Royal Bank of Scotland has extended a £100m five-year senior debt facility to Henderson Global Investors’ (HGI) flagship £653m UK Shopping Centre Fund.
The Henderson UK Shopping Centre Fund – which unit holders agreed to extend by a further seven years in the summer, extending the fund’s life to 2021 – owns differing equity stakes in three prime shopping centres as well as Edinburgh’s St James’ Shopping Centre in its entirety.
HGI’s legacy £70m Bayern LB loan, secured against the £112.18m-valued St James’ Shopping Centre, the fund’s only 100%-owned asset, reflected a 62.4% LTV, against a 65% LTV covenant, and with a May 2014 maturity looming.
But Bayern LB had implied that the facility, which carried an all-in rate of 3.95%, would not be renewed or extended by the bank.
In addition, the fund’s £20m unsecured Lloyds Bank facility, which was only £2.65m drawn, was due to expire next Monday, 25 November.
Colin Throssell, head of property treasury at HGI, then undertook a search for a fresh senior facility, out of which process, the £100m RBS facility was chosen.
RBS’ five-year £100m senior loan is priced at 225 basis points, with an all-in cost of debt of 3.57%. The fund has drawn down £80m to repay the maturing Bayern LB facility, with the remainder to be used as working capital.
The drawn £80m component of the RBS facility comprises two tranches: £50m at a fixed rate of 4.06%; and £30m priced at a floating rate of 2.77%. The blended average equates to the 3.57% figure.
In addition to refinancing St James’ Shopping Centre, the enlarged facility also finances the fund’s 33%-stake in Birmingham’s Bullring Shopping Centre, which has a carry value of £307m as at the end of June.
RBS has set a 50% LTV covenant on the £100m facility, which is well within the fund’s current 12.5% fund level gearing against the fund’s own ceiling of 20% LTV.
HGI’s Throssell said: “The new financing we have arranged and executed is a great win for the fund and takes full advantage of the competitive funding environment in the UK for prime real estate debt.
“The refinancing has provided the opportunity for the Fund to establish a strong, new relationship with RBS and enabled us to deliver flexible and best value terms for investors.”
Steve Bullock, head of real estate funds at RBS Real Estate Finance, said: “We are delighted to have been selected to provide these facilities to the UK Shopping Centre Fund and in doing so establish a new relationship with Henderson Global Investors, one of the UK’s leading fund managers.
“The flexibility of the financing will help the fund deliver on its pipeline of exciting opportunities, further enhancing a very impressive asset base, and demonstrates our continued support for the UK real estate sector.”
The fund, managed by Myles White, has delivered a 5.0% total return over the last year, rising to 13.3% per annum over three years.
Henderson’s flagship UK Shopping Centre Fund, a Jersey-based property unit trust launched in July 2004, now has a redemption window available in 2017 following this summer’s fund life extension.
Concurrently with the fund life extension, HGI raised around £200m to meet redemptions, fund redevelopments and “to take advantage of opportunities to invest further into prime UK shopping centres”, Henderson said in a statement at the turn of August.
In addition to the 100% ownership of Edinburgh’s St James’ Shopping Centre and a one-third stake in Birmingham’s Bullring Shopping Centre, the fund also owns 50% stake in both Whitefriars shopping centre in Canterbury and the Buchanan Galleries shopping centre in Glasgow.
The fund’s equity stake in Whitefriars is £79m, while its equity stake in Buchanan Galleries is £140m, taking the market value of fund’s assets to £639m as at the end of June, with the balance of the £653m in cash for liquidity, working capital and capex.
In May Hammerson, who originally developed the Bullring in a joint venture with Land Securities in 2003, increased its joint venture stake in Birmingham’s premier shopping centre, acquiring Future Fund’s 33.3% stake for £307m.
The deal took Hammerson’s joint venture stake, with Canada Pension Plan Investment Board (CPPIB), to 50%.
Land Securities owns the remaining 50% in Buchanan Galleries, while CPPIB owns the remaining 50% stake in Whitefriars.See table below
Yesterday, HGI confirmed it had secured a €100m five-year senior loan from Morgan Stanley and Deutsche Pfandbriefbank for Herald, Henderson’s European Retail Property Fund.
The €100m facility, priced at a blended margin of 158 basis points, is secured across three retail assets: Metropolis Shopping Centre in Italy, and City Centre and Shopping Cité, both in Germany.
In August, HGI refinanced its circa £432m UK Outlet Mall Fund with a fresh senior and development financing package of £265m across two separate five-year loans from MetLife, Bayerische Landesbank and Santander.