Goldman Sachs has financed Morgan Stanley Real Estate Fund VII’s (MSREF) the acquisition of the 15-strong Italian Auchan shopping centre and retail park portfolio with a €360m five-year senior loan which is set for a securitisation exit before the end of the year, CoStar News can reveal.
The new fund completed the €635m acquisition of the portfolio of 13 shopping centres and two retail parks last Friday from Gallerie Commerciali Italia (GCI), a wholly-owned subsidiary of Immochan and Auchan Group, the Continental shopping centre developer. Morgan Stanley Real Estate Fund VII (MSREF VII) is the majority investor in the new fund.
The 2.15m sq ft (200,000 sq m) Auchan portfolio is spread almost entirely throughout Northern and central Italy – including in Torino, Cuneo, Mazzano, Vicenza, Padova, Ancona, Senigallia, Porto S Elpidio, Grottammare, Pescara and Giugliano – with just one of the 15 properties in Catania, in the south.
Immochan, which will become a minority investor in the new fund , will use the proceeds to accelerate its ambitious shopping centre development programme across Southern, Central and Eastern Europe.
Goldman Sachs’ acquisition finance reflects a 56.7% LTV, and is thought to be priced at on a Spain-like premium of mid-to-high 400 basis points over three-month Euribor.
CoStar News understands that Goldman Sachs’ decision to securitise the €360m senior loan is due to the efficiency of a capital markets exit compared to the complexity of syndicating Italian loans.
This is the largest real estate senior loan extended in Italy in the years since the global financial crisis, and will be the first traditional Italian securitisation since the €435m Infinity 2006-1 Classico in October 2006 by IXIS Corporate & Investment Banking, which merged the following month with Natexis Banque Populaire to form Natixis.
More recently, in November 2010, Mediobanca and MPS Capital Services, a subsidiary of Banca Monte dei Paschi di Siena (MPS), securitised a €1.67bn loan secured by a portfolio of 683 bank branches and offices effectively in a sale-and-leaseback in an issuance called Casaforte, to raise much-needed capital during the global financial crisis.
Banca MPS sold the Casaforte bonds to its own retail customers.
Since and including 2000 there has been €32.3bn of Italian CMBS issuance, excluding Italian loans in mixed conduit transactions, according to research by Bank of America Merrill Lynch. Since 2004, this figure is €11.4bn.
Immochan has sold more than €900m of Auchan shopping centres since the turn of the year, and has confirmed a €2bn expansion strategy for the region to build around a 7.5m sq ft (700,000 sqm) portfolio over the next three years.
Immochan reported annual revenue for 2012 of €600m, with a portfolio under management comprised of 342 shopping centers across 21.5m sq ft (2m sq m) and a further 12.9m sq ft (1.2m sqm) in retail parks across 12 countries.
Morgan Stanley has been reviving its series of MSREF opportunity funds in recent years. Although the $8bn MSREF VI was one of the greatest underperformers during the global financial crisis, it is thought the more recent $4 billion MSREF VII has been more successful.
According to a Wall Street Journal report back in May, MSREF is gearing up to raise a $1bn to $3bn global property fund, with China Investment Corporation (CIC), the country’s largest sovereign wealth fund which itself owns a 6.4% stake in Morgan, to become an anchor investor.
Goldman Sachs and Morgan Stanley both declined to comment.
Bank of America Merrill Lynch and Deutsche Bank officially launched the sale of the heavily-trailed €699.7m German Residential Funding 2013 – 2 Limited CMBS, secured by a GAGFAH portfolio of 22,849 residential units, 5,026 parking and garage units and 1,075 other together valued at €1.19bn by CBRE in August.
The LTV of the portfolio is 65%. The five-year €699.7m CMBS loan for the WBN, WGN and NILEG residential portfolios carry a coupon of 2.71%, almost 250 basis points lower than the 5.17% on the previous CMBS.
In addition, GAGFAH has signed a new three-year loan agreement for the Acquisition 1 portfolio of about €145m with a coupon of 2.87%, compared to the previous coupon of 4.44%. GAGFAH has also agreed on a two-year extension for the €200m GBH loan
Markus Scheufler, research analyst, at Deustche Bank wrote in a research note published today: “Gagfah just announced the refinancing of circa €1bn debt cheaper than what we and especially consensus previously expected. The total volume is comprised of a new €700m five-year CMBS with a coupon of 2.71% (versus 5.17% previously) which is better than our assumption of ~3% and also comes slightly earlier than what we initially expected (1Q14).”