North-west firm is second company to diversify debt by issuing retail bonds secured on property
Bruntwood has raised £50m in only the second secured issue of retail bonds backed by property assets.
The north-west based private company’s seven-year issue was priced at 6% and the £50m raised was at the lower end of its £50m-£70m size range.
Chief executive Chris Oglesby said Bruntwood had turned to the retail bond market to diversify the sources and tenure of its debt.
It is the eighth issue by a property company and he said Bruntwood’s was a secured issue – unlike those of six listed property companies that have tapped the market so far – “because we recognise that as a private company, we probably needed to offer more. And it was very important to us for the first time in the market that we came forward with something very retail-friendly.”
The retail bond market represented a fourth source of debt capital for Bruntwood, which has an £891m, 110-strong portfolio and close to £600m of debt. “We went to the institutional market in December and put in place a £120m, 10-year bilateral loan with Legal & General,” Oglesby said.
“We have a CMBS and were pleasantly surprised when we went to investors in the new year to find that there was still demand for our bond. “We restructured the CMBS on the basis that we paid down half and extended £229m to January 2016. “We have also found there is demand from banks again.” The company plans to extend a £225m facility with RBS, HSBC and Barclays.
Oglesby said there is “demand for strongly recurring revenue streams from institutional and retail investors, and companies like ours with granular portfolios and strong income are ideally suited to both CMBS and retail bonds.
“But we don’t know what will happen to the securitisation market in the longer term; we feel very comfortable with four different sources at the moment.” The properties put up behind the retail bond and the new corporate banking facility are coming out of the CMBS or the existing bank facility in phases.
Alpha Plus issued the other secured retail bond with a property flavour. Alpha is not a property company, though it is managed by Delancey, but its 5.7% bond was secured on prime central London sites.
Investec advised Bruntwood.