BAML leads race for Hines’ €430m Milan refinancing

Citigroup is also second-round bidder to refinance Porta Nuova scheme

Bank of America Merrill Lynch is said to be in pole position to win the €430m refinancing mandate for part of the Porta Nuova development in Milan – home to the 32-storey UniCredit Tower.

Citigroup is also in the second round for the mega-ticket deal, which has attracted intense interest from a raft of European banks. Pricing is thought to be extremely competitive, in the region of 205 basis points.

This is lower than the 250bps  the market had expected. It reflects the strength of the asset and borrower, in a market where lenders are keen to deploy balance-sheet capital, because it offers better returns than can be secured at a similar level of risk-taking in London or Paris.

Banks were last week invited to make “one last offer” after first round pricing came in at around 240bps, said a source that had not made the final round. Bidders in the first round included Société Générale, BNP Paribas, Natixis, ING, Deka, Aareal, BAML, Citi, Goldman Sachs and Deutsche Bank.

“A powerhouse [such as BAML or Citi] could either distribute the debt now or sit  on it for six to nine months, hoping for CMBS spreads to tighten even more, and make decent money that way,” the source speculated.

Qatari-backed developer Hines Italia is seeking non-recourse, senior debt at a 50% loan-to-value ratio over five or seven years, with no amortisation or prepayment fees, as part of a financing that allows for an allocation of €10m for VAT, as well as €40m for capital expenditure.

Hines has been developing the 3.5m sq ft Porta Nuova Garibaldi business district and is refinancing a portfolio of seven grade-A buildings, plus 803 parking spaces, valued at between €800m and €1bn. UniCredit is the prime tenant in the majority-let complex, on an 18-year lease.

The refinancing process, code named ‘Desiderata’, is being handled on the borrower’s behalf by Banca IMI, Mediobanca and John Carrafiell’s GreenOak. It should be finalised by early May. BAML and one other investment bank is also in the final round for the €450m-500m refinancing mandate for London & Regional’s Accor hotels portfolio across Germany and the Netherlands.

There had been an additional mezzanine requirement of up to €150m, although it may now shape up as a whole loan. Deutsche Bank and Goldman Sachs have also been linked to the process, being run by Eastdil Secured and known as ‘Project New Day’, which should also be settled in May.