Quintain has closed an £800 million corporate development facility with three North American lenders, securing finance for the next five years for the development of its masterplan at Wembley Park in north London.
The facility is split into a £560 million, five-year revolving senior loan which has been provided by Wells Fargo and US insurer AIG, and £240 million of mezzanine from Canadian Pension Plan Investment Board.
The hybrid loan is secured at the corporate level by Quintain shares and by a mortgage against existing assets. The finance will be used to repay a £425 million Wells Fargo bridge loan, and will be drawn down for the next phases of the 85-acre Wembley development which includes 4,850 homes, more than a third of which will be affordable, with many available to rent through Quintain’s private rented sector business Tipi, plus additional commercial space.
Quintain was acquired by Lone Star Real Estate Fund IV in September 2015, financed by the Wells Fargo bridge, and its strategy now is to focus on Wembley Park and sell off the rest of the company’s portfolio.
Simon Carter, finance director of Quintain, said: “We understand that this may be the biggest UK development and PRS financing this year.
He added: “This is to finance the whole group, and importantly for us, Wembley, in one go, giving us the flexibility for development. The senior loan is fully revolving and that allows us to recycle capital efficiently as we sell assets from our non-core portfolio.”
Catherine Webster, Quintain’s strategic finance and investment director, said the mezzanine tranche had also been structured so that it can be drawn down, incrementally over three years.
Carter said he was unable to comment on the pricing of the new debt: “But we believe it is a competitive package given it is both funding development and the corporate, and we are raising all the money up front.”
As buildings are completed over the next few years, they are likely to be refinanced. “Once we have completed each project we can refinance with longer-term asset-specific debt,” Webster said.
Quintain’s revised plans for Wembley Park, which won consent from Brent Council in May, involve investing between £800 million and £1 billion over the next five years to transform it from a world class events destination into a London neighbourhood with new homes, shops, work space and public spaces as well as the stadium.
The company’s strategy is to create additional value through building up a large-scale PRS portfolio.
The site, around the famous Wembley stadium, already includes the Arena performance complex, a Hilton Hotel and the London Designer Outlet shopping village as well as 1000 residential units, with a further 600 under construction. Some 141 PRS apartments under the Tipi brand have been let this year at prices of over £20,000 per annum for two-beds.
It is notable that all three lenders are North American and that they understand the multifamily residential rental market. Wells is a long-time relationship lender of Lone Star, and AIG has also participated in loan-on-loan financings which the private equity firm has raised on European non-performing loan portfolio acquisitions in the last four years.
Carter worked with CCPIB on a financing of the Hercules UK retail warehouse fund when he was at British Land.
Max Sinclair, head of UK commercial real estate, Wells Fargo said: “We were delighted to support our long-standing client Lone Star in their acquisition of Quintain last year. Arranging this new, longer term facility alongside AIG marks the next phase in our continued support and assists Quintain in executing their vision and strategy for Wembley. Supporting the creation of a living community with PRS at its heart plays to the strengths of Wells Fargo’s multi-family experience in the U.S.”
Geoff Souter, Managing Director, Head of Private Real Estate Debt, CPPIB said: “We are pleased to support Quintain and Lone Star in the work they are doing to redevelop the area surrounding Wembley Stadium into one of London’s most exciting destinations to live, shop and work.
Wells Fargo is agent and AIG and Wells Fargo were co-arrangers for the senior loan.