A pan-European industrial portfolio owned by Starwood Capital and M7 Real Estate is set to seed two future CMBS deals.
The investors’ joint venture, MStar, has agreed two new loans, one with Bank of America Merrill Lynch and the other with Deutsche Bank, which are both potential securitisation sales.
BAML has won a mandate from the duo to refinance the Tamar European Industrial Fund (TEIF). The fund, which was de-listed in September, owns a €125.9m pan-European portfolio.
MStar has secured €95m of debt, reflecting a 75% loan-to-value ratio. The five-year finance has a margin of around 325 basis points over Euribor. BAML fought off competition from Citi for the mandate.
Deutsche Bank has provided an €84m loan secured on a €129m portfolio of German and Dutch MStar assets. The five-year finance has a margin of 250bps above Euribor and a 65% loan-to-value ratio.
Deutsche Bank will warehouse the loan which is expected to become part of a multi-country DECO CMBS. In September the German bank arranged the first post-crisis multi-borrower CMBS – the €250m DECO 2014-TULIP, held against Dutch assets. There hasn’t yet been a CMBS this cycle secured on collateral from more than one country.
BAML is also believed to be warehousing the TEIF loan for a CMBS. The TIEF portfolio has 27 properties in France, three in Germany and two in the Netherlands totalling 226,641 sq m with a total annual passing rent of €13m. It is 12% vacant with a weighted average lease term of 2.6 years.
MStar is making a large margin saving by refinancing the fund. The current €60m of debt, from Deutsche Bank and Macquarie, is priced at 675bps above Euribor, with a 48% loan-to-value.
Volume by value of CMBS issuance is down this year compared to last year, though not by number of deals: last year’s €8bn tally was boosted by several €1bn-plus refinancings of German multi-family housing.
So far this year there have been 10 new CMBS, totalling €3.07bn, but a notable trend is that investment banks are beginning to broaden the type of assets financed via the capital markets. They have successfully sold slightly more complex deals than single-borrower, single asset offers.
After the TEIF refinancing it is thought that BAML is the frontrunner to provide a further €105m of debt for a pipeline of MStar’s deals, although Citi is also competing for the next mandate. If BAML were successful, the two loans could be combined in a multi-jurisdictional CMBS.
Citi has already built up a substantial book of European logistics loans this year. Having completed deals with the likes of Blackstone and Oaktree, these loans could be combined to form an industrial-focused CMBS.
MStar Europe was formed in April to buy continental assets with an initial portfolio target of €500m and €200m of equity. This has subsequently risen to a €1bn target, with the JV having already put together a portfolio of €260m across France, Germany, the Netherlands and Sweden.
Light industrial asset manager M7, run by chief executive Richard Croft, also formed a tie-up with Starwood last year to buy £100m of multi-let, UK industrial assets. M7 has additional joint ventures with companies including Bayside Capital, Oaktree Capital Management and M&G.