Custodian REIT announces the completion of a new term loan facility

Custodian REIT is pleased to announce the completion of a new term loan facility.

On 5 April 2017, the Company and Aviva Investors Real Estate Finance (“Aviva”) entered into an agreement for Aviva to provide the Company with a new term loan facility of £50 million (“the New Loan”), comprising two tranches of £35 million (“Tranche 1”) and £15 million (“Tranche 2”) respectively.

The Company drew down Tranche 1 on 6 April 2017, which is repayable on 6 April 2032 with a fixed rate of interest of 3.02% per annum payable on the balance.  Tranche 2 is available for draw down on or before 5 October 2017 with a fixed rate of interest payable on the balance, calculated at the same margin as Tranche 1 above the prevailing Treasury 4.25% 2032 gilt rate on the date of draw down.

Following agreement of the New Loan, the Company has £150 million of agreed debt facilities comprising:

  • A £35 million revolving credit facility (“RCF”) with Lloyds Bank plc expiring in November 2020, with a maximum loan-to-value (“LTV”) of 50% and attracting annual interest of 2.45% above three-month LIBOR;
  • A £20 million term loan with Scottish Widows Limited repayable in August 2025, with a maximum LTV of 45% and attracting fixed annual interest of 3.935%;
  • A £45 million term loan with Scottish Widows Limited repayable in June 2028, with a maximum LTV of 45% and attracting fixed annual interest of 2.987%;
  • A £35 million term loan with Aviva repayable in April 2032, with a maximum LTV of 50% and attracting fixed annual interest of 3.02%; and
  • A £15 million term loan facility with Aviva repayable 15 years from the date of drawdown, with a maximum LTV of 50%.

The Company’s debt facilities have a weighted average term of 10.1 years, a weighted average cost of 3.1%[1] per annum and 23% of the available facilities are at a variable rate of interest.

Following drawdown of Tranche 1 the Company has cash and undrawn facilities of £78.0 million available to deploy, which will be used to acquire £14.1 million of properties currently under offer and in solicitors’ hands (“the Pipeline Properties”), with the balance expected to be significantly invested in other commercial properties within a period of three to six months.

Net gearing[2] is 13.9%, which is expected to rise to 17.0% on completion of the purchase of the Pipeline Properties, with the Company’s objective to increase gearing towards a ratio of 25% loan to value.

Commenting on completion of the New Loan, Richard Shepherd-Cross, Managing Director of Custodian Capital Limited (the Company’s discretionary investment manager), said:

“With interest rates continuing to be significantly below their historical average, we have taken the opportunity to reduce the Company’s exposure to interest rate risk, while increasing debt capacity, lengthening the debt expiry profile and maintaining the weighted average cost of debt at 3.1% per annum.  The flexibility to repay the RCF and manage the facility limit to minimise non-utilisation fees further demonstrates the efficiency of the Company’s debt structure.

“In addition to the Pipeline Properties, we are seeing an increasing number of acquisition opportunities within our target lot size and are tracking circa £40 million of further opportunities that fit our investment objectives.”

Gregor Bamert, Head of Aviva Real Estate Finance said:

“We are delighted to support Custodian REIT’s requirement for a flexible debt structure, which combines the attractive pricing currently available for long term debt with the ability to manage their portfolio proactively.  We look forward to being a long term partner of Custodian REIT, starting with this transaction.”

[1] Assuming Tranche 2 attracts fixed annual interest of 3.02% when drawn.

[2] Gross borrowings less unrestricted cash divided by property portfolio valuation.

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