The deal – for all assets in the Bridge portfolio except for the 40,223 sq m Alfred-Herrenhausen-Allee 1 office in Eschborn, which is the former Vodafone headquarters – has been structured as a share sale and will close before the October interest payment date.
The office block in Eschborn, which has largely been vacated by Vodafone although the global mobile phone operator continues to pay the €7.4m annual rent until the end of 2017, has been earmarked for a separate investor.
Net proceeds of €266.9m from the five-asset sale to Apollo will be distributed to noteholders in Windermere X transaction.
The combined sale of the five-strong Bridge portfolio and the to-be-finalised Eschborn asset sale is expected to close ahead of the October interest payment date (IPD).
Apollo is already in discussion to refinance the all-cash share purchase with investment banks, including BAML, Goldman Sachs and Deutsche Bank, and is seeking a debt facility of up to 70% loan-to-cost (LTC), implying a new senior loan of around €185m.
The selected investment bank is likely to exit the fresh loan through a new securitisation, returning the portfolio to the shrinking European CMBS universe.
The remaining Bridge office portfolio acquired by Apollo is comprised of:
- the 44,278 sq m Galluspark office in Frankfurt;
- the 17,279 sq m Am Unisys-Park 1 office in Sulzbach;
- the 48,073 sq m Alt Moabit 91 office in Berlin;
- the 11,953 sq m Kaiserswerther Str. 117– 119 office in Düsseldorf; and
- the 29,740 sq m Abraham-Lincoln-Park 1 office in Wiesbaden.
The last public valuation of the six-strong portfolio was conducted in September 2013 – which was €325m. However, the have been both positive and negative changes at the underlying property level, such as the WALUT and future expected rental income.
CoStar News understands that the five assets Apollo acquired were recently valued at circa €285m, which would imply Apollo’s price reflects 5% discount on current real estate value.
The Bridge Whole Loan has an unpaid balance of €370.5m, including the senior loan with an unpaid loan balance of €321.2m and the B-Loan, which was acquired in two tranches by hedge fund Davidson Kempner.
Davidson Kempner paid little for the B-Loan, given it was out-of-the-money. The junior loan has ballooned from its nominal €30m at the time of the 2007 securitisation to around €29m, due to accumulated default and unpaid interest.
The two-year old valuation of the former Vodafone headquarters in Eschborn was €74.1m, prior to knowledge of the global mobile phone operator’s decision to vacate.
However, the sale of the Eschborn asset is expected to be sufficient so as to deliver a par recovery on the senior loan.
For Hatfield Philips International (HPI), the special servicer on the Bridge loan, to achieve a par recovery on the senior loan, which has an outstanding balance of €321.2m, the Eschborn asset would have to be sold on a vacant possession value basis of above €54m.
Valad Europe was appointed to asset manage the six-strong Bridge portfolio, formerly owned by the Fortress Investment Group-controlled Eurocastle Investment, in April last year.
HPI replaced the Eurocastle-controlled asset manager on the Bridge portfolio in January 2014, after consensual loan restructuring and extension talks broke down.
HPI brokered a deal with Davidson Kempner to prevent an attempt to oust the loan servicer on its special servicing role, and subsequently appointed PricewaterhouseCoopers and NAI Apollo Group to sell the Bridge portfolio.
All parties declined to comment.