Barclays has securitised £537.8 million of debt it earlier provided to Blackstone Group to refinance two portfolios of logistics properties, according to the presale reports by rating agencies Moody’s and Morningstar DBRS.
The CMBS, UK Logistics 2024-1 DAC, is the first deal of the year and comprises two loans: the £328 million St Modwen facility and the £209.8 million Mileway facility. CoStar News first flagged that Barclays was preparing a circa £500 million UK logistics CMBS for Blackstone in early March. The five-year loans pay interest quarterly based on Sonia – the Sterling Overnight Interbank Rate – plus a fixed margin of the weighted average margin of the notes.
The St Modwen loan is backed by 49 logistics properties covering 5.2 million square feet in two prime urban logistics estates, Trafford Park and Heywood Distribution Park in Greater Manchester. The portfolio has been valued at £531.6 million by CBRE. The portfolio produces £24.3 million in net rent and has an occupancy rate of 88%, with a weighted average lease length to break of 3.1 years and to expiry of 4.8 years. Blackstone is looking to spend £25 million to refurbish the properties and upgrade them to higher ESG ratings.
CoStar News revealed Blackstone had bought the two North West estates from US investor Harbert Management Corporation in the second quarter of last year. It was the biggest industrial deal of the year alongside Blackstone’s £700 million purchase of Industrials REIT in the first quarter.
The Mileway loan is secured against 17 properties covering 4.2 million square feet, predominantly in London, the South East and the Midlands. JLL valued the portfolio at £317.5 million. The properties produce £16.9 million in net rent and have an average lease to break of 5 years and to expiry of 7.3 years. Blackstone plans to spend £22 million of refurbishment capex.
Morningstar DBRS pointed out that the securitised loan represents a relatively high Morningstar DBRS loan-to-value rating of 92.5% but said that this is mitigated by the fact that rents in the Mileway and St Modwen portfolio are 30% and 27% below market rents respectively. Moody’s said the assets were well-located, close to major road networks and population centres, with a highly diversified tenant base. However, it said there were refinancing risks as there is no scheduled amortisation. It also pointed out that the properties are older with weak energy efficiency ratings.
The CMBS has five tranches. The £299 million A notes, rated Aaa by Moody’s, represent the largest part of the notes (55.7%), followed by £61.14 million B notes, £36.6 million C notes, £74.4 million D notes and £55.2 million E notes. Barclays will retain £28.24 million.