The UK Property Income Fund (UK PIF), a UK core-plus fund which allows investors to individually customise their own leverage appetite, has added a £52m senior debt facility and an £11m capex facility from Santander, in its first bank deal with the UK fund manager.
Combined with a legacy £112.5m legacy Eurohypo facility, the total debt available to LGP’s multi-leverage fund is now £175.5m, with co-terminus maturities to May 2017 for all three tranches.
CoStar News understands the Santander £52m senior debt facility is priced at 300 basis points over three-month LIBOR, while the £11m capex facility is at 400 bps.
LGP’s senior loan margins reflect a balance in a premium for the fund’s slight leverage complexity, offset by the UK fund manager’s track record as one of the largest landlord’s in the country.
The all-in cost of borrowing is estimated at 4% for the duration of the loan, secured by a pool of well-located, larger lot size assets with strong cashflows and covenants.
Since inception in March 2010, UK PIF has acquired a string of core-plus assets worth a combined £313m, including: City Place in Gatwick; St George’s House in Croydon; the Meadows Shopping Centre in Chelmsford; Fremlin Walk Shopping Centre in Maidstone; Guildford Business Park in Guildford and; Co-op distribution centre in Andover.
UK PIF’s final equity close was at the end of 2011, having secured a total of £300m of equity from 14 major international institutional investors based in the Middle East, Denmark, UK, France, Finland, Switzerland and Japan.
The UK PIF has a total investment capacity of circa £475m, and aims to provide investors with geared returns of 15% and ungeared returns of 10%, as the fund seeks to capitalise on the economic recovery in the UK based on a core to core-plus risk strategy.
Charlie Walker, director of business development and fund manager of the UK Property Income Fund, said: “Our first deal with Santander, this facility demonstrates not only their flexible approach to lending, but also LGP’s access to debt at an interesting time within the debt markets.
“Whereas most lending appetite is currently focused on simple, large, longer let assets within central London Santander has shown that it is prepared to lend on assets across the country, where the fundamentals are right.”