LandSecs’ JV secures £195m three-bank senior and development facilities

Land Securities and Frogmore Real Estate Partners have secured a two-tranche £195m three-bank refinancing with the Royal Bank of Scotland, DekaBank and ING Real Estate Finance, including a competitively-priced development margin for their central London joint venture fund.

Frogmore logoOriana Limited Partnership, the 50:50 JV which owns the combine 220,000 sq ft at 18/24 Oxford Street opposite Tottenham Court Road Tube station, replaced the maturing £144m RBS and Santander senior debt facility last November, confirmed in this morning’s Land Securities third quarter interim management statement.

CoStar News understands that the four-year RBS, DekaBank and ING REF £195m is comprised of two tranches.

The first tranche is a £170m investment senior loan, priced at 300 basis points over three-month LIBOR; and the second is a £25m development loan, priced at 375 bps. The development facility  will convert to 300bps once the development concludes and the second tranche converts to an investment facility.

Both facilities are split equally, while the investment facility was full drawn last November. The £25m development facility will finance the redevelopment of several retail units adjacent to Primark’s 141,000 sq ft flagship store, which opened on Oxford Street last September.

Oriana has submitted a planning application for phase two of the scheme which will add a combined 74,800 sq ft of retail space and 18 residential apartments.

CoStar News revealed on Monday that Irish developer and investor Aldgate Developments has secured a £85.5m two-and-a-half-year development loan from Helios Capital and GWM Group for the speculative construction of Aldgate Tower in the City of London.

Helios Capital and GWM Group’s pricing for the construction loan, given the speculative nature of the development, is priced at mezzanine-like margins in mid-teens.

Land Securities and Frogmore declined to comment.

According to Land Securities half-year report, published last November, the investment value of the REIT’s share was £153.9m, at the end of September 2012.

Based on the legacy £144m senior loan with RBS and Santander, this would imply a portfolio value for the Oriana joint venture fund of £307.8m, and a legacy LTV of 46.8%.

The replacement three-bank facility has a blended LTV across the two tranches of 60%, implying that Oriana’s portfolio value has risen in the subsequent almost four months to around £325m, according to CoStar News calculations.

However, this blended 60% LTV level is likely to reduce as the £25m development facility converts to an investment loan, as increased rental income is realised from new or bolt-on letting, which would deliver a further uptick in Oriana’s portfolio value, all things being equal.

Following the completion of the development works, Oriana’s LTV is likely to fall back to around the 50% level.

Frogmore is Oriana’s asset manager. Oriana was established in 2007, with the site assembled mainly in the 1990s by Land Securities with the former Virgin Megastore the previous flagship tenant which is one of many high-profile retailers now absent from the UK’s high streets.

About CoStar News

Finance Editor, CoStar News
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