NorthStar secures financing for €1.1bn pan-European office portfolio

NorthStar Realty Finance has secured debt for its purchase of a €1.1bn pan-European office portfolio from SEB Asset Management, Real Estate Capital can reveal.

Aareal has been chosen to provide senior debt for the deal, at a loan-to-value in the region of 50%, meaning a ticket size close to €550m. This makes the financing one of the largest on a pan-European basis in recent years.

The portfolio totals 186,299 sq m in 11 buildings across eight cities: London, Paris, Hamburg, Milan, Brussels, Amsterdam, Rotterdam and Gothenburg. It includes Condor House and Portman Square House (pictured) in London, Issy-les-Moulineaux in Paris and Maastoren in Rotterdam. The properties are 93% leased with a weighted average remaining lease term of six years.

The acquisition, originally reported by EuroProperty, was sourced by Cale Street Partners, the firm set up by former Goldman Sachs duo Ed Siskind and Ramón Camina-Mendizabal as well as former ING and UBS banker Wilson Lee. EY’s former UK and Ireland head of real estate and construction Dean Hodcroft is also a director there.

Cale Street is backed with $1.5bn of equity from the Kuwaiti Investment Authority and has flexible capital which can invest throughout Europe in senior and mezzanine debt as well as make equity commitments.

NorthStar came close to financing the deal with JP Morgan, which was offering a significantly higher leverage level, before deciding to set the senior debt at a more conservative level. It is thought that Cale Street has provided some equity as well as mezzanine debt.

When the sale was announced in January a statement said that Cale Street would “provide some financing and assisted in sourcing the transaction”.

NorthStar is spinning off a new €1.8bn REIT specifically to own European assets called NorthStar Realty Europe. The company will be initially listed in New York with a listing expected later in Europe. The spin-off is due to complete in the second half of the year and the company will have a target leverage level of 40-50%.

NorthStar has also bought a €450m pan-European portfolio called Project Trias for the company from Provinzial NordWest, which was an amalgamation of mandates it had given to IVG, Deka and Internos Global Investors. It includes 38 office, retail and industrial assets and one hotel across Germany, France, Italy and Belgium.

NorthStar’s European activities are headed up by Mahbod Nia, managing director and head of European investments. He previously worked at PanCap Investment Partners and before that was a senior executive director in Goldman Sachs’ real estate banking group.

Aareal has been expanding its real estate lending activities in Europe and completed €10.7bn of deals in 2014. Last month it bought WestImmo for €350m, which has a commercial real estate loanbook of €4.3bn.

Though Northstar’s is a large underwrite for Aareal, the German bank has taken down big deals in the past that it likes. It underwrote the entire £350m in a 2011 refinancing of UK retail warehouse fund Hercules Unit Trust.