CBRE Global Investors’ CBRE Dutch Residential Fund (DREF) has signed a new €100 million revolving credit facility at a sub 150 basis points margin with Dutch banks ING and ABN Amro.
The three year facility replaces two previous loans – a €100 million term loan with Deutsche Hypo and Berlin Hypo, and a €100 million RCF agreed in 2007 with ING Bank.
The new debt will be used to acquire new developments for the €1.1 billion fund which is back in the market buying after losing €600m due to value falls and sales to cover redemptions in 2014.
In the last 12-18 months, sentiment regarding Dutch residential property has turned around and as a result, this year the fund took in €180m of new capital from investors.
Ronald Gordijn, DREF’s chief financial officer, said the negative sentiment began to change during 2014 after the government’s housing market reform package, which included confirmation that tax relief on mortgage debt wouldn’t be wholly withdrawn, though it has been reduced. “That, together with the fact that the economy started to pick up, gave people confidence that we’d reached the bottom of our market in terms of pricing and we could go forward again,” he said.
For the last 12 months the fund has been focusing on acquisitions. Gordijn said: “We were able to grab some new developments, though it is difficult to buy existing properties because everyone wants to keep their properties now.
“We already have a pipeline of €170m of new assets which will be coming through in 2016-17 and into 2018 and for that we need flexible financing, because we’ll pay in instalments.”
The new RCF will be drawn to pay for the developments while the new equity inflows this year were used partly to pay down the term loan with the German banks.
Gordijn said there were very few banks providing revolving credit facilities to Dutch property investors earlier this year when CBRE GI was talking to lenders. Nevertheless, the pricing agreed was still attractive compared to secured term loans, at a margin of between 125 and 150 basis points.
The loan is secured on a €250m sub-portfolio, with a 35 percent loan-to-value and a 55 percent LTV covenant. “That was an important factor for very good pricing”, he said.
Gordijn said he believed there were a handful more banks, such as HSBC, which are now prepared to consider RCFs in the Netherlands.
He said DREF’s investors wanted the fund to remain lowly-geared, up to a maximum 15 percent at fund level. This year they will have had a 3.5 percent income distribution while the €1.1bn of assets had risen in value by 3% in the nine months to end of September 2015.