Starwood arranges refi of Varde’s Magni Finance agency CMBS

Starwood Capital has arranged a £158.1 million refinancing of the agency CMBS deal which Varde Partners issued last December to refinance a UK property portfolio.

Starwood is understood to have provided Varde with a whole loan of just below 70 percent loan-to-value to refinance the Magni Finance Designated Activity Company securitisation. Starwood brought a US investment bank in to the deal to take the £123 million senior portion and has retained the £35.1 million mezzanine strip within its listed vehicle Starwood European Real Estate Finance Limited (SEREFL).

Varde issued the £185 million Magni Finance agency deal on 31 December 2015. The deal securitised a loan provided by Credit Suisse to refinance Varde’s January 2015 purchase of the so-called Titan portfolio of UK properties from Aviva Commercial Finance.

The securitised loan also refinanced Varde’s acquisition of the Peacock and Toucan portfolios of 14 high street shops from Royal London Asset Management, which it bought last November.

Credit Suisse had planned to securitise the debt last year, although the European CMBS market entered a period of stagnation from late summer onwards. By year end, the agency CMBS solution was decided upon whereby Varde’s funds would acquire the notes which would be subject to a repurchase transaction by Credit Suisse.

The new floating rate whole loan provided by Starwood is understood to have been priced at an all-in cost of less than 400 basis points over three-month LIBOR. The loan has an initial term of three years, which can be extended.

Debt funds rather than banks are believed to have competed for the whole loan financing mandate. Prospective lenders had the option to either provide new finance or take on the debt in note form, although lender appetite was for a new loan.

Varde and the portfolio’s asset manager, APAM, have made asset disposals since the Magni deal was issued last December. Magni was secured by 172 properties valued at £263.7 million in September 2015. The Starwood refinancing is secured by 141 retail, office and industrial assets containing a total of 393 tenants.

Following asset sales, the notes had amortised to the amount refinanced. A total of £18.5 million of junior debt sat beneath the CMBS, which was held by Varde for risk retention purposes. It is understood that Varde still holds that debt.