A raft of European banks are competing to refinance part of the 3.5m sq ft Porta Nuova development in Milan – a €430m ticket.
Initial offers have been tendered for the financing mandate for the UniCredit office campus, code named ‘Desiderata’, from banks including Aareal Bank, BNP Paribas and Bank of America Merrill Lynch.
Goldman Sachs is also understood to be part of the “extremely competitive bidding process”, as described by one of the bidders. Deutsche Bank, Natixis, ING and Société Générale, as well as Italian banks, are also thought to be involved.
Banca IMI, Mediobanca and John Carrafiell’s GreenOak are advising the borrower – Qatari-backed developer Hines – on the refinancing, which is expected to be completed by the summer.
Hines Italia has been developing the Porta Nuova Garibaldi business district, on which the 32-storey UniCredit Tower sits, and is refinancing a portfolio of seven Grade-A buildings, plus 803 parking spaces, valued at between €800m and €1bn. UniCredit is the prime tenant in the majority-let complex on an 18-year lease.
Hines is seeking non-recourse senior debt at a 50% loan-to-value ratio over five or seven years, with no amortisation or prepayment fees, as part of a financing that allows for an allocation of €10m for VAT as well as €40m for capital expenditure.
One bank is expected to underwrite the whole ticket quickly, and market speculation is that the margin could be as low as 250 basis points. It will subsequently sell on the debt within four to six months, reflecting lenders’ confidence in the depth of the syndication market, as well as appetite for prime deals in peripheral markets.
Another potential exit includes a securitisation of the debt – the same approach taken by Goldman Sachs after its €360m financing of MSREF’s Italian Auchan shopping centre and retail park portfolio in October.
Qatar Holding, a subsidiary of Qatar Investment Authority, bought 40% of the Porta Nuova project last May. The development’s office element is believed to be valued at, or close to, a 4% yield and the owners say the whole development will eventually be worth at least €2bn.
The scheme includes luxury housing priced at the very top end of the market, which is selling slowly, according to one source. The site is a key transport node with international links via a planned French TGV train service to Marseille and Paris, as well as four local underground lines.
Banks have been increasingly willing to underwrite big-ticket deals alone in the past couple of months, as BAML did when it provided a €935m loan for Lone Star’s acquisition of Cœur Défense, later selling 34% of the debt to AXA Real Estate.
In addition, Natixis led a €406.5m refinancing of 12 French shopping centres for CBRE Global Investors, bringing in Allianz, AXA REIM and ING.
Margins are coming down: three lenders have just financed two Paris office buildings for ADIA at a rumoured 150bps (see news, p3). “But these are exceptional deals with prime assets and large sponsors with very deep pockets,” one debt adviser said.