French investor raises 85% LTV debt for €220m Paris retail centre

Source : Real Estate Capital - 03 07 2015

French corporate investor Eurazeo has raised 85% LTV, competitively-priced long-term debt finance to buy a €220m retail centre on the outskirts of Paris.

The listed investment group acquired a 78% stake in the €220m CIFA Fashion Business Centre in the Aubervilliers area on the north-eastern edge of the French capital. It is the group’s first buy for its new Eurazeo Patrimoine real estate division.

The debt finance was structured with several local banks under a crédit-bail structure which sees the banks becoming the technical owner and the sponsor taking a lease and effectively being the economic owner, close to the structure of Sharia’h financings.

The product enables banks to go higher up the risk curve in terms of loan to value and can have tax advantages for sponsors. It is thought the finance duration on the CIFA transaction is 12 years and that
this type of structure could price at margins at or below 2%.

The vendor, family shareholders, were advised by Easton Corporate Finance. The asset was opened in 2006 and was built in three phases up to 2014. Totalling 38,000 sq m it is 94% let to 264 tenants who sell wholesale to retailers. The rent is over €15m pa.

Its location is less than 500 metres from the main Paris ring road and a new metro station is due to be built nearby as part of the ‘Grand Paris’ project. Eurazeo was advised on the structuring and arranging of the debt by First Growth Real Estate. A source said: “This type of financing works best for stabilised assets given the technicality and the fact there is less flexibility for early repayments. But it is competitively-priced to the extent that traditional mortgage lenders cannot really compete.”

The asset was financed at inception by Bear Sterns, Lehman Brothers and Hypo Real Estate and has been restructured several times. Eurazeo Patrimoine CIO, Renaud Haberkorn, said: “This first investment in the Paris region provides us with an asset that combines a high return with secure rental income.”