CeGeREAL begins €400m CMBS restructuring talks

CeGeREAL, the French REIT that specialises in prime Paris offices, has appointed Lazard Frères, the French subsidiary of Lazards, to advise on the restructuring of its near €400m debt ahead of maturity next March.

The bulk of the outstanding debt is in the single-loan two-tranche Opera France One FCC CMBS, issued by Eurohypo in August 2006, which has an outstanding balance of €376.4m at the last interest payment date, priced at 4.15%.

CeGeREAL also has a third tranche, a €22.5m junior loan, priced at 60 basis points above three-month Euribor. The securitised and junior loans run pari passu, and all are secured against three prime central Paris offices – the 50,000 m² Europlaza offices in La Défense, let to Capgemini and General Electric; the 45,000 m² Arcs de Seine in Boulogne, let to Boursorma; and the 30,000 m² Rives de Bercy in Charenton, let to Credit Foncier.

However, Bouygues Telecom terminated its lease in the Arcs de Seine building (pictured below) on January 1, 2011, leaving 38,819 sq m or 88% of the building vacant. The three-asset portfolio subsequently fell in value over the 12 months to the end of 2011, by just €7m to €854m, contrasting to the 3.3% capital appreciation in the Paris office central business district market over the period, as measured by IPD.

Despite this, the CMBS loan is still comfortably performing, with the LTV at 44.06% and the interest cover ratio covenant (ICR), at 242% against a 180% threshold, according to Eurohypo’s mid-February quarterly report to CMBS bond investors.

At the end of March CeGeREAL confirmed it had signed three tenants across 17,200 m² of vacant space, which leaves 22,400 m² vacant, representing 49.7%.

The tenants comprised a leading media and telecoms company, which took nine-year lease over 10,500 m2 from October 1, 2012; Hewlett Packard, which signed on 2,900 m2 of office space in across a nine-year lease with a break after six from August 1 2012; and Huawei Technologies, which took up 1,250 m2 on March 1. The positive news prompted a circa €1.70 share price spike to close on March 30 at just under €17 per share.

Across the entire loan, the weighted average lease expiry is 5.7 years.

However, CeGeREAL admits to a “lack of short-term visibility as to the demand of major office users”.

The appointment of Lazards by CeGeREAL, which is 60% owned by CommerzReal’s €14bn Hausinvest 1, Germany’s largest open-ended fund, is seen as an indication that the French REIT is looking to extend the securitised loan, despite the low LTV.

Rothschild has been asked by some noteholders to form an ad-hoc group to represent their interests in any CMBS restructuring.

The loan matures on March 2, 2013, with the final legal maturity of the bonds in February 2016.

To facilitate a more “bank friendly” corporate structure, CeGeREAL proposed to transfer its entire activity to a wholly-owned subsidiary, Prothin, comprising the three properties, the associated CMBS debt and the management infrastructure.

CeGeREAL’s shareholders, which also include Covea and overseas private investors, unanimously approved this on December 22, 2011.

jwallace@costar.co.uk

About CoStar News

Finance Editor, CoStar News
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