News

UK CMBS signals sector surge




Goldman Sachs is acting as arranger and lender on a £449.8m UK CMBS dubbed Ribbon Finance 2018. The transaction is a further sign of a resurgence in CMBS activity across Europe, with 2018 on target to surpass the last post-crisis bumper year in 2015.

Ribbon Finance 2018 has been provisionally rated by DBRS and S&P as AAA/AAA on the £153.90m class A notes, AA(low)/AA on the £48.07m class B notes, A/AA- on the £27.93m class C notes, BBB(high)/A on the £49.02m class D notes, BBB(low)/BBB- on the £81.70m class E notes, BB(high)/BB on the £54.82m class F notes and BB/BB- on the £11.88m class G notes. The expected maturity of the loan is 13 April 2023 and the transaction is expected to price in the week of 21 May.

The transaction securitises a £449.8m loan to Ribbon Bidco to provide partial acquisition financing for the Dayan family, acting as sponsor, to acquire Lapithus Hotels Management UK and 20 hotels. As well as being initial lender and arranger, Goldman Sachs advanced a mezzanine loan of £69.2m to Ribbon Mezzco, which was later sold to Apollo Global Management.

Of the 20 hotels, three operate under the Crowne Plaza brand and 17 are flagged by Holiday Inn, with the majority based in the southeast of England. S&P notes that the portfolio benefits from the hotels being well-located across major UK cities, with four in London, five near key airports and the rest in other key areas. Additionally, the agency notes that the portfolio has generally been stable throughout the credit cycle and that the hotels are internationally recognised brands.

S&P suggests that potential challenges might arise because hotel performance is vulnerable to an economic downturn and the portfolio is vulnerable to an aviation industry downturn. The agency also comments that the loan suffers from high concentration in terms of property type, although this is somewhat mitigated by geographical diversity.

Meanwhile, Bank of America Merrill Lynch recently priced a €341m CMBS dubbed Taurus 2018-1, comprising three loans secured by Italian real estate. It has ratings from DBRS and Fitch of AA (low)/A+ on the €224.3m class A notes (which priced at three-month Euribor plus 100bp), A/A- on the €29.54m class B notes (plus 125bp), BBB/BBB- on the €37.69m class Cs (plus 210bp), BB (high)/BB- on the €32.5m class Ds (plus 335bp) and BB (low)/B- on the €17.63m class E notes (plus 450bp).

Investor demand was high for the transaction, with accounts coming largely from the UK and Europe, but over 10% coming from other jurisdictions. Additionally, while the major investor group was asset managers, a significant portion was hedge funds and banks.

DBRS comments on a wider trend towards growth of the European CMBS market, which has “seen a steady flow of issuance and a pipeline continuing to build”. This was after an 18-month hiatus was broken at the end of last year by the Taurus 2017-2 UK transaction (SCI 24 November 2017).

RB

11/05/2018 10:57:17



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