UK Commercial Property Trust (UKCPT), the £1.27bn listed closed-ended UK commercial property fund, has increased its overall debt headroom by £50m to £300m in three separate refinancings with Cornerstone Real Estate Advisers Europe and Barclays Bank.
Cornerstone, whose capital is sourced from MassMutual Financial Services Group, is in advanced negotiations to provide a £100m term loan, priced at between 1.25 to 1.45% over the relevant 12-year UK Gilt benchmark, refinancing an £80m Lloyds Bank facility which matures in June.
Based on current UK Gilt rates, the estimated total interest rate payable is between 3.31% and 3.515% per annum.
The new loan will be charged solely against the following assets:
- 27 Retail Park in Birstall, Leeds, the 122,288 sq ft bulky goods retail park has a carrying valuation above £60m;
- three properties in the Aberdeen Gateway Business Park, Sites A, C2 and D1. The combined valuation of the properties is £48.7m, developed at 5% above cost;
- 81-85 George Street, Edinburgh, the 46,736 sq ft multi-let mixed use building is valued at above £20m;
- Broadbridge Retail Park, Horsham, valued at above £20m;
- Motor Park, Portsmouth, valued at above £20m; and
- Emerald Park East, Bristol only, valued at above £20m.
Collectively these assets are valued at around £215m, based on approximations of asset values from UKCPT’s banded valuation disclosures in its annual results, which would imply a 46.5% LTV. The new facility will not be secured over the other assets of the group. The balance of the new facility, which matures in 2027, will be used for general working capital purposes.
Separately, UKCPT has extended the maturity of its existing, fully drawn £150m term loan with Barclays Bank by two years to May 2020 and negotiated an approximate 20 basis points reduction in the ratcheted margin (depending on LTV levels) to 150 bps over three-month LIBOR. All covenants remain unchanged.
Refinancing the Lloyds facility and extending the Barclays loan will incur interest rate swap breaking costs of £760,000 and £7.5m, respectively. These liabilities were fully reflected in UKCPT’s 2014 year end net asset value, which was £1.02bn or 80.7 pence per share as at the end of 2014.
Finally, UKCPT has agreed an additional five-year £50m revolving credit facility (RCF), which currently is undrawn. On which basis, UKCPT’s weighted average period to maturity on the group’s debt has increased by more than two years to 7.8 years while group level LTV is at a modest 18.7%. The current weighted average interest rate is 3.85% per annum.
UKCPT’s granular property portfolio is 44-strong, with comprised of assets individually all below £70m in value. The annualised rental income is £71.3m and the portfolio’s net initial yield is 5.1%.