Aviva provides £120m for Covent Garden portfolio and £184m for UPP university deal

West End specialist Shaftesbury and the Mercers’ Company have refinanced their Covent Garden portfolio with £120m of long-term debt from Aviva Commercial Finance.

The pair’s Longmartin Properties joint venture was set up in 2005 to redevelop 2 acres north of Long Acre. The St Martins Courtyard development of 23 shops, eight restaurants, 102,000 sq ft of offices and 75 flats was all financed with equity.

Brian Bickell, Shaftesbury’s chief executive, said both parties were long-term investors, “so we thought it made sense to put some long-term debt in place. As the banks don’t have a very long-term horizon we started talking to insurance companies.”

He said they hadn’t considered going to the US private placement market for finance, as Great Portland and several London landed estates had last year. “Although Shaftesbury’s portfolio is like a landed estate’s in some ways, our corporate structure is not, and this, as a joint venture, where the ownership could change over time, was slightly more complicated.”

The fully drawn 15-year loan is at fixed interest of 4.43%. Shaftesbury will use its proceeds to repay part of its existing revolving facilities. It will bring the REIT’s committed undrawn facilities with Lloyds, Clydes-dale, Nationwide and GE Capital (via GE’s Bradford & Bingley loan acquisitions) to £200m.

Aviva Commercial Finance completed a busy year with December’s signing off of two large loans totalling over £300m.

As well as providing £120m of senior debt to Shaftesbury and the Mercers’ Company, Aviva increased its student accomodation book with a £184m loan to Universities Partnership Programme for the operation of all accommodation at Reading University.

UPP’s 125-year contract to manage 4,320 rooms is the largest single private-sector residential investment in a UK university. Its £230m bid prevailed after months of negotiations coincided with a protracted attempt by UPP majority share-holder Barclays Infrastructure Managers to sell or restructure its clients’ UPP stake.

Dutch pension fund PGGM is in exclusive talks to become an investor in UPP and a deal is believed to be very close.

Kevin Sale, Aviva’s commercial finance director, said the UPP loan was for a term longer than 25 years at “a sensible margin” and he was comfortable with the ticket size. “Reading University didn’t want the loan to be split over several lenders and it was important to them that it was with someone very long-term,” he said.

Aviva seeks to write between £750m and £1bn of new commercial, PFI and medical property business a year and Sale said 2011 had closed “at the upper end”. His team’s largest single property loan was a £205m, 20-year facility to Peel Group.

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