CRE Market Tender for Two Neighbourhood Centres
$55M Property Investment Facility
Service
Commercial Property Investment
Funding Amount
$55M
Funding Purpose
Refinance & Equity Release
Industry
Property – Retail
The Scope
- Our client owns two large neighbourhood centres, which were funded separately by two major banks. The assets combined market value was $85M and they were sitting at 65% LVR with margins of 1.80% and 1.90% above BBSY.
- We recommended to “package” the assets to the one financier and to do this via a competitive market tender process. The introduction of competitive tension on a sizeable transaction, i.e. $55M in total debt, was the catalyst to drive a lower client margin/interest rate, introduce a standard covenant suite with the one financier, and release c.$2.2M of equity into the client’s account for wider group development activity.
- The assets are 100% leased, with a strong lease covenant with Woolworths as the anchor for each. The assets did not need repositioning & we didn’t need a financier to take any let-up or market risk etc, and it was our opinion that when packaged as one transaction, it would drive a very favourable debt package and interest rate for the client.
- Nexus was engaged to manage the entire tender process, which included inviting and selecting financiers to the process we knew would have an appetite for the proposal, preparing the information memorandum, managing pricing negotiations and assisting with transactional document review and settlement.
What We Did
- After the client agreed to our proposal, we arranged and instructed the valuations before commencing the formal tender process. The information memorandum was comprehensive, and introduced the sponsor and assets to the market, which clearly articulated our funding request, desired terms and interest rate range.
- We compiled a dashboard for the client to review, which summarised the key details of each offer, its pros and cons, a detailed comparison to the current offering vs. the new offerings with one financier, and our recommendations.
The Result
- Our funding proposal was well received and one of the assets was refinanced to one of the existing major banks whom had one of the shopping centres.
- The existing loan facility was restructured onto a new loan term, and a common interest rate margin of 1.55% above BBSY was achieved.
- Undertaking the tender process led by Nexus delivered interest savings of c.$157k per annum (i.e. the risk margin was decreased from 1.80%/1.90% to a 1.55% across both assets with the one financier).
- LVR of 65% and interest only for the contracted term.
- Equity release of $2.2M uncontrolled for the client to use on wider development activity.
- Application fee of $0 to refinance the $24M.
