Greystar Real Estate, one of the largest operators of multi-family and student housing in the US which is currently building scale in the UK, acquired 2,375-bed Nido London for £600m from a consortium led by Round Hill Capital in April, financed by a £390m three-year whole loan from Citigroup.
The loan, which reflects an LTV of 65%, has a 12-month extension option for the borrower. CoStar News reported on the initial Citigroup-led financing back in mid April.
Within two weeks of the loan’s closing Citigroup brought in Lloyds Bank on a 50:50 basis to underwrite and distribute the whole loan, which was priced at 185 basis points over three-month Libor.
CoStar News has learned that AXA Real Estate, which this week announced plans to rebrand as AXA Investment Managers – Real Assets, acquired around £250m of the whole loan in June at a price of circa 170 bps, reflecting a 15bps skim by Citigroup and Lloyds.
This week, Citigroup and Lloyds closed the syndication of a £100m tranche to one Northern European fixed income investor who required the loan to be configured in bond format to meet the requirements of the debt buyer’s underlying fund.
This £100m unrated bond – technically a CMBS for all the league table-assemblers out there – also carried a margin of 170 bps, in a transaction dubbed Odin Finance.
The syndication of CMBS tranche and the loan to AXA Real Estate, leaves just £40m between Citigroup and Lloyds Bank, the bulk of which is retained by Lloyds while Citi may still yet sell down its remaining minority slice.
Greystar led the transaction and sourced a majority pension fund partner on the deal, PSP Investment Board, one of Canada’s largest pension investment managers. PSP owns 90% of the subsequent joint venture, with Greystar retaining 10%.
Nido London is comprised of:
- the 1,158-bed Nido Spitalfields at 9 Frying Pan Alley, valued at £296m;
- the 846-bed Nido Kings Cross at 200 Pentonville Road, valued at £257m; and
- the 272-bed Nido Notting Hill at 1 Alderson Street, valued at £46.5m.
The aggregate value of Nido London was £599,45m in April 2015, according to CBRE, which represents an average capital value of £635 per sq ft. The combined annual net rent is £30m.
The macro picture
Liquidity in lending markets has contracted in recent months, putting upward pressure on margins and reducing appetite to lend.
Two weeks ago the US Federal Reserve held off increasing interest rates for the first time since the financial crisis began, driven by concerns about the fragility of global economies – notably China’s debt-fuelled economic expansion – and low inflation rates.
There remain concerns over the economic growth prospects for debt-fuelled economies like China when interest rates rise, increasing borrowing costs for corporates which could create distress for banks which provided the finance. The consequence could also be a slowdown in global economic output.
Corporate shocks such as Volkswagen’s car emissions scandal can quickly spill over into the financial sector, as banks retrench into risk-off mode, pushing up credit spreads while exit liquidity also recedes.