Aviva highlights self-storage sector with £100m, 4.9% deal to Big Yellow

Aviva Commercial Finance’s £100m loan to Big Yellow is the first by an insurer to a self storage business. The 15-year loan is at 4.9% fixed, about 200 basis points above the swap rate, and just above the 4.8% cost of the debt it refinances. It is secured on 15 freehold stores valued at £242m, equating to 41% loan to value.

The new loan will repay £100m of Big Yellow’s core £325m bank debt facility, of which £190m is drawn. The facility expires in September 2013 and JC Rathbone Associates is advising the company on its refinancing strategy.

Proportionally more is being repaid of HSH Nordbank’s commitment – the German bank is withdrawing from UK lending – cutting its participation from £150m to £65m. The company also cancelled £100m of out-of-the-money swaps (3.93% to September 2015) at a cost of £9.2m.

Big Yellow won plaudits from analysts for reducing refinancing risk, diversifying its lending base and securing the debt soon after the government’s Budget announcement about adding VAT for the first time to self-storage. The tax comes into effect in October.

Aviva’s loan amortises to £60m over the term in fixed annual amounts, in keeping with Big Yellow’s medium-term debt reduction plan. In March the UK insurance group completed a £145m, 20- year loan for the Kirsh Group for the acquisition of the City of London landmark Tower 42.