Westfield’s £750m CMBS has been priced at 87-90 basis points by investment banks Deutsche Bank and Crédit Agricole.
As revealed by Real Estate Capital (28.7.2014) it is to be the lowest priced CMBS issued since the downturn. Westfield Stratford City Finance, a single-tranche deal, has been AAA rated by both DBRS and Fitch Ratings. The new facility will represent a 38.4% loan-to-value on the £1.95bn Stratford City Shopping Centre in east London.
Previously, the lowest-priced European CMBS post-crisis was the AAA tranche of the €1.07bn Taurus-2013, at 105bps. It was issued in May last year by Bank of America Merrill Lynch, held against a €2bn multi-family German residential portfolio owned by Gagfah.
“This is definitely the cheapest debt we have seen issued in the UK since the downturn,” said Marco Rampin, head of real estate securitisation at BNP Paribas. “The only comparable is for German multi-family residential deals that were issued at a greater price but are now trading at around 80-90bps, and they have the advantage of the granularity of their exposures.
“The pricing has been driven down by the large amount of liquidity available in the market. I don’t think it will reach the levels that we saw pre-recession, but this deal has proved how low super senior triple, AAA can be priced in today’s market. It has been really driven by the excessive amounts of liquidity available, on one hand from banks that have come out of difficult situations and particularly from capital market investors that see these as liquid investments, even though they are generally perceived to be more illiquid than corporate bonds.”
Westfield’s CMBS will be used to refinance an existing £550m loan, allowing Westfield and its JV partners to take around £200m out of the asset, although around £70m could be used towards an extension and investment into the centre.
The existing loan was taken out in 2011 and was thought to have been priced somewhere between 205 and 250 basis points over Libor – a keen margin at the time reflecting the quality of the asset and the sponsors. It was arranged by Crédit Agricole, HSBC and Eurohypo, who co-ordinated a syndication with Aareal Bank and AXA Real Estate, Bayern LB, MetLife, Credit Foncier, Deutsche Pfandbriefbank and Santander.
The current securitisation is an agency CMBS meaning a Westfield vehicle rather than the two banks is the issuer; Westfield is also acting on behalf of the centre’s joint venture owners, Canada Pension Plan Investment Board and Dutch pension fund manager APG. The 1.9m sq ft centre currently has a 98.9% occupancy rate and a 6.6 years average unexpired lease term to first break.