News & Analysis

GPE raises £175m through US private placement

Great Portland Estates has turned to the US private placement market to raise £175 million of fresh capital.

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Great Portland Estates has turned to the US private placement market to raise £175 million of fresh capital.

The London-based developer and investor has issued unsecured seven-year notes, denominated in sterling. The notes carry a fixed rate coupon of 2.15 percent, representing a margin of 125 basis points over the gilt rate.

Toby Courtauld, chief executive of GPE

The notes were placed with eight institutional investors, including three new lenders to GPE. The notes have identical financial covenants to the group’s other unsecured debt.

The new issue priced on 22 February, was signed on 28 March and will close with funds drawn on 22 May, GPE said in a statement.

The new notes will refinance £159.7 million existing private placement notes which were prepaid earlier this month at a total cash cost of £176.1 million. The notes had a blended fixed rate coupon of 5.3 percent and were due to mature in 2018 and 2021.

GPE said that it also intends to prepay the remaining £127.7 million of existing private placement notes, maturing in 2019 and 2022 with a blended fixed rate coupon of 4.6 percent, following receipt of the majority of the freehold sale proceeds of its Rathbone Square property in London’s West End.

Nick Sanderson, finance director, GPE

“We are very pleased with the considerable investor appetite shown for this issue, with an order book of more than £800 million testament to our focused business strategy and conservative capital structure. This financing locks in low cost debt funding for the next cycle and we believe the coupon is the lowest sterling rate ever achieved by a REIT in the US private placement market,” commented Nick Sanderson, finance director of GPE.

The refinancing activities extend the group’s weighted average debt maturity to 6.4 years, from 4.7 years at 31 December 2016, and reduce its weighted average interest rate to approximately 2.7 percent, from 3.7 percent at 31 December 2016.

NatWest Markets and Santander acted as joint active agents on the new issue. JC Rathbone Associates is acting as hedging advisor in respect of the prepayments.