Gold, Haussmann-sense and More (London), commercial real estate week in review

Source : Debtwire - 13 12 2013

Wise men from the middle east brought gifts to Europe this week as two significant deals closed in London and Paris.

Kuwait’s St Martins Property splashed GBP 1.7bn on More London, while the Abu Dhabi Investment Authority (ADIA) completed its EUR 750m purchase of a French office portfolio, including 6-8 Boulevard Haussmann.

Sold by UBS Continental European Property Fund, the portfolio included the Haussmann property securitised in Windermere XIV, and Antony Park from Silenus (Eloc 25).


The sale was carried out as part of a dual-track process. Extensions for two loans securitised by properties within the Docks Lyonnais portfolio were lined up by seller UBS advised by First Growth, according to two sources.

The dual-track process was, one of the sources said, carried out “in case a deal fell through”, with three- year extensions and two-year extensions respectively agreed for the Haussmann (serviced by Hatfield Philips) and Antony Park loans. Another property in the portfolio – the Grolée/Carnot building in Lyon – would have been given a standstill agreement.

More in common

A similar dual-tracking process was also put to use on More London, with Deutsche Bank at one point a frontrunner to refinance the asset. St Martins paid around GBP 1.7bn for the river Thames scheme, held in EPIC (More London) CMBS.

The dual-track theme continues in Germany, where it was reported that Deutsche Annington is close to buying residential company Vitus Immobilien. Three weeks ago, a refinancing and floatation of the company seemed the more likely option, as reported by this news service. Deutsche Bank planned to issue a new CMBS to refinance last September's EUR 754m Florentia Limited CMBS to put the company on a surer footing. While this scenario has not completely been ruled out, an outright sale for around EUR 1.3bn to Deutsche Annington, or LEG, would be easier than a refi and IPO, a source familiar said.
Bathtime for bad bank?
Patrizia Immobilien is tipped as the buyer of the Leo I portfolio, Bloomberg reported. The listed firm had earlier said it was looking at a large acquisition this year - without giving any further details. While another party could yet acquire the portfolio, according to a source, a sale to Patrizia would make sense since it bought a similar portfolio, Leo II, earlier this year. Both portfolios contain assets leased to the State of Hessen. The identity of the buyer is not the most exciting part of the story, however. The question is whether the seller, FMS Wertmanagement, will take a bath on it. The bad bank's predecessor, Hypo Real Estate, lent EUR 1.13bn on the loan in 2005, sold the senior tranche to Helaba and kept the junior portion. The portfolio had tumbled in value from EUR 1.07bn to EUR 874.2m at the end of 2011.

A sale at the wrong price could, however, become a political issue. Critics may question why the state- supported bad bank was in such a hurry to offload the portfolio. The situation could turn even more precarious if FMS were to make a loss on another portfolio Project Kontor it is currently selling. Bids for the EUR 400m portfolio have come in at EUR 275m- EUR 300m, as reported by this news service. One person familiar with the portfolio said EUR 275m would be near the break-even point for FMS.

Germany accounted for 36.5% of newlending in Europe, according toDe Montfort University’s Commercial Property Lending Market mid-year report, released this week. The figure compares with 29.9% at the end of last year. In the UK, a total of GBP 193bn of debt is now held against commercial property – a fall of 2.5% over 1H13.

Bulky parcels, big appetites

Confidence in UK commercial real estate finance has improved, with a move away from “bulky refinancings”, according to a new report by Laxfield Capital. The advisory firm’s first Debt Barometer, released this week, identifies greater investment activity in the regions – leading to new lending opportunities. Laxfield's survey analysed GBP 25bn of CRE loan requests across 268 deals from 1 January to 31 October 2013. London dominated activity among fixed-rate lenders, with almost 80% – or GBP 2.7bn – located in the UK capital.

Rowan Asset Management is one borrower seeking to take advantage of the more relaxed lending conditions. The asset manager is seeking to refinance a 2011 loan against the 163,495 sq ft Aldwych House in London's Midtown. The original GBP 82.7m loan was at a 50% loan-to-value ratio. Now, Rowan is now seeking GBP 70m – when cash flow is drying up as it commences the next phase ofthe property's redevelopment. One financial advisor said he had no doubt that Rowan would get the required finance, while noting that banks are as hungry to lend on London real estate as they were in 2005-2007.