Austrian bank BAWAG has acquired £50m of a £225m loan Lloyds made to Aviva Investors and Quintain’s Quercus Healthcare Property Partnership – the largest UK institutional care home property fund.
BAWAG typically provides finance at around 50% leverage and a margin of around 400 basis points. This marks its first healthcare loan in the UK – a sector that is heavily regulated and therefore carries additional risk, so BAWAG can still achieve its higher rate of returns.
The pari passu Lloyds facility, which was last year extended until 2017, is split into a £150m term A loan and a £75m term B loan. BAWAG bought into the term B loan which, unlike the term A loan, is fully amortising within term and therefore has a slightly lower margin. The entire term B loan was for sale at one point.
BAWAG is targeting deals across Western Europe and can provide both senior and mezzanine financing, with a focus on value-add opportunities. It has previously funded deals within the care home sector in Germany, and in December took part in a €97.5m senior refinancing of Ivanhoe Cambridge and Grupo Lar’s Spanish shopping centre, Islazul, alongside West Immo and Natixis. BAWAG replaced original lender M&G Investments’ €32m ticket. The loan overall reflected a 50% LTV and pricing of 425 bps over Euribor.
The closed-ended Quercus fund was set up in 1998 and was extended last year out to 2018. It has begun an orderly sale of assets and last August tenant Care Tech bought 28 freeholds of care homes that it occupies.
Lloyds’ head of corporate real estate John Feeney said the syndication reflected Lloyds’ ongoing focus on “an originate-to-distribute strategy”.
Until recently, UK clearers Lloyds, Barclays, RBS and Santander had been the main lending sources for healthcare assets. But Feeney said: “Liquidity and demand for the healthcare sector continues to improve in line with the underlying fundamentals”.