Development bridging loan follows £124m UNITE facility late last year
Cornerstone is providing a £36m, short-term bridging loan for a residential development in central London as part of its drive to seek higher-yielding senior loan investments. Chris Bates, Cornerstone’s head of real estate finance in Europe, said the deal came about through an existing relationship and “risk-adjusted returns made it look like a sensible transaction”.
The 18-month facility will allow the developer to put a higher density scheme on an existing plot. Cornerstone’s lending activity in the UK increased during the final quarter of last year, with £310m of deals, taking its total loan book to £400m. The other most recent transaction – closed in 24 days over Christmas – is a £124m facility for student housing specialist UNITE.
The 10-year loan at a 50% loan-to-value ratio is secured against four student accommodation blocks in London, Bristol, Sheffield and Coventry. Cornerstone replaced an insurer on the financing. UNITE has now refinanced £1.1bn of debt since October, through a convertible bond issued that month, a bond issued by its UNITE Student Accommodation Fund the month after, and a £226m refinancing of its UCC joint venture in January.
Two-thirds of the company’s total debt now comes from non-bank sources, at a weighted average cost of 4.7%. Cornerstone also provided a fixed-rate, nine- and 11-year, mixed-maturity, £150m loan for UK & European, secured against six prime assets in central London and the South East.
The MassMutual-owned investment manager has more than £1bn of US separate account money to put into long-term, fixed-rate senior deals at the core end of the spectrum, but can be flexible in following particular opportunities. “The advantage we have, unlike a fund, is that we can be market-responsive,” said Bates.
It aims to replicate Cornerstone’s US business, which provides whole loans plus higher-yielding and junior debt products, and manages $28bn of debt investments. Cornerstone is looking to lend senior debt for mixed-use portfolios across the regions, as well as “classic, core central London” assets, said Bates.
“It’s very competitive; you have to marry yourself up with a similar long-term investor,” he added. “For property owners with hundreds of millions of debt on their books it makes sense to have a mix of maturities. “We do long-term, fixed lending, but we do offer substitution rights.” Cornerstone hired Kristina Foster this month to help expand into mainland Europe. Like Bates, whom she worked with at RBS, she has direct real estate experience and has invested in senior, mezzanine and whole-loan financings across Europe.