Schroder European REIT has signed a €13 million loan with Banque Populaire in France.
The loan is secured against the Saint Cloud office building in Paris, acquired by the pan-European property investment group in February this year. The loan represents 38 percent LTV against the value of the Saint Cloud asset.
The debt facility has a maturity of seven years and a margin of 1.30 percent above the three-month Euribor rate. With Euribor currently negative, it is applied at a zero rate, resulting in a current total all-in interest cost of 1.30 percent per year. This compares with the 9.5 percent acquisition net income yield of the Saint Cloud property.
The loan proceeds, part of the firm’s €30 million of remaining investment capacity, will be used to make further acquisitions across European cities expected to grow faster than their domestic economies, Schroder European said.
The firm has also acquired an interest rate cap to limit the maximum future potential interest cost if Euribor were to increase, to an all-in rate of 2.55 percent annually.
The REIT now has total outstanding debt of €73.4 million across five facilities, representing an LTV of approximately 29 percent against the overall gross asset value of the company. The current blended all-in interest rate is 1.3 percent, below the portfolio net initial yield against current valuation of around 6 percent.
“We are pleased to have secured this additional long-term debt financing at an interest rate that compares favourably to the property income return of the portfolio,” said Sir Julian Berne, Schroder European REIT’s chairman of the board.
“This is in line with our strategy of targeting gearing against those assets where it is most accretive to returns, whilst maintaining modest overall gearing and headroom to draw further debt,” Berne added.