Westfield considers CMBS for Stratford mall refinancing

Westfield night shotDeutsche Bank and Crédit Agricole CIB are working on a possible securitisation of Westfield Stratford, the East London regional shopping mall.

The potential CMBS would refinance a £550m secured loan which was taken out in 2011 by Australian shopping centre giant Westfield and ownership partners Canada Pension Plan Investment Board and Dutch pension fund manager APG.

A securitisation of the high-profile, prime asset would be a filip to the European CMBS market which has not seen any new deals issued for six months, after some €8bn of transactions during 2013.

Deutsche Bank has been a leading, if not the leading bank in re-opening the CMBS market since the financial crisis shut it down almost seven years ago. The bank has underwritten or advised on five CMBS since 2011 when it securitised a loan against Chiswick Park, west London.

Crédit Agricole  is extremely close to Westfield as one of the international investor-developer’s leading relationship banks.

The 1.9m sq ft Westfield Stratford shopping centre was valued at £1.74bn in December 2010 when CPPIB and APG, advised by TIAA Henderson Real Estate, acquired their 50% stake. The centre will have risen in value, but a source said that the refinancing is not about increasing the low quantum of leverage held against the asset. The objective is more likely to be to lower the cost of the debt.

The 2011 loan, placed when debt was much scarcer, was arranged by Crédit Agricole, HSBC and Eurohypo, who held one-third and syndicated the remainder to Aareal Bank, AXA REIM, Bayern LB, MetLife, Credit Foncier, Deutsche Pfandbriefbank and Santander. The margin on the debt was not confirmed but is likely to have been between 225 and 250 basis points at that time, even for such a high quality asset and sponsor.

One source with knowledge of the discussions said the size of the refinancing “is still a moving target, but you can assume it will be at least £550m”.

It is thought that the discussions are about an agency deal, rather than a ‘true sale’, in which the borrower, not the banks, takes the risk on the pricing of the issue and selling the bonds in the capital markets. Westfield’s finance director Philip Slavin is taking the lead in the discussions on behalf of the partnership. The company declined to comment.

After the disappointing start to the year, active participants in CMBS at rating agencies, banks and their advisers said there are now at least six potential new transactions in the works.

Deutsche Bank is said to be close to launching the first multi-loan CMBS since 2007, a circa €300m conduit CMBS secured against Italian property. It has a third possible deal in the pipeline, backed by Dutch assets.

Goldman Sachs has two possible deals. It is working on the securitisation of Italian properties owned by Blackstone, including the Franciacorta Outlet Village Rodenegg Saiano in southern Italy which the private equity group bought last September from Aberdeen Asset Management’s former Degi unit. Blackstone financed the €126m purchase with debt from Goldman Sachs.

Goldman was the bank behind the €363m Gallerie 2013 CMBS, also secured on Italian retail, which was the last deal to be structured and sold, in November last year.

The US bank is said to have hired Allen & Overy to advise on a Dutch and German hotel CMBS. The assets are believed to be the London & Regional-led consortium’s €650-700m Accor hotels portfolio (see Jan/Feb issue, front page). Eastdil Secured has been running a process to refinance the portfolio, codenamed Project New Day. The portfolio could end up being sold, sources said, with Goldman a possible source of finance.

Bank of America Merrill Lynch would like to securitise the five-year £260m loan it recently provided for Apollo Global Management’s purchase of Project Moon from Aviva Commercial Finance, at a 65% LTV. The portfolio of 135 secondary properties is spread across the UK with a bias towards retail.