CSFB

The bank has increased its securitisation activities with its first Continental issues. It has global ambitions, but for now the focus is western EuropeSwiss investment bank Credit Suisse First Boston (CSFB) has strong ambitions to expand its already significant global property activities, with a particular focus on developing its commercial property lending operation in Europe. In 2004, CSFB launched its European commercial real estate lending programme with a €200m bond issue and achieved record pricing for the European commercial mortgage based securities sector. Its first European securitisation from the conduit was given a boost from all the rating agencies: the senior tranche of €148.5m of the €198.1m bonds issued through its Titan Europe conduit gained an AAA rating from Standard & Poor’s, and, unusually, top ratings from Fitch and Moody’s. The issue was backed by five loans originated by CSFB purely with securitisation in mind. The collateral comprises 11 UK properties: four offices (two of which are in London), totalling 72.9% of the collateral; five retail properties, including two shopping centres, contributing another 21%, and two light industrial properties. Weeks later, in December 2004, this was followed by a €268m Continental issue. Titan Europe 2004-2 packaged up five loans secured against a mixed portfolio of 23 French and German assets. The issue is only the second multi-jurisdictional securitisation by a conduit lender, after Morgan Stanley’s Eloc 17. The Titan Europe 2004-2 pool is dominated by a €127m loan secured by seven cross-collateralised French office properties. CSFB is now one of the most active commercial property lenders in the UK, France and the Benelux Countries. The company also advised on the biggest property merger so far this year, involving the largest listed property firms in France and Spain, Gecina and Metrovacesa respectively. This was not the first time that CSFB has worked with Gecina. In 2002, CSFB advised on the company’s €3.6bn acquisition of French property rival Simco and the €1.2bn sale of residential assets to the US’s Westbrook Partners. A €500m Gecina bond offering followed in 2003. “CSFB is one of the largest commercial property lenders in the US and our goal is to replicate this success globally,” says Arvind Bajaj, head of CSFB’s European CMBS group. The CMBS group has 25 London-based staff and is in the process of creating loan origination teams in Paris and Frankfurt. In April, CSFB acted as arranger and bookrunner for a €1bn issue to refinance the existing debts of The Mall, a shopping centre fund managed by the UK’s Morley Fund Management and Capital & Regional. The Mall has a portfolio valued at €2.32bn. Largest ever sterling CMBS issue The issue was the largest sterling-denominated CMBS deal ever, and the second largest in any currency in Europe. The seven-year floating rate bonds were placed at 18 basis points over libor and were rated triple AAA by all the principal rating agencies; the transaction reduced The Mall’s interest payments by around €6m a year. The bonds were secured against 20 of The Mall’s portfolio of 22 UK shopping centres. CSFB’s property operations include advisory, commercial property lending and principal equity activities, employing roughly 60 staff in Europe, based in London, Paris and Frankfurt. Ian Marcus, managing director and head of CSFB’s real estate investment banking group, sees a lot of opportunities in the German property market, and recently hired a team from Deutsche Bank to take advantage of this. The team also includes Robin Broadhurst, former European chairman of Jones Lang LaSalle, who is a senior adviser to the company. “As an industry group servicing property companies, both publicly quoted and private, opportunity funds and institutions, we cover a broad spectrum of clients; we also work very closely with all the other industry and country teams that have clients that either own or occupy property,” says Marcus. The team has had particular success in assisting corporations to make money from their property, including Kingfisher, Shell, ABB, Endessa and Dividum. The third pillar of the property business is Real Estate Capital Partners (RECP), which was acquired when the company merged with US investment bank Donaldson Lufkin & Jenrette (DLJ) in 2000. RECP has just completed fund raising for its third property opportunity fund and has garnered over $1bn from global investors. George Kountouris runs this business in Europe as part of a global network with teams in the US and Japan. “They are not competing with the obvious big players which go for the mega-deals; they try and utilise their extensive relationships to secure off-market deals using innovative structuring,” says Marcus. “In certain instances we can get all three parts of our real estate team working together; either that’s driven by the clients’ needs or a recognition that the sum of the parts of our expertise is greater than the whole. Chinese walls come into play “However we are very conscious of the sensitivities this creates; therefore if the investment banking side has a sale mandate then Chinese walls come into play and the principal side of the firm is not allowed to bid for the work.” In addition, CSFB has a team called the Real Estate Private Funds Group, which raises capital for clients such as UK fund manager Doughty Hanson, property groups belonging to George Soros, and America’s Blackstone. “This group regularly speaks to around 600 investors around the world about property investment and the creation of fund vehicles,” says Marcus. The team has previously concentrated on western Europe, but CSFB also has a strong history and franchise in the emerging markets, particularly central and eastern Europe. The team is looking closely for business expansion opportunities in this region. One example of CSFB’s work in this area is its involvement in the $1.5bn flotation of Russian conglomerate Sistema AFK earlier this year. Marcus is also enthusiastic about the broadening definition of the property market. “It used to just consist of shops, industrial and offices, but now it includes health care, leisure, hospitality, education, car parks, self-storage and derivatives, and we’re interested in all these sectors.” CSFB is also very much involved in the debate with the UK Treasury about the potential for a real estate investment trust-style vehicle, not just for the UK but with a Europe-wide remit. Marcus is one of the original industry team who has been negotiating with ministers and officials on this concept. “We are looking at the consequences for an advisory and a financing business like ours if this comes about, and at the US, where leverage is used in a much more sophisticated way,” says Marcus. “Product-wise, we’re trying to think through all the consequences for our business.” www.csfb.com CSFB transactions, 2004-05CSFB was sole arranger for the largest ever sterling-denominated CMBS issue, the securitisation of UK retail fund The Mall Date Client Deal Role Value (m) Pending Gecina Acquisition by Metrovacesa Adviser €8,400 Pending HSH Nordbank Sale of Gehag to Oaktree Capital Adviser €1,500 Apr 05 The Mall Securitisation Sole arranger £1,060 Apr 05 LNR Europe European CMBS/Mezzanine Fund Placement agent £380 Apr 05 Middle Eastern Investor Financing for portfolio of German class A office assets Lender €300 Mar 05 Opportunity Fund Financing for class A Paris office asset Lender €14 Feb 05 Sistema AFK Initial public offering Joint global Co-ordinator $1,557 Feb 05 Cerberus Bridge financing for portfolio of German multi-family homes Lender €200 Jan 05 Swiss Prime Site Convertible bond Sole bookrunner and joint lead manager SFr17 Dec 04 Titan Europe 2004-2 plc Conduit CMBS Issue: 50% French/50% German collateral Principal €267 Dec 04 Swiss Prime Site Acquisition of Maag Adviser SFr846 Nov 04 Titan Europe 2004-1 plc Conduit CMBS issue : 100% UK Collateral Principal £283 Nov 04 Fadesa Accelerated bookbuild trade Lead manager €37 Oct 04 Real Estate Capital Partners Acquisition of Portuguese non-performing loan portfolio Adviser and principal not disclosed Oct 04 Government of Malta Malta Freeport privatisation Adviser $421 Sep 04 Various shareholders Sale of Dividum Oy to London & Regional Adviser €303 Jun 04 NIAM Nordic Region Opportunity Fund Placement agent €275 May 04 Canary Wharf Acquisition by Songbird Corporate broker £4,700 Apr 04 Fadesa Initial public offering Joint lead manager €501 Apr 04 Arlington Acquisition of Aberdeen Property Investors Adviser £50 Mar 04 La Défense III plc Securitisation Arranger €635 Source: Credit Suisse First Boston