Highcross, the UK property investor and developer, has refinanced its maturing debt for its third regional fund with a £175m four-year senior debt facility from Royal Bank of Scotland, Barclays, HSBC and Santander.
The four banks funded the facility just before Christmas, replacing a much larger RBS-led legacy syndicate facility, with a number of banks existing as well as Barclays joining for the first time.
CoStar News understands that the Highcross Fund III facility is sub 60% LTV, for the predominantly regional office portfolio which would imply a gross asset value of less than £290m.
While the bank consortium would not be drawn on pricing, the Highcross Fund III invests in good secondary quality commercial properties in large and medium sized cities throughout the UK, for which broad bank market pricing is thought to be around 350 basis points over three-month LIBOR.
Highcross Fund III, launched in 2008, is secured by predominantly office properties in Edinburgh, Aberdeen, Leeds and Aylesbury.
The new £175m facility provides funding for Highcross to continue to pursue asset management opportunities and will facilitate the return of cash to investors as selective disposals are made ahead of fund maturity in 2018.
RBS and Barclays, the joint lead arrangers for the refinancing, provided slightly more of the £175m total than HSBC and Santander, with the financing mandate drawing firm interest from two additional banks were turned away and helped reduce final pricing by 25 bps for Highcross, reflecting the quality of the portfolio and banks’ confidence in borroers’ management.
Stuart Heslop, regional managing director, Real Estate Finance, RBS CIB, said: “The transaction was selectively marketed and there was strong interest from the real estate finance market, which resulted in commitment levels of the lending group being scaled back and final pricing being reduced from the initial indicative price. This is testament to the high regard in which Highcross’ management is held in its market.”
Kate Jeffs, relationship director at Barclays, added: “Highcross has long been recognised as a leading regional fund manager and their expertise continues to ensure a strong performance. Our significant new contribution to this funding package cements our relationship with the firm and demonstrates our understanding of the business which enabled us to deliver a financing solution to help Highcross to meet their strategic objectives.”
Highcross is one of the biggest industrial landlords in the UK with a nationwide property portfolio that provides 32m sq ft of office and industrial space to 4,500 occupiers.
In the last 12 months, Highcross has let 1.6m sq ft of office and industrial space through more than 160 new lettings. It currently has £1.3bn of assets under management.
Mike Megan, finance director, Highcross, said: “We are delighted to have secured this funding. In spite of the tough economic conditions, we have continued to perform strongly with some very successful deals. Our focus on adding value to our office and industrial investments continues to bring positive results and this new funding package will enable us to deliver our strategy to drive positive returns for our investors.”
RBS closed two further deals just before Christmas. The first was the refinancing of a Clydesdale Bank facility, which announced its intention to exit UK senior debt lending last year, with £33m, comprised of around £30m in senior debt and £3m in mezzanine. The facility is secured by a pool Scottish commercial properties.
Last week, RBS CIB also confirmed the funding of a £8.75m development facility for West Coast Estates, the Aberdeen-based developer and investor in property across Scotland.
The funding package sees RBS refinance its existing arrangement with West Coast Estates as well as to take on the refinancing of a previous lender.
Heslop said: “Funding development schemes is core to our business and supports construction jobs and future employment in the UK.”
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