Residential development, central London1
In October 2017 we provided a £517 million whole loan to support a new residential development of 48 “super prime” units and related amenities located in central London’s Grosvenor Square.
The project is amongst the capital’s most-high profile residential developments. It is being undertaken by an experienced real estate sponsor, which contributed a significant amount of equity to the transaction. A tier-one main contractor is in place, supported by a best-in-class development team.
The debt financing has a low basis relative to market prices for the finished units. We set the £250 million senior debt at a conservative 27.2% loan-to-value2; this was supplemented by a stretch senior tranche of £138.2 million reaching 42.2% LTV, with a mezzanine tranche of £128.8 million taking the total LTV to 56.2%. The debt finance has a funding term of 3.5 years.
Retail park, Scotland1
In March 2017 we provided a £68.1 million whole loan secured against a retail park close to Glasgow in Scotland. The retail park is based in a location served by few food and retail stores, so is perfectly positioned to cater for demand from the affluent Glasgow area.
Supermarket chain Sainsbury’s is the park’s main tenant, accounting for 38% of income, and it has 21 years remaining on the lease. Other tenants include Next, M&S Foodhall, TK Maxx, Nike, Boots, Argos, Mothercare, Homebase and Halfords.
M&G divided the loan into £52.7 million senior debt at a 58.5% loan-to-value. This is complemented by stretch senior debt of £9 million to reach 68.5% LTV, and £6.4 million mezzanine debt taking the total LTV to 75.7%.
The debt finance has a four-year tenor with the option for a one-year extension and importantly offers two and a half years of prepayment protection to protect lenders should the borrower seek early refinancing.
The retail park also benefits from a weighted average lease term of 11.4 years, with a weighted average lease break of 10.4 years, due to the long-term lease commitment of Sainsbury’s.
Distribution portfolio, France1
In October 2016 we provided a €93 million whole loan to finance a portfolio of 14 distribution warehouses located across France. The portfolio is 100% occupied and primarily let on triple-net leases to a BBB+ corporate credit tenant.
The loan comprised a €64.5 million senior tranche at 52.2% loan-to-value; €11.6 million of stretch senior, up to 61.6% LTV and a €16.9 million mezzanine tranche at 72.3% LTV. All were priced relative to EURIBOR and had three-year terms.
At the time of the transaction the lead tenant re-signed leases on 13 of the assets in the portfolio, while the remaining property was sub-let.
Senior lenders benefit from full cash sweep amortisation on the loan, while junior lenders are backed by multiple protections.
1 All metrics as at origination date
2 Loan balances and LTV ratios include fees and accrued interest to date 3 months after expected completion.