Grosvenor has raised £90m of long-dated debt in a UK bond private placement, which is the second issue of its kind by the Duke of Westminster’s property company in the last 18 months as the trend towards unsecured funding continues.
The fully sterling-denominated two-tranche unsecured financing comprised £60m in 10-year notes, maturing in October 2022, priced at 190 basis points over the UK Gilt Index, delivering a coupon 3.38%; and £30m of 25-year notes, maturing in October 2037, priced at 220bps over the UK Gilt Index, with a 4.97% coupon.
Grosvenor’s issue was priced yesterday at a blended 3.91% yield, with an expected closing in October, exemplifiying the attractive long-term margins which can still be secured by blue-chip property investors for unsecured funding.
RBS acted as sole book-runner on the deal.
Grosvenor, which owns swathes of high London office and residential properties in Belgravia, Mayfair and Pimlico, said the long-dated debt suited its investment profile while funding through the bond markets deepens the diversification of its funding sources from both the banking market and the reliance on secured debt.
Roger Blundell, finance director at Grosvenor Britain & Ireland, said: “The funds will be principally used to continue our programme of investment and development in the London estate. We are delighted that investors have shown appetite for this issue; attracted by our conservative financing, low gearing and the strength of our covenant.”
Pricing for the UK private placement was taken up by UK and US pension funds and insurance companies.
Grosvenor secured £125m through a similar private placement in the UK bond markets in February 2011, consisting of £95m of 20-year notes, with a coupon of 5.57%, and £30m of 30-year notes, with a coupon of 6.05%. The blended yield was 5.69%.
RBS acted as sole book-runner on the deal, while HSBC was adviser.
Grosvenor said at the time that the £125m private placement was heavily oversubscribed, and offered historically competitive rates, which, perhaps, led to the returning to bond markets over banks, or directly to insurance lenders which similarly offer long-dated debt, albeit on a secured basis.
Blundell added: “We monitor all funding sources available to us and look to access the best market for our needs at the right time. With interest rates remaining very competitive, we felt this was a good moment to follow-on from our successful issue last year with another private placement.”
Since 2010, UK property companies have tapped the private placement markets for more than $2bn, according to a report by the Financial Times last night.
British Land raised $480m in the US private placement market last September, in what remains the largest private placement by a UK REIT.
Twelve investors took up the three times oversubscribed British Land bond, with maturities ranging form seven to 15 years, with coupon spreads from 3.9% to 5.0% in line with duration.
Great Portland Estates has twice tapped US bond markets: £128m in seven and 10-year notes priced three months ago, with coupons at 4.2% and 4.8%, respectively; and £159.7m over seven and 10-year unsecured notes in March 2011, at a 5.32% weighted average interest rate.