Deutsche Bank has won the mandate to raise £550m in senior and mezzanine debt to refinance the maturing debt on GIC Real Estate and LBREP’s 61-strong Holiday Inn hotel portfolio, in a transaction dubbed Project Thirteen, CoStar News can reveal.
The joint venture partners, along with minority equity stakeholder Realstar, which is also operating manager on the hotel portfolio, are looking to refinance the maturing debt ahead of next May’s debt maturity in the existing securitised Tahiti Finance.
CoStar News understands Deutsche Bank was appointed to the financing mandate after early interest from a number of investment banks, including Citigroup, which ran the November 2005-issued agency CMBS, as well as Goldman Sachs and Bank of America Merrill Lynch.
The outstanding £560.75m debt matures on 24 May 2013, comprising £453.79m in two securitised tranches as well as £106.57m in a mezzanine loan, according to the August quarterly surveillance report by Capita Asset Services.
Christie and Co valued the 61-strong UK hotel portfolio – spread throughout central London, suburban South East markets, UK airports and provincial towns – at £870.215m on 28 February 2012, which puts the current whole loan LTV at 64.4%, and the securitised senior loan LTV at 52.1% LTV.
The Project Thirteen refinancing process is at an early stage with the new debt stack subject to potential fresh equity and the appetite among senior and mezzanine lenders for hotel-backed debt, for which the investment decision also incorporates lenders’ views on the operating performance of the assets.
CoStar News understands that the current permutation of the debt stack comprises around £400m in senior debt and a £150m mezzanine loan, which would put the refinanced hotel portfolio at a whole loan at 63.2% LTV, and the senior LTV at 45.96%.
A successful refinancing at or around next May’s maturity would see bondholders and the junior lenders fully repaid.
Deutsche Bank declined to comment.
GIC, LBREP and Realstar bought the original 73-strong UK-wide hotels from InterContinental Hotels Group (IHG) in 2005 for £1bn. After the disposal of 12 unwanted hotels, Citigroup then securitised the deal in the December 2005-issued £650m Tahiti Finance CMBS, comprised of £535m in senior debt and the balance in mezzanine.
The joint venture consortium passed the LTV requirements necessary to receive a second and final one-year extension under the terms of the June 2010 restructuring agreement.
Last summer, Deutsche Bank successfully syndicated the majority of its £305m underwritten senior loan to finance Blackstone’s circa £600m acquisition of the eight-strong Mint hotel portfolio from Lloyds Banking Group, consensually sold by the Orr family.
Duet Real Estate Finance provided a £75m mezzanine loan.
Deutsche Bank is thought to have priced the loan at around 500 bps and syndicated the vast majority to GE Real Estate, M&G Investments and GIC Real Estate – a joint venture equity holder in Project Thirteen.
The average hotel occupancy across the portfolio at the end of the second quarter was 74.7%, while the portfolio’s total revenue for the first six months was £155,796.