LondonMetric’s MIPP JV with USS secures £75m PBB five-year loan

Metric Property Investments, which today completed a merger with London & Stamford, and the Universities Superannuation Scheme (USS) have secured a five-year £75m senior loan with Deutsche Pfandbriefbank (PBB) for their joint venture retail park fund.

PBB extended the loan, which has a 60% LTV ceiling, at an all-in cost of debt of 4.0% once fully drawn and inclusive of hedging costs.

The loan, which also has an interest cover ratio covenant of not less than 2.0 times the projected net interest payable, will allow the £150m Metric Income Plus Limited Partnership (MIPP) fund to refinance assets that have already been acquired and to purchase additional properties.

Metric, renamed LondonMetric Property today, and USS is also in talks with additional lenders about additional debt facilities.

MIPP is currently 50% invested, comprising eight out-of-town parks which are valued at £75m, and has a target LTV of 50% across its entire portfolio.

MIPP’s investment strategy is to acquire small, higher yielding, income-focussed retail parks and solus units ranging in value from £2m to £20m. The target portfolio yield on cost is in excess of 7%, to deliver attractive post leverage cash on cash returns. USS has committed an initial £50m of equity to MIPP, with Metric committing £25m.

Charles Balch, head of real estate Finance International at PBB, said: “Metric is a key target client for our bank. We are delighted to be able to support its strategy with USS in the UK retail sector.”

Andrew Jones, chief executive of Metric, said: “This deal strengthens our relationship with Deutsche Pfandbriefbank. It also demonstrates our ability to secure a flexible senior facility in a challenging environment.”

“We have concentrated on our MIPP joint venture, securing higher yielding, smaller retail parks with long unexpired lease terms enabling us to take advantage of the c.300 bps differential between the cost of debt and property yields to deliver, post leverage, double digit returns on equity,” Metric stated in its final results ahead of today’s merger.

The eight-strong MIPP’s portfolio has a running yield of 7.0% with 36% of the portfolio benefiting from RPI-linked income. In May, MIPP acquired Faustina Retail Park, Londonderry for £17.4m reflecting a yield of 7.5% and in June MIPP acquired Camborne Retail Park, Cornwall for £8.2m off a yield of 7.3%.

MIPP has acquired two properties in the last month: Lichfield Retail Park, a well-let five unit scheme anchored by Wickes in Lichfield for £11.0m reflecting a yield of 6.6% rising to 7.2% based on fixed uplifts in 2015. In addition, a standalone Wickes unit in Nottingham was acquired for £3.9m, reflecting a yield of 7.3% and with 18 years remaining on the lease.

Two weeks ago, PBB also funded €36m senior debt facility for Invesco Real Estate acquisition of the Alpha Park II retail park acquisition in western Paris.

The merged LondonMetric Property group, which values the entire share capital of the group at £209m, has created a top 10 UK REIT.

LondonMetric’s business strategy is to focus on commercial and residential property in the London economic area, as well as out-of-town retail investment and selected development and opportunistic acquisitions with strong cash flows.

The merger of the listed property companies will prompt the retirements of London & Stamford founder and chairman Raymond Mould as well as Metric finance director, Sue Ford, while reuniting Metric’s Andrew Jones with his ex-colleagues at Pillar Properties Patrick Vaughan and Martin McGann.

London & Stamford was established by property veterans Raymond Mould and Patrick Vaughan in October 2007 and admitted to the Alternative Investment Market in November 2007.

The company’s speedy completion of a number of high-profile acquisitions including a 50% stake in the Meadowhall shopping centre in Sheffield further cemented Mould and Vaughan’s reputation for expertly playing the UK’s property cycles.

Raymond Mould, retiring chairman of London & Stamford, said: “ I am delighted to have this opportunity to hand over the keys of an excellent real estate portfolio to an experienced and well trusted team, chaired by Patrick Vaughan who has been my business partner and friend for over 40 years, and have no doubt that they will build upon the considerable success that has been achieved to date.”

jwallace@costar.co.uk

About CoStar News

Finance Editor, CoStar News
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