal. We have been talking to Aviva Investors for a few years now, and they have taken the time to understand our business and our flexible customer proposition and to tailor a finance package around our requirements.”

During 2016, Aviva expanded its product range to include floating rate finance and the insurer also began lending into the continental European market. However, head of real estate finance Gregor Bamert said that the Bruntwood deal demonstrates that Aviva still has an appetite for longer-tenor annuity-matching loans.

“We are pleased to have executed the facility within a short time-frame providing Bruntwood with a strong funding outcome at a time of broader market uncertainty,” Bamert said.