Barclays is preparing to launch a circa £500 million commercial mortgage-backed securities secured against UK last-mile logistics properties owned by Blackstone Group, CoStar News understands.
If the deal goes ahead, it will be the first CMBS of 2024 and the third Blackstone logistics CMBS since last summer. It will be seen as evidence of the market thawing after the market froze in May 2022 due to uncertainty about inflation and rising interest rates caused by the war in Ukraine. It also introduces a new banking name aside from the US investment banks typically involved.
The exact size and composition of the deal are still being decided, with a launch date about six weeks away. The CMBS would refinance a facility Barclays had earlier provided to Blackstone for various acquisitions.
Spreads have tightened since Blackstone reopened the CMBS market in July 2023 with the £263 million Last Mile Logistics CMBS. Towards the end of last year, investors believe that central banks are done with raising interest rates, giving rise to hope that more deals will follow in 2024. Today, spreads for triple-A rated notes are in the mid to high 100 basis points for European logistics CMBS. By contrast, the £145 million class A notes in the Last Mile Logistics CMBS, rated AAA by S&P and KBRA, priced at 235 basis points over Sonia on the Sterling Overnight Index Average benchmark.
At around £500 million, the deal would also be substantially bigger than the three CMBS transactions in 2023. Blackstone’s second CMBS, also backed by UK logistics, Stark Financing 2023-1 in October, came in at £339.5 million. Brookfield’s Belgian office CMBS, Magritte CMBS, in November was €208.4 million.
Barclays was one of nine banks taking part in the €7.5 billion refinancing of Blackstone’s Mileway logistics platform, as first reported by CoStar News. The debt reflected 50% loan to value and carried a margin in the mid-200 basis points. The refinancing repaid around €2.5 billion of outstanding logistics CMBS.
Although take-up and investment volumes have been down, logistics continue to be popular among investors as rents continue to rise and good space is becoming scarce. Blackstone is a strong believer in logistics, which has accounted for more than 80% of its investments in Europe, including the UK. During the first half of 2023, Blackstone was able to charge 45% more rent after leases expired in its UK portfolio.