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DWS, Societe Generale’s financing of Défense Plaza ‘remained attractive’ despite covid-19

The €205m refinancing facility for Northwood Investors was described by DWS’s Oswatitsch as having a ‘defensive nature’.

DWS and Societe Generale pushed through the refinancing of an office building in the La Défense business district of Paris, despite the growing fears of market turmoil caused by the coronavirus pandemic.

The bank lenders closed the €205 million deal in March just as covid-19 lockdowns were starting to sweep across the globe.

The Défense Plaza building, owned by US private equity real estate firm Northwood Investors, was previously financed by Morgan Stanley and Aareal Bank with a €202 million loan in June 2016.

The latest facility comprises a €175 million senior loan and a €30 million mezzanine facility syndicated to a debt fund managed by DWS.

“We of course faced process challenges during close, like notary meetings during covid-19,” Alexander Oswatitsch, head of European real estate debt at DWS, told Real Estate Capital. “However, from a credit perspective, the deal profile remained attractive and resilient for all parties despite covid-19.”

The Deutsche Bank subsidiary declined to comment on the tenor or the pricing of the loan, but the mezzanine financing is understood to be competitive.

The 14-storey office building, located in the main business district of the French capital, comprises over 31,000 square metres and is fully let to a diversified tenant base of blue-chip companies, including the financial organisations State Street and GE Capital.

“Défense Plaza benefits from very good technical specifications and has a good letting history, as well as being strategically well-located within La Défense,” said Oswatitsch. “For these reasons, we were comfortable with the defensive nature of the cashflow and the valuation at which we provided the financing.”

Northwood purchased a stake in the Défense Plaza building back in 2011, marking the first investment in Europe for the firm.

Looking ahead, Oswatitsch said that a reduced equity investment market is still set to limit any pickup in debt transactions. He did however say that prime real estate assets would remain attractive to buyers and lenders alike during this period.

“We expect core lenders to focus and be competitive on defensive sectors such as residential and logistics,” he said.

“Other sectors such a hotel or secondary offices will temporarily suffer from a lack of financing, which may also create some distressed opportunities and attract different types of lenders.”