Lone Star’s Quintain has pulled off one of the UK’s largest development finance agreements, securing an £800m facility from a trio of North American lenders.
The five-year corporate loan is held against the entire company but will be used predominantly to develop its Wembley Park project. This will include 1m sq ft of offices and a further 6,000 flats in addition to the 1,000 already built. Many of the flats will be operated by the company’s PRS platform, Tipi.
US insurance and banking giants AIG and Wells Fargo issued a £560m senior loan, with AIG providing a slight majority. The senior loan sits at a loan-to-value of less than 50% and is priced in the region of 350bps. The deal was led by Wells as agent and the bank was also co-arranger alongside AIG.
Canada Pension Plan Investment Board provided a £240m, five-year mezzanine loan priced close to 10%. The deal is CPPIB’s biggest since Rawle Howard joined as director to bolster the division from Blackrock last year. The facility is structured so that Quintain can sell down non-core assets from its broader portfolio, such as its stake in the Quercus Healthcare Fund, for the first three years, and redeploy the capital into Wembley.
The premium pricing of the deal reflects the complexity, scale and flexibility of the deal as well as the current scarcity of development finance. As part of the deal, Quintain has not had to pre-commit to exact timescales for which it will proceed with different elements of the Wembley project but it will inject large amounts of additional equity into the company as it is built, which will become additional security.
Wells Fargo’s £425m bridging loan provided to Lone Star when it took Quintain private in a £745m deal last October has now been refinanced.
The deal is thought to be the largest UK PRS debt deal to date and demonstrates lenders’ increasing willingness to be active within the subsector.
It is Wells Fargo’s first PRS loan since it moved into the UK market. The bank is combining its knowledge from the sector in the US with its established UK team, led by Max Sinclair and Michael Acratopulo, and is expected to ramp up its PRS activity.
It is looking for deals in both London and the regions, driven by quality of borrower and operating partners.
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