Term Sheet: Will NatWest’s retail loan sale serve as a benchmark?, LendInvest’s £150m funding boost, Spain’s biggest data centres debt deal to date

The sale of NatWest’s distressed shopping centre loan portfolio Project Mercatus offers a reference point for investors evaluating UK distressed shopping malls; LendInvest expands its capital sources through a £150 million (€176 million) partnership with banks Barclays and HSBC; A syndicated loan to fund data centres in Spain has been upgraded to €320 million; and more in today’s briefing, exclusively for our valued subscribers.

They said it

“A ‘green’ or ‘sustainable’ bond is likely to become the rule rather than the exception, as it was the case in previous years.”

Toby Cohen, head of real estate debt advisory at Rothschild & Co, told Real Estate Capital that, as institutional investors increasingly seek sustainability-linked notes, green bond issuance in the real estate sector will become more common.

What’s happening?

NatWest’s retail NPL sale offers a benchmark
UK private equity firm Attestor Capital and asset manager Ellandi emerged last week as the front-runner for NatWest’s £536 million (€628 million) portfolio of non-performing loans backed by UK shopping centres. The sale is important for two main reasons. First, it is the first NPL loan portfolio placed on the market by a UK bank this cycle, and its pricing could offer a benchmark for investors working on distressed malls across the country.

Although details are yet to be emerged, React News reported last week that the face value of the book fell from an original gross book value of £536 million to around £375 million due to sales of underlying assets during the process. It is understood the winning bid would be at a discount of less than 60 percent of book value, which would mean Attestor and Ellandi may have agreed to pay around £150 million.

A £150m funding boost for LendInvest
London-based specialist property debt platform LendInvest announced earlier this week it had secured a £150 million credit line from UK banks Barclays and HSBC to fund UK home loans originated by LendInvest. While HSBC became LendInvest’s funding partner in April 2019, it is the first time Barclays has backed the company’s UK buy-to-let residential mortgage business. The deal demonstrates growing interest from global financial institutions to gain exposure to UK buy-to-let residential through short-term financing. Major capital providers, which previously backed LendInvest include JPMorgan, Citibank, National Australia Bank and HSBC among others, helping its funds under management to grow from £375 million in 2017 to about £2.7 billion.

ICG targets equity for its expansion
Intermediate Capital Group is looking to add an equity component to its real estate platform, which has for years focused on debt. For this expansion, the London-based asset manager has tapped Krysto Nikolic (his LinkedIn here) to be its new head of real estate, REC can confirm. The industry veteran joins ICG from Starwood Capital, where he has worked as a managing director and head of European real estate since 2018. ICG entered the real estate sector in 2011 by acquiring a majority stake in debt specialist Longbow – the group’s founders, Kevin Cooper and Mark Wheeler, still lead the real estate division for the time being. Nikolic brings with him experience from his time at TPGGoldman Sachs and Apollo Global Management.

Are RTO office delays worrying landlords?
The fast-spreading Delta variant of the coronavirus is not a major concern to office occupiers, despite the fact an uptick in new infections may lead tenants to postpone their return-to-office dates, according to a report from Fitch Ratings. RTO delays are not triggering lease terminations or a significant reduction in office space needs, and are therefore unlikely to affect long-term leasing plans, the New York-based credit rating agency said. Rent collection has also generally withstood covid-related challenges, as office tenants have maintained their operations and long-term leases will typically be expiring at an annual rate of less than 10 percent over the next few years. However, Fitch expects longer-term flexible-working and demographic trends to weaken office fundamentals, including occupancy rates and net effective rents.

Data snapshot

Turning green
According to Scope’s data, €22 billion of the €60 billion issued in 2021 to August was accounted for by green, social or sustainability-linked bonds. That 36 percent share was up significantly from 19 percent across 2020, when €12 billion of the €60 billion issued was for this type of bonds.

Loan in focus

Spain’s biggest data centre financing just got bigger
Nabiax, the Spain and Latin America-focused data center specialist, has secured further finance from the consortium of 12 domestic and international bank lenders that capitalised its purchase of 11 centres from Spanish telecoms group Telefónica in 2019. That deal, which cost the Asterion Industrial Partners-owned business €550 million, required €285 million of debt. But as the portfolio has grown to 15 assets, further financing has been needed. With the latest loan agreement with the consortium, which includes Spanish banks BBVA and Santander, the debt stands at €320 million. The financing was and remains the biggest arranged for data centers in Spain, executives familiar with the transaction say. It also carries sustainability credentials, too. Nabiax will receive a margin reduction of up to 5 basis points should it hit sustainability targets, which include two environmental goals and a social key performance indicator related to gender equality.

Today’s Term Sheet was prepared by Eugenia Jiménez with Evelyn Lee and Kyle Campbell contributing.