Bruntwood, the family-owned North West-focused property company founded by Michael Oglesby almost 40 years ago, completed a partial refinancing of its outstanding £432.55m securitised debt with a £120m 10-year senior loan from Legal & General Investment Management.
LGIM’s fixed rate loan will partially pre-pay the maturing Bruntwood CMBS, issued by the Royal Bank of Scotland in November 2006, as part of a wider refinancing by Bruntwood ahead of the existing two securitised loans’ maturity in mid-January next year.
The £120m loan reflects a 65% LTV, which implies the security pool has a portfolio value of £184.6m, while the margin is thought to be around 300 basis points over three-month LIBOR. The all-in cost of debt of debt is 4.64%.
Graham Rouse, Commercial Real Estate Lending Manager at Legal & General, said: “Another significant and sizeable deal, this is the successful conclusion of several months’ close discussions and yet again demonstrates our ability to take a more adaptable and innovative approach to lending.”
LGIM’s collateral pool comprises six office buildings in Manchester – including the 28-storey City Tower which is Bruntwood head office – and one in Birmingham.
This is LGIM’s second senior loan, following its maiden deal, a £121m 10-year debt facility to UNITE Group, secured by a student accommodation portfolio.
Chris Oglesby, chief executive of Bruntwood, said: “Securing this new, long term facility with a lender like Legal & General is testament to the strength of our successful business model and allows us to part refinance our CMBS as well as to position ourselves for future growth.
“We are extremely pleased to form a long term partnership with Legal & General, a lender who has taken the time to get to know our business and have been very accommodating and understanding of our requirements in order to ensure that our business model can continue to prosper.”
Bruntwood is thought to be near to announcing further partial refinancings with lenders, possibly in re-shuffled pools of collateral and over different maturity terms.
Bondholders in the Bruntwood CMBS are expected to be repaid the partial refinancing in time for the 15 April interest payment date. The current outstanding balance for the two loans comprises £203.4m for the Bruntwood Estates Alpha Portfolio loan and the £229.15m Bruntwood 2000 loan.
The combined market value of the two Bruntwood portfolios secured by CMBS loans has fallen by 13.84% in the almost the last six years – from £669.0m to £576.4m according to a Knight Frank re-valuation at the end of September 2012 – with the capital depreciation driven by rising vacancy.
The value in the original BE Alpha portfolio has fallen by 10.8% to £276.5m, as the vacancy rate almost doubled from 10.8% to 20.0% over the near six year period, while the Bruntwood 2000 portfolio fell by 16.4% to £299.9m, as the vacancy rate climbed from 6.1% to 10.8%, as at the October IPD.
But Bruntwood has made progress in turning around the vacancy rates of both original portfolios in the last two years with nearly unbroken quarterly rises in the occupancy rate of both portfolios, as at the October IPD.
Bruntwood signed up Aegis to a 17,960k sq ft space expansion at City Tower, a 7,234 sq ft deal with Manchester International Festival at Blackfriars House and deals to Tesco, Target Marketing Solutions and ES Training over 10,483 sq ft at Riverside.
CoStar Finance 