Real estate firm Avison Young said it agreed with its lenders following a credit downgrade to secure additional capital to reduce its financial obligations by more than half.
In a deal expected to close next month, Toronto-based Avison Young reached a deal that will mean it's “not required to make certain payments on its term loan,” according to a company statement. Avison Young added that it “has made all required payments during this process.”
The measures follow a statement by Standard & Poor’s Global Ratings Division that it had recategorized Avison Young to the selective default category last week after the real estate firm defaulted on $400 million in debt by missing loan payments in the last two quarters. S&P ranks debt and creditworthiness.
Avison Young is a commercial real estate adviser that represents institutions, as well as high-net-worth individuals and family trusts, and manages assets, construction projects and leasing and mortgage financing. The firm was founded in 1996 and grew from 11 to 64 offices between 2009 and 2015. Avison Young expanded further after Quebec’s CDPQ public pension fund invested $250 million into the firm in 2018, allowing it to grow into 19 countries.
“This transaction is an incredibly exciting step forward and positions Avison Young with the financial flexibility to invest in growth and continue to deliver for our clients,” said Mark E. Rose, chief executive officer of Avison Young.
In its statement last week, S&P said Avison Young "remains current on its debt service obligations under its revolving credit facility. In addition to taking the rating action, our assessment of information received from the company has led us to revise our assessment of management and governance on the issuer to negative from moderately negative," S&P wrote in its statement last week.
The downgrade comes at a time when some commercial real estate companies have struggled due to higher lending rates. Investor CDPQ recently posted a negative return within its real estate holdings. The CDPQ recently announced plans to make changes involving the management of both of its real estate arms Ivanhoe Cambridge and Otera Capital and assume direct control over its real estate divisions.
Avison Young's offices include 14 in Canada, including in Montreal where it grew rapidly after buying out Devencore in 2021. Avison Young operates 56 offices in the United States, including 11 in California, as well as 12 offices in the United Kingdom, 5 in Germany, where it eliminated the jobs of 6 of its 50 employees last December. It also operates one office each in Israel, Poland, South Korea and Romania.