CLS Holdings has completed the “innovative” financing of a portfolio of government-occupied properties.
It completed an institutional private placement, dubbed Project Neo, with a UK institution.
The £80m, secured, nine-year, partially amortising note will carry a fixed coupon of 4.2% over a weighted average term of 7% and will be listed.
The terms are considered to be much more attractive than a bank would offer for debt secured on a portfolio that has around five years until the first tenant break and was bought at a price reflecting a 12.25% yield.
CLS executive chairman Sten Mortstedt said the “innovative, flexible, funding solution… is tailored to our aspirations for this portfolio, which is 99% government occupied”.
It is understood that the placement has flexible rights of withdrawal and substitution, which allow CLS to take properties out and put others in to the security package. The profile of the debt matches the investor’s plans for the portfolio, which it intends to hold long term while working with tenants including HM Revenue & Customs.
The listed group bought the 34-strong former Wichford government income portfolio, which was owned by Redefine International, from receivers FRP Advisors for £118.6m in a cash deal in September.
It generates a rental income of £15.1m pa, and has a weighted average lease term of 7.2 years, or 4.8 years to the first break.
CLS was one of the first UK property companies to issue a retail bond, raising £65m from its 5.5% seven-year retail bond – 30% above target – in 2012.
Since then it has completed a second bond issue and in its full-year results chief executive Richard Tice said it was an option for the company to do another bond in 2014. This could include further secured bonds as the European secondary office investor continues to expand its £1bn portfolio.
Bridget.O’Connell@estatesgazette.com
