Blackstone Real Estate Debt Strategies (BREDS) has won the acquisition financing mandate for Ashkenazy Acquisition Corp’s Old Spitalfields Market in the heart of London’s financial district, agreeing a five-year £95m whole loan which is expected to fund within the next couple of weeks.
Ashkenazy paid Ballymore Properties £113m at the end of May for the Grade II-listed historic site, infamous in the 19th-century for a spate of Jack the Ripper murders, taking the closing leverage to 84.1% LTV, reminiscent of pre-global financial crisis levels.
However, CoStar News understands that Ashkenazy’s investment play is expected to considerably improve the tenant base of Old Spitalfields Market, with plans to upgrade the units – leased currently by a mix of restaurants, pubs, retailers and offices – to attract higher-end, higher-paying occupants.
Ashkenazy’s business plan targets a material increase in the aggregate rental income over the next two to three years, which in turn, would increase the value of Old Spitalfields Market and, subsequently, lower the LTV by the maturity of the five-year loan in July 2018.
While the final loan parameters are still to be finalised, the senior loan is expected to cut off at around £65m, which would reflect around a 61.9% LTV, priced at around 275 basis points over three-month LIBOR.
The mezzanine loan is expected to close around £23m, priced at between 12% and 13%, while there is a circa £2m allocation within the whole loan for a capex facility to finance the planned asset management work, which will be supplemented by additional cash from Ashkenazy.
Blackstone is expected to hold the £23m mezzanine loan and syndicate the senior loan.
Eastdil Secured arranged the financing tendering process for Ashkenazy, which drew a raft of term sheets, including from Starwood Capital, Goldman Sachs, Citigroup, Deutsche Bank, Och-Ziff and LaSalle Investment Management.
Old Spitalfields Market is Ashkenazy’s maiden UK property acquisition, although similar upside-focused investment strategies have been successfully deployed by the New York-based private real estate investment firm in the US, including the repositioning of Union Station in Washington DC.
Ashkenazy describes its investment strategy as aiming to “acquire irreplaceable properties in premier locations with the potential for significant increase in cash flow and residual value,” according to its website.
Blackstone declined to comment and Ashkenazy could not be reached for comment.