Canada Life and Aviva Investors have extended £209m in two seperate long-term senior debt facilities to Picton Property Income, the 41-strong former ING Real Estate UK commercial property fund.
Picton has closed a £114m 15-year Canada Life a senior loan, in which £34m amortises in year 10, and a 20-year £95m Aviva Investors senior loan, with almost one-third repaying over the life of the loan.
The debt refinancing has been secured at a blended margin of approximately 2.1% which, based on benchmark gilts, currently reflects a fixed cost of approximately 4.4%.
Both facilities are underwritten against a 65% LTV. Picton will incur £5.1m in swap breakage costs next month, as well as arrangement and restructuring costs, to enable the early repayment and refinancing.
Picton’s £188.5m refinancing replaces a circa £170m JPMorgan-issued CMBS loan and an outstaning £17m bilateral senior debt facility with Royal Bank of Scotland facility, both due to mature next January.
Both facilities are expected to complete in July, with Picton undertaking necessary minor fun restructuring to facilitate two bilateral pools of assets on a reflective non-recourse basis. Picton has an additional £8m of smaller non-core unsecured assets whioch are held for disposal.
Picton issued zero dividend preference shares (ZDPs) in December 2010 to buy out shareholders in Rugby Estates Investment Trust, which were acquired two years ago. The ZDPs were valued at £29.5m at the end of December, maturing this October. Picton is now looking to repay some ZDF shareholders and extend the term for others.
Nick Thompson, chairman of Picton, said: “We are delighted to have secured long term financing from such established lenders in the market. This successful refinancing, together with the internalisation of the management, are two strategic aims we set some 18 months ago and the delivery of these now provides clear financial benefits.”
Michael Morris, chief executive of Picton Capital, said: “These new debt facilities provide the company with a much more balanced debt exposure and staggered maturity profile. With the increased financial stability and flexibility that this transaction provides, we are now able to focus on the active management of the underlying portfolio.”
Picton Property Income is an income-focused UK commercial property fund formerly-named ING UK Real Estate Income Trust.
Picton’s 63-strong mixed sector UK investment property portfolio benefits from a diversified tenant cashflow and was valued at £422.1m at the end of last year.
The securitised loan, in the December 2005 JP Morgan-issued £225m ING (UK) Listed Real Estate Issuer, covers 41 of the properties, last valued at the end of the last September at valued at circa £345m, based on the 65% LTV.
The CMBS originally secured 55 assets, but after some sales and purchases, the portfolio count in the securitised loan has fallen to 41 properties. It is unlikely that the new facility or facilities will secure Picton’s entire portfolio.
The portfolio provides an annual rent roll of around £28m, across a 246 tenant base diversified by sector and geography, including – if all available breaks were exercised – 75 leases worth £5.8m per annum, or 20.7% of the securitised portfolio, due to expire in the coming two years.