Legal & General Property (LGP) has refinanced the circa £1bn Industrial Property Investment Fund (IPIF) with a two-tranche £275m six-year term loan with Royal Bank of Scotland, Wells Fargo and L&G’s lending arm, LGIM Commercial Lending.
IPIF’s fresh £275m senior loan is split 50:50 fixed rate and floating rate divided between the lenders as follows:
- RBS provided £70m fixed rate and £25m floating rate debt;
- Wells Fargo provided £90m in floating rate debt; and
- LGIM Commercial Lending provided £67.5m fixed and £22.5m floating rate debt.
The £275m facility reflects a sub 30% LTV for IPIF, for which the legacy debt included a £135m majority held by RBS. An additional £75m facility provided by Legal & General’s annuity business, in a debt deal with preceded the insurance firm’s move into UK property lending.
The combined £210m facility that was due to expire in September 2015.
IPIF seeks to retain high yielding assets and to recycle properties that are vulnerable to voids or tenant default and where few added value opportunities. It is comprised of granular, higher yielding, multi-let industrial estates with 143 properties, as at the end of the first quarter, with more than 1,800 units.
IPIF’s acquisition strategy focuses on London and the South East, and in particular, in inner urban areas where there is a higher probability of achieving change of use.
The lowly-geared fund is one of the most liquid closed-ended funds in Europe, benefiting from a strong secondary market with approximately 5% of its units traded each quarter.
Towards the end of last year, IPIF merged with the Falcon Property Unit Trust, providing it with over 280 units over 36 multi-let estates which it felt would significantly benefit from the scale, resources and efficiencies of IPIF’s management intensive structure, whilst increasing IPIF’s already large added value pipeline at an opportune point in the market cycle.
The merger followed shortly behind the news that IPIF had extended its life to 2020, whilst also adding redemption provisions and introducing a number of initiatives enabling it to be more flexible in terms of raising further equity and responding to market conditions.
In a press release, Jonathan Holland, fund manager of IPIF, said: “This new financing arrangement supports the fund through to the end of its life cycle and provides us with significant headroom with which to capitalise on attractive investment opportunities that we believe currently exist in the market.”
Nick Solomon, director at the Royal Bank of Scotland, added: “The financing positions IPIF well for the next stage of its lifecycle and demonstrates RBS’ continuing appetite for the UK real estate market.”
Richard Craddock, director at Wells Fargo, said: “The IPIF funding further demonstrates our clear objectives in the UK commercial real estate market: to grow our business by continuing to support top tier investors on a range of asset types and funding structures.”
Ashley Goldblatt, head of commercial lending at Legal & General Investment Management, added: “Acting as a co-lender alongside banks, providing floating rate finance and lending for as short a term as six years are three stances that the market would not ordinarily associate with us.”