Blackstone and Telereal Trillium have sourced around £750m of debt to back their acquisition of Network Rail’s £1.46bn Arches portfolio.
The duo have agreed a funding deal with Bank of America Merrill Lynch to finance its purchase of the 5,200 assets at a loan-to-value close to 50%.
It is possible that the initial acquisition loan issued by BAML to fund the Arches purchase could be issued as a CMBS, with the granularity, diversity and subsequent stability of the income lending itself well to the debt capital markets structure.
The UK CMBS market has been subdued over the past five years but there has been a flicker of activity in 2018.
BAML and Morgan Stanley issued a £315.3m CMBS loan secured against assets bought by Blackstone for its multi-let industrial strategy in June, and a month earlier Goldman Sachs also launched a £427.3m CMBS held against 20 hotels owned by the Dayan family.
What next for Blackstone and Telereal’s £1.5bn Arches?
Blackstone’s 50% ownership of the Arches portfolio is being funded from its open-ended, core-plus Blackstone Property Partners Europe fund. The fund already has an established relationship with BAML.
In June the fund issued €600m (£534m) of four-year bonds carrying a 1.4% coupon for which BAML, alongside Morgan Stanley, were the bookrunners. The following month the fund also issued a further €650m of seven-year bonds with a 2.2% coupon with the same banks as bookrunners. All of the bonds were BBB- rated.
Blackstone Property Partners Europe, which targets lower returns than Blackstone’s traditional opportunistic vehicles, held a €1.4bn first close in November last year and currently has €2.2bn of assets under management.
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