L&G Completes Â£350m Industrial Fund Refinancing.
23 July 2014
Legal & General Property (“LGP”) announces that it has completed the successful refinancing of its Industrial Property Investment Fund (“IPIF” / the “Fund”), agreeing a new £275 million term part fixed rate, part floating rate facility with three lenders, RBS, Wells Fargo and L&G’s lending arm, LGIM Commercial Lending Limited (“CLL”), with an additional £75 million revolving credit facility provided by RBS and Wells Fargo which can be drawn down for future investment opportunities. The new loan will enable the Fund to continue delivering strong income distribution to investors.
Replacing a £210 million facility that was due to expire in September 2015, the new £350 million loan facility is arranged over a six year term, supporting the Fund through its recently extended life span and providing it with significantly increased firepower with which to seek attractive market investment opportunities. RBS continues to be the principal debt provider and arranger, with a £95 million stake in the secured facility and 50% share of the revolving credit facility, whilst L&G has increased its loan to £90 million (from £75 million). Wells Fargo has come in as a new lender to the Fund, providing £90 million of the secured facility and a 50% share of the £75 million revolving credit facility.
The largest industrial fund in the IPD, IPIF has continued to be one of the most active investors in the UK industrial market, growing its assets under management from £920 million to over £1 billion since the beginning of the year. Launched in 1997, IPIF was one of the first indirect specialist real estate funds. Having outperformed its benchmark, the IPD Quarterly Industrial Benchmark, over three, five, 10 and 15 years and delivered a total return of 25.9% to its investors over the 12 months to June 2014, the Fund continues to be a leader in its sector. The lowly geared fund is one of the most liquid closed-ended funds in Europe, benefiting from a strong secondary market with approximately 5% of its units traded each quarter.
Towards the end of last year the Fund successfully merged with the Falcon Property Unit Trust, providing it with over 280 units over 36 multi-let estates which it felt would significantly benefit from the scale, resources and efficiencies of IPIF’s management intensive structure, whilst increasing IPIF’s already large added value pipeline at an opportune point in the market cycle. The merger followed shortly behind the news that IPIF had extended its life to 2020, whilst also adding redemption provisions and introducing a number of initiatives enabling it to be more flexible in terms of raising further equity and responding to market conditions.
Commenting on the refinancing, Jonathan Holland, Fund Manager of IPIF, said: “The Fund has continued to lead the market in delivering strong outperformance through its careful stock picking of good quality, higher yielding multi-let industrial estates and highly proactive asset management programme. This new financing arrangement supports the Fund through to the end of its life cycle and provides us with significant headroom with which to capitalise on attractive investment opportunities that we believe currently exist in the market.”
Nick Solomon, Director at the Royal Bank of Scotland, commented: “RBS is delighted to lead this financing and continue our long standing relationship with Legal & General and IPIF; which continues to perform strongly. The Financing positions IPIF well for the next stage of its lifecycle and demonstrates RBS’ continuing appetite for the UK real estate market.”
Richard Craddock, Director at Wells Fargo, said: “The IPIF funding further demonstrates our clear objectives in the UK commercial real estate market: to grow our business by continuing to support top tier investors on a range of asset types and funding structures. We are delighted therefore to be extending our relationship with Legal & General and to support a Fund with such a strong and proven track record.
Ashley Goldblatt, Head of Commercial Lending at Legal & General Investment Management, commented: “Acting as a co-lender alongside banks, providing floating rate finance and lending for as short a term as six years are three stances that the market would not ordinarily associate with us. We are delighted therefore to have this opportunity to show that we can compete successfully in these areas.”