Urbanest has turned to a club of insurers to refinance its portfolio of five high-end student accommodation blocks in London.
The deal, which is expected to close in the next few weeks, involves the company borrowing close to £360m in long-term finance.
M&G Real Estate, US insurer Pricoa and Aviva are poised to provide a 10-year, fixed-rate loan. That level of finance would reflect a loan-to-value of 55% on a valuation of £650m.
The assets in the 2,467-bed portfolio include schemes in Tower Bridge, EC3; Westminster Bridge Road, SE1; and in Hoxton, King’s Cross and St Pancras, all N1.
The refinance will not include the company’s ongoing £40m purchase of Emperor House and Roman Wall House, both EC3, from the Livingstone brothers’ London & Regional.
The finance deal will replace a number of loans taken since the development of the assets, including one provided by LaSalle Investment Management for £100m used by Urbanest to buy and develop the 1,100-bed Westminster Bridge Road asset in early 2013.
Another of the loans was a £90m financing from Singaporean sovereign wealth fund GIC, which was provided on a whole-loan basis for the development of the company’s St Pancras asset.
By taking the new finance package, Urbanest will be able to replace short-term, relatively expensive debt priced during development phases with one package which is cheaper and secured against reliable income streams.
Student accommodation portfolios are popular with insurers because of the relatively constant occupancy rates and recurring income that they provide.
Insurers have become an increasingly dominant force in the UK market since the onset of the financial crisis (p52).
All of Urbanest’s projects are attractive to lenders because the schemes are in London, home to the country’s greatest number of universities and colleges.
In addition, the portfolio is aimed at the higher end of the student accommodation market and has a better level of income cover to ease worries over cash flow.
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