Brookfield prices UK student housing note

Canadian real estate investor Brookfield has priced a £215 million senior secured bond, in the first publicly-traded deal in the European CMBS market in 2017.

The 7.7-year single-tranche deal is understood to have priced last week at 185 basis points over UK gilts. The notes priced at the lower end of guidance, which was understood to be 185-190 bps. At the time it priced, orders were said to be close to £450 million.

The deal – known as Student Finance PLC – has been arranged by Barclays, HSBC and RBC Europe. The sponsor is GL Europe RE Holdings, a vehicle which is owned by funds managed by Brookfield Asset Management affiliates. The borrower will use the proceeds of the deal to repay a bridge loan for its acquisition of the properties.

The underlying properties are a portfolio of student accommodation assets which Brookfield bought from Avenue Capital in February 2016 in the Canadian firm’s debut in the UK student housing sector.

The portfolio contains 13 properties located in Nottingham, Sheffield, Leicester, Newcastle and Wrexham. In total, the portfolio contains 5,684 beds and was 98.7 percent occupied during the 2015/2016 academic year.

The loan-to-value of the notes is 53.2 percent, based on Cushman & Wakefield’s valuation of the portfolio at £404.3 million as at September 2016. The bonds’ expected final maturity is September 2024, with legal final maturity set at September 2029. Solutus Advisors is the deal’s servicer.

A mezzanine facility, understood to have been provided by Cheyne Capital Management, is subordinate to the securitised notes.

Four of the properties in the deal were previously securitised in a floating rate note issued by Chalkhill Partners in 2014. The £107 million 10-year floating rate AYR Issuer SA was backed by properties in Nottingham, Leicester and Sheffield which were owned at the time by Avenue Capital.