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Barclays Bank wins £335m whole loan financing for Oaktree-led MEPC buy

Barclays Bank has won the £335m whole loan financing mandate for Oaktree Capital Management and Patrizia Immobilien’s joint acquisition of the three-strong MEPC UK business parks portfolio.

Oaktree, which is the majority equity investor with at least 90% of the joint venture share, has selected Barclays after a competitive financing process which included a number of investment bank underbidders including Citigroup, Deutsche Bank and Bank of America Merrill Lynch.

Barclays’ selection, over the investment banks, reflects an extension of its existing relationship with Oaktree and Patrizia after financing their acquisition of iQ Winnersh with a £175m whole loan last year.

The final price paid by the Oaktree-led joint venture for the portfolio – dubbed Project Aviemore – was £430m while the financing mandate settled at 78% LTV, which implies a whole loan of £335.4m.

While the senior and mezzanine split is still to be finalised, CoStar News understands that the senior loan LTV detachment point is expected to be 65%, which implies a senior loan of approximately £279.5m and a mezzanine loan of £55.9m.

Furthermore, CoStar News understands that Barclays has priced the senior loan to hold at around 175 basis points over three-month LIBOR and is now trying to sell the mezzanine with a 7% internal rate of return (IRR) although the junior loan pricing could still rise.

At this stage, one of the contenders for the mezzanine strip is thought to be DRC Capital. Real Estate Capital first reported Barclays Bank’s win yesterday.

Oaktree and Patrizia confirmed the closure of the initial all-cash acquisition on Monday, reflecting a net initial yield of 7.3%, while the debt refinancing is scheduled for 25 September – one week after the Scottish referendum which potentially represents a currency risk in the event of a break-up of the United Kingdom.

The three regional business parks are spread over 4m sq ft of mixed-use space leased to 510 tenants. They comprise:

  • the 2m sq ft Hillington Park in Glasgow;
  • the 1.2m sq ft Birchwood Park in Warrington, 20 miles east of Liverpool; and
  • the 820,000 sq ft Chineham Park in Basingstoke, 17 miles south west of Reading, which includes MEPC as a tenant.

The weighted average unexpired lease term (WAULT) is 5.3 years to expiry and 4.1 years to break clause, while the portfolio occupancy levels is 91% and the annual rent roll is £33m.

In yesterday’s statement, Rob Brook of Patrizia Immobilien said: “This considerable acquisition adds three high quality assets to our expanding UK-wide portfolio.

“Each of the three parks provide significant development opportunities within growing regional markets, which, working alongside Oaktree, we aim to maximise over the next few years through additional investment and asset management initiatives.”

All parties declined to comment.

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