A new player in the European real estate debt market has bought the mezzanine debt secured against three UK business parks formerly owned by MEPC, Real Estate Capital can reveal.
Highbridge Principal Strategies, owned by JP Morgan Asset Management, has taken just under £75m of a £335m whole loan secured against the regional assets that Oaktree Capital Management and Patrizia Immobilien bought from MEPC in August for £430m. Barclays is understood to have priced the mezzanine tranche at an internal rate of return of between 8% and 9%.
Highbridge came out ahead of interest from GIC and DRC Capital whilst the likes of Europa Capital and LaSalle Investment Management also considered the opportunity.
Barclays sold the position to Highbridge, having underwritten a whole loan at the time the assets’ sale completed. The £335m loan with a five-year term has a loan-to-value of 78%, with the senior priced at around 175 basis points . The mezzanine bought by Highbridge sits at a loan-to-value of just above 60%.
Investment banks including Citi and Bank of America Merrill Lynch were also interested in the initial financing with the prospect of putting together a CMBS.
Highbridge’s entry into the market is the latest sign of a diversifying European debt market with the number of non-bank lenders growing steadily. The extra competition is also seeing a continued driving down of the pricing of mezzanine debt.
The company recruited Philip Moore as a vice president in July to head its real estate debt investment in Europe. He was formerly a principal at DRC Capital.
Highbridge originates whole and mezzanine loans as well as buying tranches.
Its first European deal completed during the summer when it funded Northwood Investors to buy the 161-room Four Seasons hotel in Prague from Avestus Capital Partners with a whole loan of around €40m.
The three parks within the former MEPC portfolio – Hillington Park in Glasgow, Birchwood Park in Warrington and Chineham Park in Basingstoke – total 4m sq ft and were hotly-contested when they came to the market, the sales price reflecting a yield of 7.3%.
All parties declined to comment.