Legal & General has completed its first real estate debt financing deal, agreeing a new £121m loan to the Unite group.
The 10-year debt facility is at 60% loan-to-value with a fixed rate of 5.05% for the duration of the loan, which will amortise to £109m – or 55% LTV – by 2022.
Together with headroom in other facilities, it provides Unite with the capacity to pay down its remaining facilities that mature in 2013.
Following the refinancing, Unite’s weighted average debt maturity increases to 3.5 years, and its next debt maturity is not until May 3013.
The transaction reduces the group’s see-through cost of debt by 10 basis points from 5.7% at the end of last year to 5.6%, generating annual savings of around £600,000.
These savings will offset the swap break costs amounting to £4.7m that have been incurred as part of the transaction and will be recognised in the first half of 2012.
Following the transaction, the proportion of the group’s debt that is hedged has increased from 69% at 31 December 2011 to 80%.
The deal was arranged by Legal & General Investment Management Commercial Lending, which was established in May 2011 when Ashley Goldblatt was appointed head of commercial lending.
L&G also acted as facility agent.
Unite chief financial officer Joe Lister said: “Securing this new, long-term facility with a lender of Legal & General’s quality is further testament to the strength of Unite’s business and marks an important step for the group.
“We have now arranged over £400m of new debt facilities for Unite and its funds in the last 12 months.
“Controlling gearing levels and extending debt maturities remains a key priority for Unite and we will continue to work closely with our financing partners to further strengthen the group’s financial position over the year. Our long track record and recent successes in raising new finance give us continued confidence for the future.”
Goldblatt said: “Having looked at the market in depth over the last year and with an experienced team in place, this first, sizeable, complex transaction answered our objectives in developing this area of our business. Unite represents a market leader with a strong track record, operating in a resilient but non-traditional sector of the real estate market.
“Additionally, we have proven ourselves capable of taking a more flexible approach to lending, as is seen in the 10-year loan term.
“Traditionally, insurance companies have restricted themselves to long-term loans of 15-20 years or more, which match their long-dated liabilities, whereas those banks that are still willing or able to lend are only prepared to do so on short terms. This is a space that we feel comfortable in filling.”
bridget.o’connell@estatesgazette.com
