Safetstore’s £73m US private placement issue is a first for self-storage
Great Portland Estates and Safestore have raised £201m via US private placements.
Safestore’s £73m ($115m) issuance is the first in the self-storage sector and part of a bigger £400m refinancing.
“This issue opens up a new source of funding and further extends our debt maturities,” said chief financial officer Richard Hodsden.
Great Portland’s £127m ($200m) issue, its second, launched at $75m but was more than five times oversubscribed.
“We hoped for a good response from current and new investors, but the level of demand was on the upside,” said GPE finance director Nick Sanderson.
Stuart Hitchcock, director at Royal Bank of Scotland’s private placement group, said: “The UK has a bit of a halo at the moment, given the volatility in Europe and the rest of the world.
“It’s a favoured jurisdiction for investors and we’ll see strong issuance in a number of sectors over the next few months, but it’s not going to satisfy demand.
“Existing investors have upped their allocations to private placements, but we are also seeing interest from non-traditional lenders.
Sanderson added: “For medium to long-term, fixed-rate unsecured financing, this was the most attractive market.”
US private placements are priced at a margin over US Treasury bills. GPE’s unsecured seven-year issue was swapped into sterling, giving it £128m at a sterling-weighted average fixed interest rate of 4.59%.
On its first £157.9m issue 14 months ago, the weighted average interest rate was 5.32%. “The pricing on 10-year maturities has been competitive with shorter-term bank financing,” said Hitchcock.
“For some issuers we have seen cheaper pricing for 15 and 20 years than five-year bank money. It depends how the comparables are trading.”
RBS arranged both issues, with HSBC for Safestore’s and with Lloyds on GPE’s. GPE’s investors were US institutions, mainly insurers and over half of them new.
“They are buy-and-hold investors, so will undertake the same style credit analysis banks would and really dig into the credit story,” said Hitchcock.
“US investors understand our business model; they invest in REITs and understand London,” said Sanderson, who took up the finance post at GPE a year ago.