Lone Star closes £1bn Moorfield ‘Project Laser’ portfolio financed by £593m RBC and Wells Fargo loan

Lone Star has completed the acquisition of a portfolio of mixed-use UK secondary properties from Moorfield’s first maturing two private equity funds for just under £1bn, financed with a £593m whole loan from RBC Capital Markets and Wells Fargo.

Screen Shot 2015-02-11 at 20.08.37RBC and Wells provided three-year £593m whole loan on a 50:50 split at a loan-to-cost (LTC) of approximately 70%, CoStar News understands.  

Both banks will retain its £296.5m position on balance sheet.  RBC and Wells are relationship lenders to Lone Star having taken a one-third share each of the private equity firm’s £3.5bn financing of the IBRC Project Rock loan portfolio 12 months ago.

The whole loan has two one-year extension options and is thought to be priced just under 300 basis points.  The LTC implies a purchase price of £847m, which in turn indicates that Lone Star purchased a small proportion of the assets on a cash-only basis.

The property portfolio, dubbed Project Laser, is comprised of the majority of assets in Moorfield Real Estate Fund (MREF) and Moorfield Real Estate Fund II (MREFII) and was acquired by the Lone Star Real Estate Fund III.

The portfolio – as accurately outlined in CoStar News’ report just before Christmas – is comprised of a mix of hospitality assets, business parks, offices, student accommodation and residential developments, including:

  • The Salisbury – Salisbury House, a Grade II-listed building situated in the City of London with 236,369 sq ft of office, retail and ancillary accommodation;
  • Pinnacle, West Riding House, a 19-storey mixed use city centre building in Leeds, 68,500 sqft prime retail space and 81,500 sqft of offices, supported by a 440 multi-storey car park.  Major tenants include retailers Next, Tesco and Superdrug and office tenants include Barnett Waddingham and the government;
  • The Towers, an urban business park in Didsbury, South Manchester, comprised of nine office buildings, totalling 290,000 sqft set within 19 acres of landscaped parkland.  Tenants including British Airways, John Lewis, Oracle and Cisco;
  • Skypark business park in Glasgow, comprised of 550,000 sq ft across buildings providing a wide variety of office, storage and retail accommodation to tenants, including O2, Travel 2 and Serco;
  • a 40% stake in the five-strong Brindleyplace office portfolio in Birmingham, which includes major occupiers Deutsche Bank, Royal Bank of Scotland Plc, Deloitte. The joint venture partner is Hines Global REIT;
  • Velocity Village, a 612,000 sq ft mixed-use commercial and residential development in Sheffield, across five buildings located on Tenter Street and comprises 364 apartments and more than 100,000 sq ft of commercial office and retail space.
  • a 50.0% stake in Sovereign Reversions, a residential equity release portfolio. The business owns and manages portfolios of UK equity release plans, secured by circa 1,000 residential properties. The joint venture partner is Grainger. This tranche of the Laser portfolio trade has exchanged but not yet completed;
  • A portfolio of 24 regional mid-market Mercure & M Gallery hotels;
  • A portfolio of 46 Shearings hotels; and
  • Domain, Queens Road, a 399-bed student accommodation block leased to University of Winchester.

Moorfield will continue to have a role as asset manager, alongside Hudson Advisors, “to ensure there is continuity of asset management initiatives, asset knowledge and stakeholder relationships,” a press statement by Moorfield added.

Moorfield raised £265m in equity for MREF in 2005 and £389m in equity for MREFII in 2007, the combined £689m equity was leveraged to assembled a circa £2bn UK property portfolio which invested in shopping centres, hotels, student accommodation, offices, business parks, logistics, pubs, residential  as well as mixed-use properties.

In a statement, Marc Gilbard, chief executive officer of Moorfield Group said: “This is the largest transaction that Moorfield has undertaken in its corporate history and is a very effective way for MREF and MREFII to dispose of the majority of their investments.

“We are very pleased with the investment performance this will give to our investors and it allows us to focus on optimising the value of the remaining assets in these funds together with investing our recently raised MREFIII. We are also glad to be able to continue to work with Lone Star and Hudson Advisors to ensure further value is realised from the assets that they have acquired.”

Moorfield will return the capital to fund investors and begin deploying capital for its successor fund, Moorfield Real Estate Fund III (MREFIII), which materially surpassed its capital raising objective in January after raising up to £500m, across three tranches.  For the full story, please click here.

The transaction has been undertaken ‘off-market’ with Doherty Baines acting on behalf of Lone Star. Herbert Smith Freehills and PWC acted for Moorfield and Allen & Overy, Pinsent Masons, Shoosmiths  and PWC acted for Lone Star.


About CoStar News

Finance Editor, CoStar News
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