An option for Deutsche Bank’s potential securitisation of Chiswick Park could be to parcel it up as part of a US CMBS deal.
Deutsche Bank has agreed to provide a £300m loan for Blackstone’s purchase of the West London business park. The bank is exploring options to split up and sell on the debt, although it is not thought to be determined to execute a securitisation right away.
There is more liquidity in the US, where the CMBS market re-opened last year, while the UK market has yet to re-start. If structured this way, it is thought that the vehicle would require a sterling bond class or at least a cross-currency swap.
“From a risk perspective it is doable,” said Andrew Currie, a managing director in Fitch Ratings’ structured finance group specialising in CMBS. “If investors in the US were interested in taking exposure to assets in the UK, then it could be done.
“You might want to do it this way if you thought you’d get better execution, for example if you put that loan as part of a portfolio of other loans and you attracted better pricing, even taking into account the potentially significant cost of putting in a cross-currency swap.”
CMBS deals were not structured this way in the past; the only cross-currency deals of this nature were synthetic. But Currie noted: “That doesn’t mean it couldn’t happen.” Typically, tenants pay rent in one currency and in the same currency the landlord pays interest on a loan. That same interest is used to pay interest on the notes.