REC AWARDS 2017: The lenders of the year
REC AWARDS 2017: The advisors and loan sales players of the year
Financing deal of the year – investment
Winner: Bank of America Merrill Lynch/Goldman Sachs/Blackstone Real Estate Debt Strategies for OfficeFirst
Runner up: Citi/Morgan Stanley/Royal Bank of Canada/Goldman Sachs Real Estate Principal Investment Area/Blackstone Real Estate Debt Strategies for Sponda
Last March, Blackstone closed the circa €3.3 billion purchase of OfficeFirst Immobilien – the former IVG’s German office portfolio – in one of the largest European platform transactions of the year.
The €2.1 billion financing of the deal – which was completed during Q2 2017 – comprised a €1.7 billion senior facility, provided by Bank of America Merrill Lynch and Goldman Sachs on a 50/50 basis – plus one of the year’s largest European mezzanine loans.
Goldman Sachs provided half of the €500 million junior loan through the Real Estate Principal Investment Area of its merchant bank. The property debt fund business of the deal’s sponsor – Blackstone Real Estate Debt Strategies – came in to take the other half of the mezzanine piece.
“Who would have thought a German deal with the market’s largest borrower would end up being done by investment banks?” comments Jan Janssen from Goldman Sachs’ investment bank.
The reason, Janssen suggests, is that the speed of execution required, plus the complex nature of the transaction, put the financing into investment banking territory. “There was a lot of structural complexity in that loan which would have been difficult to underwrite in a larger club deal on day one,” says Janssen.
One challenge involved taking into consideration that a key asset from the portfolio – The Squaire office building at Frankfurt airport – was to remain within an existing CMBS financing structure. Despite the complexity and speed required, Janssen says, the lenders priced a deal which was competitive with the commercial banking market.
“The terms we could offer were attractive,” he says. “The majority of deals we underwrote last year were priced inside 200 basis points – we have the ability to go very tight.”
Syndication of the loan is understood to have brought banks including Royal Bank of Canada and Helaba into the deal.
Financing deal of the year – development
Winner: Cain International, Qatar Investment Authority for One & Five Bank Street, London
Runner up: Blackstone Real Estate Debt Strategies for St Giles Circus, London
Cain International, which was founded as Cain Hoy in 2014, invests in real estate through both equity and debt. In one of its stand-out deals of 2017 – indeed, one of the largest development financings in the UK market during the year – it arranged a £450 million (€508 million) construction loan for a 27-storey office tower in London’s Canary Wharf.
The firm teamed up with Qatar Investment Authority to provide Canary Wharf Group with financing for One & Five Bank Street, which is 40 percent let to the French banking group Société Générale.
Cain International provided 75 percent of the loan, with the remainder put up by QIA, the owner – alongside Brookfield Property Partners – of Canary Wharf Group as of April 2015.
“As an ex-banker of 25 years, you get to know and build relationships with people in the industry,” comments John Cole, managing principal of Cain International, “and the opportunity to look at this mandate came about purely from a conversation.”
In previous cycles, senior development debt for a prime London office building would have been almost certainly provided by a bank. “There is a gap where the usual sources of development funding find it challenging to lend in that space due to capital constraints. We have the ability to offer a one-stop solution.”
Backing a large London office scheme as Brexit unfolds makes sense, argues Cole: “Yes, there is speculative space, but we support the sponsors’ business plan and have taken a balanced view on the risk profile. Real estate is about more than examining spreadsheets; schemes are driven by people and the properties themselves and we have faith in the sponsors’ ability. London is a global city in which people want to live and work.”
Borrower finance team of the year – fund manager
Winner: Blackstone
Runner up: TH Real Estate
Blackstone – the largest borrower active in Europe – raised a record amount of debt in 2017 to support its investment drive. During the year, €18 billion was raised across 40 deals, up sharply from €5.5 billion in 2016 and €13 billion in 2015.
Major platform and portfolio purchases fuelled the need for large financing deals, which are arranged for the firm by Will Skinner and Gadi Jay in the real estate team. Financings included more than €2 billion for the acquisition of OfficeFirst, the former IVG’s German offices platform and €2.6 billion of debt to support the acquisition of the Finnish Sponda platform.
“Sponda was an interesting deal,” recalls Jay. “Raising such a debt quantum in Finland took a lot of thought. We agreed to three separate loans, two backing core pools of assets and a third for a pool of higher-yielding properties.”
Across 2017’s deals, Blackstone sought loan agreements which provided the freedom to execute opportunistic and value-add strategies across its investment.
Skinner explains: “We continued to work with debt capital partners to structure deals that align the capital stack. Our typical deal includes a cash trap based on performance but no default covenants. This structure protects the lender while also ensuring that deals have sufficient liquidity to weather economic shocks.” Pricing across markets tightened during 2017, Skinner and Jay note. This was, in part, influenced by the rare CMBS deal which Bank of America Merrill Lynch issued in November, sponsored by Blackstone to fund a portfolio of UK ‘last mile’ logistics assets. The AAA notes priced at 85 basis points, bringing price discovery into a market that had been moribund.
“It was an important transaction,” says Skinner, “it showed that there is investor appetite for CMBS in Europe as a viable alternative source of capital.”
The firm will continue to target large-ticket investments in 2018, bringing scope for major financing deals, Jay says. “We will also consider our existing facilities with a view to refinancing. It can be efficient to aggregate loans into single facilities.”
Borrower finance team of the year – REIT
Winner: Hammerson
Runner up: Unibail-Rodamco
UK retail REIT Hammerson ended 2017 with the announcement that it had agreed a £3.4 billion (€3.8 billion) all-share offer for rival shopping centre owner Intu Properties in a deal that will create a £21 billion pan-European shopping giant.
During the year, Hammerson’s finance team, led by chief financial officer Timon Drakesmith, worked to get the firm’s debt facilities in order. In April, Hammerson agreed a £350 million revolving credit facility with a syndicate of 14 international banks – including several Asian lenders – designed to reduce its cost of debt.
The deal, priced at 90 basis points, replaced a £175 million loan, which carried pricing of 150bps. The run-down of lenders in the deal included Japanese bank MUFG, First Commercial Bank, ICBC, Agricultural Bank of China and Bank of Taiwan.
“This new credit facility is the latest milestone in our journey to reduce Hammerson’s cost of debt by refinancing in an attractive funding environment,” Drakesmith said at the time.
The deal followed a series of 2016 financing deals, including a £400 million US private placement, a €500 million bond issue and a £420 million revolving credit facility.
Another of 2017’s notable debt deals was the €625 million refinancing of the Dundrum Town Centre mall in Dublin, alongside joint owner Allianz Real Estate. The deal locked in a sub-2 percent margin for seven years, with the loan provided by a club of banks led by BNP Paribas and DekaBank.
The refinancing came almost two years after Hammerson and Allianz made moves towards ownership of Dundrum by acquiring the ‘Project Jewel’ loan book from Ireland’s National Asset Management Agency, which contained legacy debt secured by the property.
If you do not receive this within five minutes, please try to sign in again. If the problem persists, please email: