In January, Crossbay, the urban logistics platform launched last May by property manager MARK, secured a €400 million loan from US bank Citi to finance its pan-European assets and fund its expansion. The debt deal followed the closure of €550 million in equity commitments from investors in October.
Why did Crossbay require finance?
Until October, financing had been done on a country-by-country basis. With last-mile assets it can be quite difficult to get single-asset financing, because the lot sizes are relatively small at between €5 million and €12 million, so we closed a lot of transactions purely with equity. We used Citi’s pan-European facility to refinance a Spanish loan, but also to refinance all the assets that we had bought with equity, outside Italy. We might refinance Crossbay’s Italian debt at some point in the future.
Why did you choose Citi?
I had meetings with several banks at the end of 2019 and early 2020. We worked with JLL and selected Citi, in part, because of the flexibility of its terms. There are surprisingly few banks that have the capability to do financing across multiple jurisdictions.
We wanted an uncommitted facility and Citi was prepared to offer that. We do need to run deals past them to get funding approved, but it is a very efficient process and it allows us to secure additional tranches for future acquisitions.
The whole process was very thorough. It still surprises me how much people can get done, despite the fact we cannot have face-to-face meetings due to covid.
How has covid affected you as a borrower?
Covid did not slow down Crossbay’s acquisition process in 2020, but it did slow down the discussions with some of the banks we approached. Some financial institutions had to take a step back, because it was difficult to do major financings without detailed site visits.
“There is going to be an increased disparity between the sectors lenders feel are resilient
and those they do not”
Going into the covid crisis, one of the key things for us, across MARK’s wider business, was making sure we had no major upcoming debt maturities where it would have been difficult to source refinancing. We were lucky that we had maturities out further than 2021, or loans in sectors in which it was still possible to refinance. Logistics is one of the few areas where financial institutions and their investors are very comfortable.
Using JLL as an advisor on the Crossbay deal was helpful because you need a virtual data room, and it is quite complicated if people can only do limited site visits.
Covid may have indirectly affected financing costs though because we were not able to generate the same amount of competitive tension as we were pre-pandemic. I think maybe it made a difference of about 25 basis points on the coupon. The potential of a hard Brexit when we made the deal may also have played a part.
What is your outlook on the financing market?
I think there is going to be an increased disparity between the sectors lenders feel are resilient and those they do not. There is no financing available for shopping centres unless they are the strongest in Europe, for example.
I think there will be appetite for financial institutions to lend against last-mile logistics. The risk in last-mile logistics has been significantly reduced from the lender perspective, so I think competition will increase and margins will come down. The next refinancing moment for us will be sometime in 2022 or 2023 at the more core or core-plus level. By that time, the terms should be significantly better than today.