Citibank has launched a securitisation of three senior commercial real estate loans totalling £840 million secured against a giant portfolio of Blackstone Real Estate Partners' industrial assets in the UK, underscoring the recovering commercial mortgage-backed securities market across Europe.
The transaction, UK Logistics 2025-1 DAC, originated by Citibank's London branch, will see the bank advance the Nevis Loan of £360 million, the Fawr Loan of £300 million and the Pike loan of £180 million to borrowers ultimately owned by funds managed by Blackstone Real Estate Partners.
Ratings agency Morningstar DBRS has assigned provisional ratings for the CMBS.
The transaction refinances Blackstone's acquisition of three logistics portfolios comprising 8.8 million square feet of standing logistics assets and 1.3 million square feet of industrial outdoor storage in the UK, largely concentrated in the South East and London.
The European CMBS market has opened 2025 strongly with more issuers, sponsors and asset classes thanks to increasingly competitive pricing.
Earlier this month, Bank of America launched a £356.8 million commercial mortgage-backed securitisation via two loans collateralised by Lone Star's recent UK Project Tiger portfolio acquisition and Henderson Park's Silverburn shopping centre, respectively, as reported.
That CMBS was the fourth to launch in Europe this year after Bank of America launched Taurus 2025-1 EU DAC, a €259.8 million securitisation of a portfolio of logistics properties owned by Carlyle Group, in February.
Also, in February Blackstone's first European CMBS of the year, the €525 million Sequoia Logistics 2025-1 DAC, the largest euro-denominated issuance CMBS since 2021, priced at a weighted average margin of 192 basis points, the keenest for a direct CMBS in four years, as reported.
In January, presales ratings were assigned to Pembroke Property Finance 3 DAC, a €343.6 million multi-borrower securitisation focused on Irish properties. Finance Ireland, the non-bank lender owned 48% by Pimco and 42% by M&G, is the sponsor, which comprises 110 non-recourse commercial property loans to 68 borrowers secured against 234 properties across the Republic of Ireland.
CMBS deals priced tighter as 2024 progressed thanks to falling interest rates. There were five European deals in the year, meaning this year's transactions already match that number. The only deal that did not involve Blackstone last year was Vantage’s £600 million data centre CMBS. Three of Blackstone's transactions involved logistics properties, underlining investor demand for the asset class.
In 2023, there were three CMBS transactions, totalling €909 million, 40% less than the €1.5 billion issued in the first four months of 2022, before the market shut down. The figures are way down on the €7 billion issued in 2021.
Speaking to CoStar News at the Mipim real estate conference in Cannes last week, Gadi Jay, senior managing director in the real estate group at private equity giant Blackstone, said real estate credit markets were improving, and Blackstone had been keen to help kickstart a recovering CMBS market as part of this: “We have seen a material uptick in liquidity for real estate debt across the spectrum and whilst we anticipate some amount of volatility, overall the trends remain positive for financing going forward. A well-functioning debt market requires a diversification of funding sources, an example of which is CMBS, where we have seen more deals brought to market this year then we have for a number of years.”
The collateral for the Nevis Loan comprises 59 logistics assets in the UK with 45% of the portfolio value concentrated in London and the South East. Valuations prepared by JLL in January 2025 attributed a market value of £515.035 million and a portfolio valuation of £580.78 million for the properties. The loan-to-value ratio based on the values is equal to 69.9% and 63.5%, respectively.
The Fawr Loan is a £300 million loan that will refinance existing indebtedness of the Fawr borrowers, refinance the acquisition of the Fawr property portfolio, and be used for general corporate purposes and financing or refinancing financing costs.
The collateral securing the loan comprises 26 UK logistics and IOS assets. Of the portfolio value, 70% is in London and the South East, the North West accounts for 17%, and the remaining 13% of value is in the Midlands. Valuations prepared for the properties by JLL in January 2025 concluded an aggregate market value at £501.45 million and a portfolio valuation of £565.72 million.
The £180 Pike loan relates to a term loan to be advanced by Citibank to a single borrower that is ultimately owned by Blackstone. The purpose of the loan is to refinance existing indebtedness of the borrower for general corporate purposes and financing or refinancing transaction costs.
The collateral securing the loan comprises 23 logistics assets in the UK with 33% of the portfolio value concentrated in the South East. Valuations prepared for the properties by JLL in January 2025 concluded an aggregate market value of the collateral at £265 million. There are also two land plots included in the portfolio and the valuation including these sites is £265.355 million.
The transaction is expected to repay in full by May 2030.