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Oaktree and Patrizia weigh up terms sheets for £352m MEPC financing ticket

Oaktree Capital Management and Patrizia have received wide interest from across the spectrum of lenders for the circa £352m financing of the three-strong MEPC UK business park portfolio, in what has become the summer’s most competitive financing mandate.

Just under two weeks ago, Oaktree Capital Management and Patrizia won the competitive blind auction to acquire three business parks from MEPC – in a process dubbed Project Aviemore – for a price now believed to be £440m.

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.

CoStar News understands Oaktree and Patrizia have already received terms sheets from investment banks, UK clearing banks as well as debt funds at a requested 80% LTV, which implies a whole loan financing ticket of £352m.

There is a range of financing strategies under consideration, including slicing the £352m whole loan into a 65% LTV senior loan, of £286m, and a £66m junior loan up to 80% LTV detachment point.

A number investment banks are understood to have submitted term sheets for the whole loan which a CMBS exit strategy in mind for the senior loan along with a syndication of the junior loan.

Citigroup, Morgan Stanley and Deutsche Bank are understood to be among the investment banks which have already submitted initial term sheets. The most relevant comparable for this financing solution is, of course, Deutsche Bank’s £580m Chiswick Park whole loan refinancing for Blackstone in June last year.

The £380m senior loan, originated at sub 250 basis points over three-month LIBOR, was securitised in the unrated DECO 2013-CSPK CMBS, while a £200m mezzanine loan was placed with a separate account of Qatari Investment Authority (QIA) capital managed by Apollo Global Management. Based on the revaluation at the time of the refinancing, the whole loan was 81.35% LTV.

An alternative strategy is for one lender to write a whole loan and hold and syndicate according to their business models.

CoStar News understands that, inter alia, term sheets have been submitted by three UK clearers all with an originate-to-distribute strategy in mind – Royal Bank of Scotland, Lloyds Banking Group and Barclays Bank – in addition a financing offer by originate-and-hold insurance lender, M

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