Morgan Stanley lines up syndication for Blackstone’s £190m Adelphi debt

Morgan Stanley is syndicating the £190m five-year senior loan extended to Blackstone for the private equity giant’s acquisition of the Adelphi building in the West End, with AIG, BAWAG and Insight Investments lined up to take the lion’s share of the debt, CoStar News can reveal.

Morgan Stanley (correct)

AIG is to take around £80m of the loan, followed by BAWAG, with £50m, while Insight Investments is taking around £25m.

There is a fourth European buyer which is taking the smallest position, around £25m, CoStar News understands, leaving Morgan Stanley with the balance.

In addition, Morgan Stanley is holding the £10m reserve account facility which will subsidise loan interest payments from this summer as Blackstone undertakes substantial renovation works at the 292,122 sq ft trophy asset off the Strand.

Morgan Stanley’s successful syndication will enable the investment bank to recycle the capital again in new financing mandates.

CoStar News revealed that Morgan Stanley had won the financing mandate to fund Blackstone’s £265m purchase of the Adelphi building in February, in a consensual sale agreed by 18 months ago Istithmar, Dubai’s investment fund, for an asset it paid £325m in 2007.

Goldman Sachs was the underbidder on the ticket to finance Blackstone’s Adelphi. Eastdil Secured arranged the financing mandate for Blackstone.

Based on the £190m senior loan balance, Blackstone’s LTV is 71.7%, which rises to 75.5% when the £10m extra for the reserve account to subsidies loan repayments during the planned construction years is included.

Morgan Stanley has priced this risk into the margin of the loan, which is understood to be passed on in full to syndication investors – at 400 basis points over three-month LIBOR – although the global investment bank will book arrangement fees from the syndication parties.

This is Morgan Stanley’s first European real estate loan since underwriting the €195m five-year senior loan to refinance Beacon Capital Partners and Northwood Investors’ joint venture 14-storey Défense Plaza in Paris, which is sold down entirely to Aareal Bank, and arranged a €15m junior loan to complete the financing package.

Blackstone paid a 7.5% deposit on the Adelphi to the special servicer of the matured securitised loan, Capita Asset Services, amounting to £19.875m, based on a £265m price.

Blackstone’s equity balance, at £55.1m, and Morgan Stanley’s £190m financing will be paid at this Friday’s interest payment date repaying in full the outstanding  Barclays Capital Indus Eclipse 2007-1 CMBS loan, of £212.29m.

Prudential M&G, which owns the outstanding £35.8m B-note, will suffer a partial loss due to the circa £30m mark-to-market swap liability.

Loan servicing for the Morgan Stanley-originated Adelphi loan is expected to transfer in-house to Morgan Stanley Mortgage Servicing, which the investment bank is currently considering selling off.

Last October, CoStar News revealed Morgan Stanley was eyeing up a return to UK property lending and that the global investment banking giant could secure its first loan before the end of the first quarter.

AIG, a long-standing investors in European CMBS bonds, returned to direct European property lending in the second half of 2011, taking a number of syndicated senior loan positions, including around £50m share of Citigroup’s circa £150m component of the loan-on-loan financing to fund Lone Star’s acquisition of the first Lloyds Banking Group NPL, the £923m Project Royal.

Late last summer, AIG acquired around a £75m syndicated stake in Goldman Sachs’ £220m Devonshire Squire senior loan to Blackstone, second only in size to AXA Real Estate’s £100m position on the same ticket.

In its maiden bilateral European real estate loan, AIG, the recovering US insurance giant, has agreed heads of terms to underwrite a 10-years €350m senior loan to refinance a part of the €2.06bn refinancing requirement of Gagfah, the Fortress majority-owned German residential investor.

AIG’s Gagfah loan is around a 55% LTV – implying a collateral market value of €636m – and priced at near 250 basis points over three-month EURIBOR, CoStar News understands.

All parties declined to comment.

About CoStar News

Finance Editor, CoStar News
Gallery | This entry was posted in Banks, CMBS, Lenders, Market Trends, Private equity real estate, Refinancings and tagged , , , , . Bookmark the permalink.

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