Fonciere Developpement Logements (FDL), the French residential REIT, has sold €500m in five-year dated unsecured corporate bonds priced at 295 basis points over the mid-term swap rate.
FDL’s issuance pays a 3.875% annual coupon and is rated BBB- stable by Standard & Poor’s. Pricing closed just before midday at fractionally below par, – at 99.716 – which gives a yield at closing of 3.931%.
The final pricing for the bonds, which mature on January 16, 2018, is slightly shallower than yesterday’s guidance of between 300 and 310 bps.
BNP Paribas, Credit Agricole, Credit Mutuel, HSBC, Natixis and Société Générale were joint bookrunners.
Standard & Poor’s BBB- rating is consistent with the rating agency’s wider corporate rating review published two weeks ago, in which FDL was rated ‘BBB-/A-3’.
S&P wrote that FDR has “a ‘strong’ business risk profile underpinned by a large portfolio of mainly office properties, worth about €8.9bn relative to an economic value of €9.5bn.
FDR also holds equity stakes worth about €540m, including a stake worth about €420m in Foncière Développement Logements, the listed residential property company.
“We believe FDR will continue generating strong revenues, supported by the high and resilient occupancy rate it manages, at or above 95% on average over the past four years,” wrote S&P.
FDL’s preference for rated corporate debt in preference to secured senior debt from bank markets reflects the continued diversification by European REITs in their financing sources, with bond markets competitively priced.
REITs and listed property companies in Europe are increasingly issuing corporate debt and convertible bonds amid a market which is bereft of a functioning securitisation market, which has seen just two CMBS transactions this year.
Deutsche Bank priced the five-year Vitus Immobilien FLORE 2012-1 CMBS three weeks ago in a rare European securitisation.
One month ago, Klépierre, the French REIT, issued a seven-year €500m euro bond, priced at 145 basis points above the mid swap rate, reflecting a 2.75% coupon.
Unibail-Rodamco, Europe’s largest listed commercial property company, placed €750m in convertable bonds, reflecting a 35% premium reference share price.
In the UK, Hammerson, the UK and France retail-focussed REIT, closed a seven-year dated €500m senior unsecured corporate bond, priced at 145 basis points over mid swap rate reflecting an annual coupon of 2.75%.
Six months ago, FDL refinanced the maturing €537.12m Immeo Residential Finance No. 2 CMBS debt with €568m from two German banks.
The financing is split 80% with one bank, at around €454.4m, which is currently syndicating less than half of its total hold, while a second bank has taken the remainder, worth around €113.6m.
The refinanced terms comprised a seven-and-a-half year maturity, at fixed interest rate of 3.6%.