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Jeff Pulsford: CMBS offers stability and confidence in cashflow |
International property group Goodman was able to price a £800 million ($1.61 billion) commercial mortgage-backed securitization in July before the debt markets took a turn for the worse. The deal, lead managed by Calyon and Royal Bank of Scotland, was part of a £1.2 billion refinancing of Goodman’s Arlington Business Parks Partnership (ABPP) fund. RBS and Eurohypo acted as arrangers. "We were very pleased to get this deal away in a market that is deteriorating around us," says Jeff Pulsford, Goodman’s European CEO. "It gives the fund stability and confidence in cashflow."
The refinancing was undertaken to replace credit facilities arranged in October 2004 and those assumed with the acquisition of Akeler, a UK-based developer, in 2006. In addition to the CMBS issue, the refinancing includes a £400 million bank loan, which will be used to buy new sites and develop them. RBS and Eurohypo provide the revolving credit facility. Pulsford estimates that the refinancing will save the fund £5 million in interest payments.
The triple-A-rated £483.2 million seven-year tranche priced at 25 basis points over three-month Libor. The triple-A-rated £83.3 million tranche managed 35bp over three-month Libor and the £69.2 million double-A tranche went for 45bp over. The £72.3 million single-A tranche priced at 70bp over and £67.5 million worth of triple-Bs priced at 120bp. The £24.5 billion triple-B minus tranche went for 150bp.
The debt is secured by a pool of ABPP’s high-quality business park properties, which benefit from strong cashflows and long leases, with an average unexpired lease term to expiry of 12.8 years. Pulsford says the ABPP properties are seen to be in the safe haven end of the market and are leased to large corporations, many of which are in the mobile phone sector.
Pulsford says the firm would have postponed the deal if market conditions had worsened: "If we’d tried to get it done [in the beginning of August] it would have been nearly impossible. If we’d gone away from the markets and come back in September, October or November, who knows how it would have gone."