Criterion preps £500m PRS war chest after £1bn refinancing

Criterion Capital is planning to deploy up to £500m into London’s private rented sector (PRS) market after completing a £936m refinancing with Aviva.

The London-based property company, headed by Asif Aziz, carried out one of the largest refinancing deals this cycle raising 35- and 50-year finance secured on 14 assets.

“Off the back of the refinancing transaction, we have effectively freed up capital for the group which together with gearing will give us about £500m of firepower,” said Graham Wood, Criterion’s chief investment officer.

The refinancing covered a portfolio of 14 West End properties including the London Trocadero and the Criterion Building, both at Piccadilly Circus. The portfolio is valued at around £1.8bn reflecting a loan-to-value of just over 50%.

The uplift in the value of the portfolio will enable Criterion to make further PRS office-to-residential or brownfield development acquisitions. The company already has 4100 PRS homes in its pipeline.

“We will be actively looking to deploy that (£500m) into the PRS market. I believe we have the third largest PRS pipeline in London and that’s a core focus for us,” Wood said.

Aviva’s refinancing, believed to be the largest by a single lender in the UK this cycle, took out a number of lenders including Royal Bank of Scotland, which lent against the Trocadero. Barclays had securitised its loan secured against the Criterion Building and the bondholders will now be repaid.

The very long-term maturities of Aviva’s facility reflected the nature of Criterion’s investors, said Wood.

“The objective is to hold these assets for the long term, if not forever and what we’re seeking to do is align our financing with our investor’s underlying strategic, wealth preservation objectives.”

Only a small number of lenders were prepared to lend for such long terms but the market was still competitive, he said.

“Pricing wasn’t an issue. The reason we went for Aviva was because they provided the right balance between commercial terms and the length of facility,” said Wood. Criterion would only say that the cost of the finance, priced over the gilts, was at “very favourable rates”.

A proportion of Aviva’s facility is earmarked for the redevelopment of the Trocadero, which will see a 700-bed Ibis pod-hotel, seven-screen Picturehouse cinema and new retail outlets created.

Criterion had been in discussions with other lenders last year to finance the Trocadero separately.